Annual Report 2015
For the Year Ended March 31, 2015

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

1

CONTENTSCONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Corporate Governance

Financial Section

Corporate Data

Contents
Guide to Buttons
ProfileContents

Tokyo Electron Limited (TEL™) is a world-leading
supplier of semiconductor production equipment (SPE)and flat panel display (FPD) production equipment. We
provide a broad lineup of products that offer superior
process performance and high productivity and related
services to semiconductor and LCD panel manufacturers
around the world.
An unwavering commitment to customer satisfactionthat dates back to our founding in 1963 has cemented
our position as a market leader. Our competitive strengthlies in our capability to proactively and precisely identify
real customer needs and respond to them with cuttingedge technology and products.
With a global network that spans Japan, the U.S.,
Europe and Asia, we are opening up new frontiers for
digital networks by contributing to enhancing ourcustomers’ production lines through untiring dedication
to technology innovation.

Financial Highlights
Consolidated Financial Highlights .............................................................................................................

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2

Business Overview
Business Overview ...................................................................................................................................

3

Message from the COO ............................................................................................................................

4
7

8

Corporate GovernanceCorporate Governance .............................................................................................................................

9

Directors, Audit & Supervisory
Board Members and Executive Officers .................................................................................................... 11

Financial Section
Disclaimer
Matters discussed in this annual report, including forecasts of future business performance of Tokyo Electron, management strategies, beliefs and other statements
are based on Tokyo Electron’s assumptions in light of information that is currently
available. These forward-looking statements involve known or unknown risks,
uncertainties and other factors that could cause actual results to differ materiallyfrom those referred to in the forward-looking statements.
Factors that have a direct or indirect impact on Tokyo Electron’s future performance include, but are not limited to:• Economic circumstances in Japan and overseas, consumption trends, andlarge fluctuations in foreign exchange rates• Changes in semiconductor/FPD/PV markets• Changes in the demand for products and services manufactured or offeredby Tokyo Electron’s customers, such as semiconductor manufacturers,
FPD manufacturers, photovoltaic panel manufacturers and electronics makers• Tokyo Electron’s capabilities to continue to develop and provide products
and services that respond to rapid technology innovation and changing
customer needs in a timely manner
For details, please refer to Business-related and Other Risks on page 15.

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Review of Operations and Business Outlook
Review of Operations and Business Outlook ............................................................................................

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To Our Stakeholders
Message from the CEO ............................................................................................................................

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Financial Review ....................................................................................................................................... 12
Consolidated Eleven-Year Summary ......................................................................................................... 16
Consolidated Balance Sheets ................................................................................................................... 17
Consolidated Statements of Operations ................................................................................................... 18
Consolidated Statements of Comprehensive Income ................................................................................ 18
Consolidated Statements of Changes in Net Assets ................................................................................. 19
Consolidated Statements of Cash Flows .................................................................................................. 19
Notes to Consolidated Financial Statements ............................................................................................. 20
Independent Auditor’s Report ................................................................................................................... 28

Corporate Data
Consolidated Subsidiaries / Investor Information ....................................................................................... 29

TOKYO ELECTRON ANNUAL REPORT 2015

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2

CONTENTSCONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Corporate Governance

Financial Section

Corporate Data

Consolidated Financial Highlights

Consolidated Financial Highlights

Thousands of
U.S. dollars¥497,300¥612,170¥613,125$5,102,147

Operating income

97,87060,443

12,54932,205

88,113

733,236

Income (loss) before income taxes
and minority interests

99,57960,602

17,767(11,756)

86,828722,543

Net income (loss)

71,92436,726

6,076(19,409)71,888598,219

Depreciation and amortization

17,707

24,19826,631

24,88820,878

173,737

Capital expenditures

39,14039,541

21,774

12,79913,184

109,711

R&D expenses

70,56881,50673,24978,66471,350593,742600,000

80,000450,000(%)
20.0

88,113¥633,091(Millions of yen)
100,000

14.6

14.4

60,000300,000

40,000150,000

20,000

12.0
9.5

8.0

5.3

2.5

Operating margin
ROE

14.6%
13.3%

9.5%

2.5%

6.3%

1.0%

5.3%
(3.3)%

14.4%

0

12

13

14

15

0

11

12

13

15

14

Operating Income
Operating Margin

Thousands of
U.S. dollars

Millions of yen

4.0

0

11

11.8%

16.0

32,205¥668,722(Millions of yen)
750,000

12,549For the year:
Net sales

Net Sales2015

60,443

2015

97,870

2014

613,125

2013

612,1702012

497,300

2011

Operating Income
and Operating Margin

633,091

Years ended March 31

668,722

Millions of yen

At year-end:
Total assets¥809,205¥783,611¥775,528¥828,592¥876,154$7,290,955

Total net assets(Total shareholders’ equity)584,802598,603605,127590,614641,163

5,335,456

Yen

Net Income (Loss)
per Share

U.S. dollars(Yen)
600.00450.00

ROE
(%)
16.0

Per share:¥  401.08$     3.34

114.00

80.00

51.00

50.00

143.001.19

Notes: 1. U.S. dollar amounts are translated from yen, solely for convenience, at the prevailing exchange rate on March 31, 2015 of ¥120.17=U.S.$1.
2. Depreciation and amortization does not include amortization and loss on impairment of goodwill.

300.0013.3

12.0
401.08¥ (108.31)

11.8

8.0
6.3

150.00

4.0

1.0

0

0
-108.31¥    33.91

33.91¥  205.04

205.04

Cash dividends¥  401.73

401.73

Net income (loss)—Basic-150.00

-3.3

-4.0

11

12

13

14

15

11

12

13

14

ROE = (Net income or loss /Average total equity) × 100

15

TOKYO ELECTRON ANNUAL REPORT 2015

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3

CONTENTSCONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Corporate Governance

Financial Section

Corporate Data

Business Overview

Business Overview

SUMMARY OF BUSINESS

Semiconductor
Production
Equipment

MAIN PRODUCTSSALES BY REGION

Semiconductor devices (IC chips) are used in mobile devices, such as smart-

Coater/Developer

Single Wafer Deposition System

phones and tablets, and in electronics ranging from flat panel TVs and other

Plasma Etch System

Cleaning System

digital home appliances to cutting-edge medical equipment. Tokyo Electron

Thermal Processing System

Wafer Prober

15.2%

Japan

China

offers semiconductor production equipment for manufacturing such devices,

6.9 %Southeast
Asia

along with superior technical support and service.
Our product lineup includes coater/developers, plasma etch systems, ther-

3.1%

mal processing systems, single wafer deposition systems and cleaning systems used in wafer processing. We have also added products for handling themagnetic materials necessary to form the memory cells of STT-MRAM*, a candidate for the next generation of memory device. Other products include wafer
probers used in the wafer testing process, electrochemical deposition systems
and wafer bonders/debonders used in advanced packaging processes.
* STT-MRAM: Spin Transfer Torque-Magnetoresistive Random Access Memory (an emerging memory
promising for its low power consumption)

Coater/Developer
CLEAN TRACK™
LITHIUS Pro™ Z

Plasma Etch System
Tactras™

ALD System
NT333™

16.9 %
24.2%
10.2%
23.5%

South
Korea

TaiwanEuropeNorth
AmericaSingle Wafer Deposition System
Trias e +™

FPD Production
Equipment

Single Wafer Cleaning System
CELLESTA™ -i

Flat panel displays (FPDs) are used in a wide variety of applications, such as

FPD Coater/Developer

flat panel TVs, mobile devices including smartphones and tablets, and recently

FPD Plasma Etch/Ash Systemeven digital signage for advertising. Tokyo Electron supplies FPD coater/developers and plasma etch/ash systems used to manufacture FPDs, along with

Wafer Prober
Precio™ XL

Inkjet Printing System for Manufacturing OLED Panels

solid technical support and service.
Tokyo Electron’s product lineup also includes an inkjet printing system for
manufacturing OLED panels using large-sized substrates to take advantage ofthe expanding OLED display market.

20.6 %
79.4 %Japan

FPD Coater/Developer
Exceliner™

FPD Plasma Etch/Ash System
Impressio™

Inkjet Printing System for
Manufacturing OLED Panels
EliusTM 2500

Overseas

TOKYO ELECTRON ANNUAL REPORT 2015

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4

CONTENTSCONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Message from the CEO

Review of Operations
and Business Outlook

Corporate Governance

Financial Section

Corporate Data

Message from the COO

To Our Stakeholders Message from the CEO

Transforming
for the Next Half Century
To begin, I’d like to express my thanks for the continued understanding and support of ourinvestors and all Tokyo Electron’s stakeholders. Looking back at 2014, capital investment bysemiconductor manufacturers was brisk. Global sales of semiconductors reached a record
high of US$340 billion, reflecting strong demand for cutting-edge mobile devices and data
centers. Capital investment in the wafer fab equipment market, in which Tokyo Electron operates, grew 16% year on year to US$32 billion. Buoyed by increased market shares, Tokyo
Electron’s consolidated net sales for fiscal 2015, ended March 31, 2015, grew to ¥613.1 billion,
outpacing market growth. Operating income rose 174% year on year to ¥88.1 billion.
Furthermore, the second half of the fiscal year saw consolidated net sales of ¥318.9 billion
and operating income of ¥58.0 billion, achieving a record-high level of operating margin forthe six-month period. Seeking to reciprocate the support of our shareholders, we paid annual
dividends of ¥143 per share, our highest ever.
Regarding our planned business combination with U.S.-based Applied Materials, wewere ultimately not able to secure regulatory approval under applicable competition laws.
Despite the best cooperative efforts of both companies since the business combination plan
was announced in 2013, we had no choice but to terminate the agreement. I apologize to ourshareholders who supported us in this endeavor, particularly at last year’s General Meeting ofJune 2015

Shareholders, for this disappointing turn of events. While we were not able to execute thebusiness combination, fiscal 2015 nevertheless represented a major inflection point for Tokyo
Electron in terms of progress toward future growth as we successfully bolstered profitability
and product competitiveness in our mainstay semiconductor production equipment (SPE)

Tetsuro Higashi
President & CEO

business and implemented business reorganization to increase profit margins. Furthermore,
we are firmly determined to apply the many lessons we learned in the course of preparing forthe business combination to achieve greater growth.

TOKYO ELECTRON ANNUAL REPORT 2015

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5

CONTENTSCONTENTS

Financial Highlights

Business Overview

Review of Operations
and Business Outlook

To Our Stakeholders

Message from the CEO

Corporate Governance

Financial Section

Corporate Data

Message from the COO

Message from the CEO

Concentrating Management
Resources
in Core Businesses toGrow Profit

Tokyo Electron is working to transform for the next half
century. The Company is formulating a new medium-term
management plan, reviewing its capital policies andconsidering ways to offer more appealing shareholder returns.

23.6%

392.0

400

80

0

0

0

13
Net Sales

14

15

Gross profit margin

13
Net Sales

12.5

20

14

15

Segment profit margin

5.3%

40

2.5%

12.4%

200

32.2

15.5%

60

400

200

88.1

478.8

613.1
39.6%

497.3

600

Operating Income andOperating Income Margin(Billions of Yen)
100

576.2

(Billions of Yen)
600

612.1

(Billions of Yen)
800

33.0%

2015 marks the 50th year since the penning ofMoore’s Law. Over these five decades, semiconductors have undergone incredible transformation
through constant miniaturization, increasing in
performance and dropping in cost, and thus playing a major part in the emergence of modern
societies built on advanced information and communications networks. To illustrate the way that
semiconductors have evolved, Intel comparedthem to automobiles. If cars had evolved the way
semiconductors have, cars that topped out at 130
km/h in 1971 would have reached speeds of
482,700 km/h in 2015. Fuel economy of 11 km/l in1971 would be up to 850,369 km/l in 2015, andthe price of a car, US$2,500 in 1971, would be

down to just four cents*. I think this shows just
how surprising and dramatic progress in semiconductors has been.
Today, society is rapidly approaching a newera. Until now, people have largely had to deliberately use personal computers, mobile devices
and networks to enjoy their benefits. Soon, theinternet of everything (IoE), in which virtually
everything is connected through the internet, will
arrive. In this futuristic-seeming era, such technologies as big data analysis that makes sophisticated use of the vast amounts of information beingtransmitted on networks and AI-equipped interfaces between humans and machines will support
our daily lives in ways we are not even aware.
To create such an advanced society, expectations toward technological innovation in semiconductors and their production equipment are only
rising. The semiconductor industry now stands atvarious technological inflection points. Initiatives

31.9%

The Ongoing Evolution of
Semiconductors and Rising
Expectations for Production
Equipment

SPE Segment Net Sales
and Segment Profit Margin

14.4%

Net Sales and Gross
Profit Margin

13

14

Operating income

15
Operating income margin

Segment profit is based on income before income
taxes and minority interests.

to create 3D structure devices, adopt new materials and realize STT-MRAM (magnetic memory)and other forms of emerging memory havebegun. We regard these technological inflection
points as excellent opportunities for businessexpansion and remain committed to striving
toward growth. The semiconductor productionindustry will continue to expand. I am confident
that Tokyo Electron will achieve further growth byaggressively investing in the development ofgrowth fields, creating breakthrough technologies, and thus contributing to the creation ofvalue for society.
* Source: IntelFiscal 2015 Business Highlights
1.	Increased Profitability and Competitivenessin the Mainstay SPE BusinessIn 2014, capital investment in wafer fab equipment grew a considerable 16% year on year,
backed by strong demand for mobile devices. To
take advantage of opportunities for growth in2014, Tokyo Electron advanced the timely introduction of new products. These efforts paid off as
our market shares in all product categories grewand SPE segment net sales outpaced market
growth, climbing 20% year on year to ¥576.2 billion. In the cleaning system and etch system businesses, areas of particular focus for us, weachieved steady market share growth, with thecleaning systems business reaching an all-timehigh. In addition, we have been working toTOKYO ELECTRON ANNUAL REPORT 2015

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6

CONTENTSCONTENTS

Financial Highlights

Business Overview

Review of Operations
and Business Outlook

To Our Stakeholders

Message from the CEO

Corporate Governance

Financial Section

Corporate Data

Message from the COO

Message from the CEO

Demand for semiconductors
will expand as the world
connects through the IoE
Automobiles

Transportation

Data center
Smart homes

expand sales in the field solutions business,
which handles sales of parts and used equipment, modifications and maintenance services,since setting up a dedicated business unit in 2009
for this area. In fiscal 2015, we achieved annual
net sales in this business of over ¥170 billion, well
above our target of ¥150 billion. As miniaturization
advances and demand for more sophisticatedtechnologies increases, the expectations facing
equipment manufacturers regarding sophisticatedsolutions and support capabilities are also rising.
At the same time, we continue to advance initiatives to streamline development and manufacturing, including reducing costs from the design
stage onward, shortening production lead times
and revising procurement.
As a result of such efforts, in fiscal 2015 weachieved a segment profit margin in the SPE business of 23.6%, a record-high level.
2.	Business Reorganization to Concentrate
Management Resources
In fiscal 2015, we also implemented significant
business reorganization to further improve profitability. First, withdrawal from the unprofitable
photovoltaic panel (PV) production equipment
business proceeded as planned. Accordingly, infiscal 2016, ending March 31, 2016, we will only
continue support operations for delivered units,
and we expect to greatly reduce segment loss
compared with fiscal 2015. We also consolidated
development sites and other locations.
Furthermore, we reduced our stake in Tokyo
Electron Device Limited (TED), which handles the

Net Income (Loss) and ROE

90

-19.4

13

14

30

-3.3%

6.1
1.0%

0

60

50

40

11.8%

120

51

150

60

20

143

(Yen)

71.9

(Billions of Yen)
80

Cash Dividends per Share

-20

0

13
Net income (loss)

14

15
ROE

15

The fiscal 2013 annual dividend of ¥51 includes
a commemorative 50 year anniversary dividend of ¥20.

Smart Cities

The cloudData center

AI

Data center

Big data analysis
Industrial

Wearables

Medical/Healthcare

MobileMemoryelectronic components and computer networks
business, resulting in the reclassification of TED
from consolidated subsidiary to equity method
affiliate. As a result, the fiscal 2015 gross profit
margin improved 6.6 percentage points year on
year to 39.6%. ROE came to 11.8%, and net
cash provided by operating activities amounted
to ¥71.8 billion, both big improvements over theprevious fiscal year. Going forward, we aim tocontinue to strengthen our business foundations,grow profit and return profit to our shareholders.
Lastly, in May 2015, we announced a new
executive framework aimed at powerfully
pushing growth forward. This change brought
younger members into top management. We
also newly appointed the chairman of theboard and established the position of Chief
Operating Officer (COO) under the president

Processors

Sensors

and CEO. These changes are intended to create a system that can swiftly execute businessand thus move continuously forward in anenvironment of constant change and fierce
competition. We also added executive officers
who possess rich experience managing local
companies overseas, intending to enhance ourcompetitiveness at a global level.
In April 2015, we announced plans for ashare repurchase of up to ¥120 billion. Goingforward, we will formulate a medium-term
management plan to address new tasks facing
us and review our capital policies while considering ways to offer more appealing shareholder returns. We will accelerate innovative
initiatives and strive to increase corporate
value. Thank you for your continued confidence and support.

TOKYO ELECTRON ANNUAL REPORT 2015

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7

CONTENTSCONTENTS

Financial Highlights

Business Overview

Review of Operations
and Business Outlook

To Our Stakeholders

Message from the CEO

Corporate Governance

Financial Section

Corporate Data

Message from the COO

To Our Stakeholders Message from the COO

As Technology
Advances, New
Opportunities
Arise

Expanding our Competitive
Strengths
to Maximize Growth
Opportunities

I am pleased to have assumed the position ofrepresentative director, senior executive vicepresident and COO in June 2015. I would like tothank our shareholders and other stakeholders fortheir support and confidence.
The internet of things (IoT), which will connect not
only conventional PCs and mobile devices, butalso various other objects, is nearly upon us.
According to Cisco Systems, a U.S.-based networking equipment manufacturer, the number ofdevices connected to the internet is expected to
grow from 14.5 billion in 2014 to 50 billion in
2020, and annual global IP traffic is thus expected
to grow an average of 21% per year from 2013 to2018. Technological innovation in semiconductors

Under a new executive framework designed to maximize
Tokyo Electron’s strengths, we are pursuing world-classproduct competitiveness and profitability and thus seeking
to enhance corporate value.

has an important part to play in the arrival of thisnew era, as do the cutting-edge production
equipment technologies that support such innovation.
The semiconductor industry is now right on thebrink of the most important inflection points in its
history. Until now, semiconductors have developed through ongoing miniaturization. However,as miniaturization progresses, we are encountering various technological barriers that cannot be
overcome by existing technologies. To breakthrough these barriers, innovative new technologies are emerging. These include 3D structuredevices, such as 3D NAND flash and FinFET, theuse of new semiconductor materials, and multiple
patterning that realizes finer patterns by using
etch and deposition with current lithography
technology. By developing products suited forthese new technologies, Tokyo Electron raised its
market share in every one of its product categories in 2014. We regard technological inflection
points as unparalleled opportunities for businessexpansion.
Going forward, under a new organizational structure, we will focus on our mainstay semiconductor production equipment (SPE) and flat panel
display (FPD) production equipment businesses
to further enhance product competitiveness. First,
we are forcefully implementing our region andaccount management structures to construct anorganizational system that can better respond to
customers’ needs by quickly offering sophisticated solutions. Furthermore, as technologicaldemands grow more advanced, process control
across product categories grows more important.
Tokyo Electron will therefore leverage the strengthof its large and diverse product lineup to develop
higher-added-value products. We are concentrating resources in areas that are expected to growand streamlining development to accelerate theimplementation of our product strategies.
As a market leader in the fields of SPE and FPD
production equipment, we seek to contribute to
the creation of a bright future for the world and, in
doing so, continue to increase Tokyo Electron’s
corporate value. To make Tokyo Electron a truly
global company, we will do our utmost to achieve
world-class profitability and product competitiveness. To succeed, I ask for your continued support and confidence as we continue to move
forward.

June 2015

Toshiki Kawai
Senior Executive Vice President & COO

TOKYO ELECTRON ANNUAL REPORT 2015

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8

CONTENTSCONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Corporate Governance

Financial Section

Corporate Data

Review of Operations and Business Outlook

Review of Operations and Business Outlook
SALES BY SEGMENT

SHARE OFNET SALES

BUSINESS ENVIRONMENT

BUSINESS OVERVIEW

BUSINESS OUTLOOK

Semiconductor Production Equipment(Billions of yen)
0

150

300

450

11

600

511.3

12

Net Sales

477.9

13

¥ 576.2

392.0

14billion
478.8

15

94.0%

576.2

In 2014, global shipment volumes of smartphones and other mobile devices were robust,
up 23% year on year, and demand for data center servers was strong, due to expanding internet data transmission volumes. Supported bythese factors, sales in the global semiconductor
market grew 8% year on year to a record high of
US$340 billion. Accordingly, investment in additional production capacity for mobile DRAM and
NAND flash memory picked up speed. Capital
investment in logic semiconductors was also
firm, supported by favorable server demand. As
a result, global capital investment in wafer fab
equipment saw considerable year on year
growth, up 16%.

Segment net sales grew faster than the wafer fab
equipment market, up 20.3% year on year to¥576.2 billion.

Overall demand for flat panel displays (FPDs)
grew nearly 10% (area basis) in 2014, reflecting
shifts toward larger and higher definition smartphone screens and TVs. As a result, capital
investment in production equipment for largesized panels in China grew, and the worldwide
market for FPD production equipment saw solid
year-on-year growth of 20%.

Segment net sales rose 15.5% to ¥32.7 billion.

The number of photovoltaic panels (PV) installed
globally continues to increase each year, reflecting growing environmental awareness and energy supply problems worldwide. Nevertheless,production equipment remains in oversupply.

Segment net sales fell 4.9% year on year to¥3.6 billion.

Market share in all product categories improved,and overall share of the wafer fab equipment market rose from 10.5% to 13.6%.
Market share of cleaning systems reached 25%,
its highest level ever.
Net sales in the field solutions business (sales ofparts and used equipment, modification, maintenance services, etc.) rose more than 35% year on
year.

Demand for semiconductors is expected to continue to grow. This growth will be driven
by the increase of per-mobile and per-server memory, the arrival of the internet of things(IoT) and more sophisticated use of big data as well as the rapid development of the networks that support these technologies.
For these developments to progress, semiconductor devices must offer even higher performance at lower cost. The role of semiconductor production equipment is thus growing
ever more important. Tokyo Electron regards this technological inflection point as an opportunity for growth and is aggressively bringing to market new high performance, high productivity products. In the area of finer patterning, to expand sales, the Company is introducing
coater/developers with new defect-reducing features, single wafer cleaning systems that
reduce pattern collapse, as well as etch systems and deposition systems, for which demandis expected to grow alongside expansion in multiple patterning processes. Furthermore, in
response to the adoption of 3D structure devices and new semiconductor materials, Tokyo
Electron aims to increase its market position in such areas as ALD systems, etch systems anddry cleaning systems, which boast advanced thin-film control and processing technologies.
STT-MRAM (spin transfer torque-magnetoresistive random access memory) is a promising candidate for the next-generation of memory device. Tokyo Electron possesses all
the products necessary to form STT-MRAM’s core memory cells. Using this advantage,
the Company aims to establish high-volume manufacturing technology that will help
commercialize STT-MRAM for practical use through joint development with business
partners, universities and consortia.
In the advanced packaging field, we are working to reduce costs, the greatest obstacle to mass production, through joint research with Singapore’s Agency for Science,
Technology and Research.

FPD Production Equipment(Billions of yen)
0

20

40

11

60

80

5.3%

66.7

12

Net Sales

69.9

13

¥ 32.720.1

14billion
28.3

15

32.7

Sales in China accounted for over 50% of total
sales.
Sales of inductively coupled plasma (ICP) etchsystems, which have a competitive edge amongproducts for high definition, large-sized panels,
were strong.
Tokyo Electron’s inkjet printing systems for manufacturing OLED panels were adopted in customers’ development lines.

Total FPD area demand is forecast to continue expanding, reflecting strong demand
for larger televisions and smartphones, the adoption of higher resolutions, including
4K, and expected market growth for displays used in automobiles and wearables.
Accordingly, in 2015, the FPD production equipment market is expected to grow
20% year on year due to continued capital investment in large-sized panels andincreasing investment for small- and medium-sized panels for mobile devices.
At the same time, in thin-film transistor (TFT) processes, the use of low-temperaturepolysilicon (LTPS) and such oxide semiconductors as indium gallium zinc oxide (IGZO)
in place of conventional amorphous silicon is growing alongside the shift toward higher
definition displays. Tokyo Electron will continue working to increase revenues by
expanding sales of technologically superior ICP etch systems that can handle these
new materials. The Company furthermore aims to expand the production equipment
market for OLED displays, which are hailed as the next generation of display technology, by increasing productivity and reducing costs for customers with inkjet printing systems for use in the manufacture of large-sized OLED panels.

PV Production Equipment(Billions of yen)
0

2

4

6

8

0.6%

11
Net Sales

12
13

¥ 3.6

0.1

billion

14

3.8

15

3.6

From fiscal 2011 to fiscal 2012, PV production equipment
sales are included in FPD production equipment sales.

Business withdrawal proceeded as planned.

Aiming to break into the thin-film silicon PV production equipment market, Tokyo
Electron became the exclusive sales representative of Switzerland-based Oerlikon
Solar in 2009. In 2012, the Company acquired Oerlikon Solar with the aim of generating growth. However, having determined that it could not expect a reasonable returnon investment going forward, Tokyo Electron ended all research and development,
manufacturing and sales operations in the PV production equipment business at theend of March 31, 2014.
Going forward, the Company will continue only support operations for delivered
units, and expects to further reduce losses in this segment.

TOKYO ELECTRON ANNUAL REPORT 2015

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9

CONTENTSCONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Financial Section

Corporate GovernanceCorporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate GovernanceCorporate Governance
Against a backdrop of ongoing business globalization, Tokyo

clearly define management accountability, the term of office forconsolidated return on equity (ROE), two performance

Internal Control System and Risk Management

Electron maintains a management philosophy that places

directors is set at one year.

indicators of consolidated business results. Necessary

Tokyo Electron is implementing measures related to Internal

adjustments are then made when there are special factors

Controls Over Financial Reporting based on the Financial

that should be taken into account, such as principal

Instruments and Exchange Act. In response to the May 2015

emphasis on improving corporate value for its shareholders
and all other stakeholders. To this end, the Company

The Audit & Supervisory Board

considers it important to strengthen corporate governance. In

The Company has five Audit & Supervisory Board Members,

performance indicators for the term under review, includingchanges to the Companies Act and the Ordinance forline with the following three basic principles, the Company

three of whom are outside Audit & Supervisory Board

profits and losses, and so on. In principle, performance-

Enforcement of the Companies Act, the Company has updated

works to maintain a highly effective, optimized corporate

Members. The Audit & Supervisory Board Members attend

linked compensation comprises cash bonuses and stock-

the Fundamental Policies Concerning Internal Controls withingovernance structure while upgrading and strengthening its

meetings of the Board of Directors and other important

based compensation. Performance-linked compensation is

the Tokyo Electron Group and is working to strengthen internalinternal control systems and risk management system.

business meetings, audit the performance of duties bylimited to five times the fixed yearly remuneration. The ratio

control systems as a corporate group and to improve thedirectors, determine audit policy and the division of auditingof cash bonuses to stock-based compensation has

audit system of the Audit & Supervisory Board in terms ofTokyo Electron’s Basic Principles of Corporate

duties among Members at Audit & Supervisory Board

generally been one to one. Stock-based compensation

concreteness and robustness.

Governancemeetings, and examine the Group’s execution of operations.

consists of granting share subscription rights with a set

1. Ensure the transparency and soundness of business operations

Through these and other measures, Audit & Supervisory

strike price of one yen per share and a three-year vesting

2. Facilitate quick decision-making and the efficient execution

Board Members work to provide effective auditing. During

period before the granted stock options may be exercised.

fiscal 2015, the Audit & Supervisory Board met seven times.

3. T he performance-linked compensation of outside directorsof business operations
3. Disclose information in a timely and suitable manner

Risk Management System
To more effectively strengthen the internal control and risk
management systems of the entire Group, Tokyo Electron has

does not include stock-based compensation.
Outside Directors and Outside Audit & Supervisory
Board Members

established a dedicated risk management and internal control

4. The compensation for Audit & Supervisory Board Membersfunction within the General Affairs Department under theconsists only of a monthly fixed remuneration, to maintainexecutive officer in charge of compliance and internal control.

independence from management.

This function analyzes the risks which could affect the GroupThe Corporate Governance Framework

From the viewpoint of objectively ensuring the effectiveness ofTokyo Electron uses the Audit & Supervisory Board system

the decision-making of the Board of Directors, Tokyo Electron

5. Retirement allowance systems for corporate directors andbased on the Companies Act, and furthermore has

has appointed two outside directors to the Board: Mr. Hiroshi

Audit & Supervisory Board Members have been abolishedreduce risk, such as requiring self-assessments from relevant

established its own Compensation Committee* andInoue, who is Chairman of the Board at Tokyo Broadcastingsince the end of fiscal 2005, as part of the revisions todepartments related to identified key risk factors. It also

Nomination Committee** to increase the transparency and

System Holdings, Inc., and Mr. Masahiro Sakane, who isTokyo Electron’s executive compensation program.

reports on risk management activities to the Audit &objectivity of management. The members of theseCouncilor at Komatsu Ltd. Additionally, to objectively ensurecommittees are directors or Audit & Supervisory Board

the reasonableness of the audits, Tokyo Electron has

Members, excluding the representative directors. Also, toappointed three outside Audit & Supervisory Board Members:

more clearly define the roles of the Board of Directors and theMr. Mikio Akaishi, Mr. Takatoshi Yamamoto and Mr. Ryuji

executive body and to facilitate quick decision-making, Tokyo

Sakai, who is an attorney at law of Nagashima Ohno &Electron has adopted the executive officer system since 2003,

Tsunematsu. Mr. Mikio Akaishi conducts audits of the Tokyoand in 2015 established the Corporate Senior Staff (CSS),

Electron Group as a full-time Audit & Supervisory Board

composed mainly of executive officers, as a deliberative body

Member.

Supervisory Board Members and the Board of Directors.

Diagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Shareholders' Meetingfor the Group’s global strategy. Moreover, Tokyo Electron has
been disclosing the individual remuneration of representativeCompensation for Corporate Directors and Audit &directors since 1999 in recognition of the importance ofSupervisory Board Members

managerial transparency for shareholders.
* 	Compensation Committee: This committee makes recommendations to theBoard of Directors on the director remuneration system as well as
representative director remuneration itself.
** 	Nomination Committee: This committee nominates director- and CEOcandidates, and submits them to the Board of Directors for approval.

compensation more closely to financial results andshareholder value, raising corporate competitiveness, andenhancing management transparency.
1. The compensation for corporate directors consists of a

The Board of Directors
The Board of Directors consists of 13 directors, two of whom
are outside directors. In principle, the Board of Directors meets

Board of Directors

Compensation Committee
Nomination Committee

monthly fixed remuneration and a performance-linked
compensation.
2. The performance-linked compensation system foronce a month. During fiscal 2015, the Board of Directors met

corporate directors is designed to align compensation moreon 12 occasions. In order to ensure that the Company canclearly with financial results and increases in shareholder

respond quickly to changing business conditions, and to morevalue. It takes into account consolidated net income andAudit & Supervisory
Board

Chief Business Ethics Director
Chief Internal Control Director
Chief CSR Promotion Director

Tokyo Electron has adopted the following executive
compensation program with the intention of tying

and, as necessary, promotes measures to manage andRequest for improvement/Report

Representative Directors

Confirm the progress of improvements and give instructions
Audit and improvement reports

Request for improvement/ReportCompliance & Internal Control Executive Officer
CSR Promotion Executive Officer

Internal Audit Dept.
(Global Audit Center)

Executive Officers

Committees Ethics Committee
Information Security Committee
Export Trade Control Committee

Independent Auditors

Request for improvement/Report

CSR Promotion Council
Risk Management & Internal Control Function(General Affairs Dept.)
Request for improvement/Report

Monitoring

Administrative Depts.

Check and balance

Business Depts.

Audit

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

10

CONTENTSCONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Financial Section

Corporate GovernanceCorporate GovernanceCorporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate GovernanceBusiness Ethics and Complianceinternational standards and internal company rules, andoversee the meeting. Under the leadership of the CSR

The Global Audit Center oversees the internal auditing

Stakeholder trust is the cornerstone of business activities. In

continuously apply them in all of their activities.

Promotion Executive Officer, the Group is working to further

activities of the entire Tokyo Electron Group. The Center isorder to maintain trust, it is necessary to continuously act inAuditing by the Internal Audit Department

enhance CSR activities.

responsible for auditing the business activities of the Group’s

rigorous conformity to business ethics and compliance. In line

domestic and overseas bases as well as their compliance andwith the Fundamental Policies Concerning Internal Controls

The Tokyo Electron Group uses its e-learning system tosystems, and for evaluating the effectiveness of internal

within the Tokyo Electron Group, all Group executives andprovide mandatory web-based training covering the basics ofcontrol systems. As necessary, the Global Audit Center also

employees are required to maintain high standards of ethics

compliance, export-related compliance and other topics for all

provides guidance to operating divisions.

and to act with a clear awareness of compliance.

executives and employees. The Group also implementsCompliance Education

Constituent of the
FTSE4Good Global Index

specialized web-based training on insider trading and otherCoordination between Audit & Supervisory Board

Business Ethics

Members and Internal Audit Department

In 1998, Tokyo Electron formulated the Code of Ethics of the

The Audit & Supervisory Board Members coordinate with theTokyo Electron Group to establish uniform standards to

Global Audit Center, a department responsible for internal

govern all of its global business activities. In the same year,

auditing activities, primarily by attending its report meetings.

subjects that is tailored to particular job positions andfunctions.

since September 2003. The FTSE4Good Global Index is a social
responsibility investment (SRI) index provided by the FTSE Group,Internal Reporting System

the Company appointed a Chief Business Ethics Director and

The Group operates an internal reporting system that

established the Ethics Committee, which is responsible for

employees can use to report concerns related to any activity

Coordination between Audit & Supervisory Board

promoting business ethics awareness throughout the Group.

which may violate laws, regulations or principles of business

Members and Independent Auditors

The Ethics Committee comprises the Chief Business Ethics

ethics. The entire Group has established an ethics hotline andDirector, the Ethics Committee Chairman and the presidents

a compliance hotline, and this reporting system is also in

The Audit & Supervisory Board Members receive audit plans

Tokyo Electron has been a constituent of the FTSE4Good Global Indexa world-leading index firm wholly owned by the London Stock Exchange.

Dialog with Investors
IR Activities

for the fiscal year from the independent auditors, as well asof major Group companies in and outside Japan. The

place at each overseas base. In all cases, this system ensures

Striving to maintain dialog with investors, Tokyo Electron

explanations regarding auditing methods and particular areascommittee meets semiannually to report on ethics-related

that strict confidentiality is maintained to protect

appoints an executive officer in charge of IR and maintains aof focus, among other matters. The independent auditors

matters at Group companies and discuss such matters as

whistleblowers and ensure that they are not subject to any

dedicated Investor Relations Department under the direct

audit the year-end financial statements and review themeasures to promote ethics and compliance.

disadvantage or repercussions.

control of the president & CEO.
Tokyo Electron holds earnings release conferences forquarterly financial statements, and report the results of theiraudits to the Audit & Supervisory Board Members.

Compliance Systemsecurities analysts and institutional investors with such

Tokyo Electron has appointed an executive officer in charge ofCSR (Corporate Social Responsibility)

speakers as the CEO and the executive officer in charge ofcompliance and internal control as part of ongoing efforts to

The Tokyo Electron Group regards as its greatest social

accounting. The Group also participates in IR conferences inthat it can conduct its audits during the fiscal year promptly

raise awareness of compliance across the Group and to further

responsibility achieving sound and sustained corporate growthand outside Japan, at which the executive officer in charge ofand correctly.

improve its implementation. In addition, Tokyo Electron has

in order to contribute to the development of society throughIR speaks, and holds individual meetings.

drawn up the Compliance Regulations setting out basic

the provision of superior products, technologies and services.

The spokespersons for the IR Department hold individualcompliance-related requirements in line with the Code of

To further promote CSR initiatives, the Group has establishedmeetings with investors and periodically relay the opinions of

Ethics. The Compliance Regulations are intended to ensure

a CSR Policy as well as dedicated CSR promotion structure.

investors at these events to the CEO and the executive officer

The Company provides KPMG AZSA LLC, its independent
auditors, with all necessary information and data to ensurein charge of IR so that feedback can be of use inthat all individuals who take part in business activities for theGroup clearly understand pertinent laws, regulations,

CSR Policy

management.

In 2013, Tokyo Electron adopted a CSR Policy based on theDoes Tokyo Electron have these major components of corporate governance?
Compensation Committee

Yes

Composed of directors, excluding representative directors,
or Audit & Supervisory Board Members

Nomination Committee

Yes

Composed of directors, excluding representative directors,
or Audit & Supervisory Board Members

Company’s Corporate Philosophy and Management Policies,

Shareholders’ Meeting

codifying its basic stance and values with regard to CSRTokyo Electron mails a Notice of Annual General Meeting ofactivities and concretely stating its corporate social

Shareholders to shareholders more than three weeks inresponsibility and policies. By understanding its duties as aadvance of the meeting as one of its measures to vitalize

good corporate citizen and earnestly responding to thethese meetings and to promote smooth and efficient voting. It

demands of society, the Tokyo Electron Group seeks toalso sets the date of the Company’s meeting to avoid days oncontribute to society and create hope for the future.

which many such meetings are concentrated. In addition,

Outside directors

Yes

Two of the 13 directors are outside directors

Outside Audit & Supervisory Board Members

Yes

Three of the five Audit & Supervisory Board Members areoutside Audit & Supervisory Board Members

Executive officer system

Yes

Disclosure of individual remunerations of representative directors

Yes

Performance-linked compensation system

Yes

Stock options system

Yes

Retirement allowance system for executives

Noformulate and review CSR promotion plans and indicators,

initiatives, Tokyo Electron’s website carries notices,

Anti-takeover measures

Noand newly appointed a Chief CSR Promotion Director toresolutions, and voting results of shareholders’ meetings.

shareholders are free to cast their votes via the Internet.
Disclosed since 1999
Does not apply to outside directors andAudit & Supervisory Board Members

CSR Promotion Council, Chief CSR Promotion

Moreover, Tokyo Electron participates in the web-based voting

Director, CSR Promotion Executive Officer

platform for institutional investors operated by ICJ, Inc.

In 2014, the Group established the CSR Promotion Council to

To supplement the above shareholder meeting-related

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

11

CONTENTSCONTENTS

Financial Highlights

Business Overview

Review of Operations
and Business Outlook

To Our Stakeholders

Financial Section

Corporate GovernanceCorporate GovernanceDirectors, Audit & Supervisory Board Members and Executive Officers

Directors, Audit & Supervisory Board Members and Executive Officers (As of June 19, 2015)
Directors

Executive Officers
Tetsuro Higashi

Tatsuya Nagakubo

President & CEO

Vice President & General Manager,
Human Resources & General Affairs Division,
CSR Promotion,
Corporate Branding Promotion

Toshiki Kawai
Senior Executive Vice President & COO,
General Manager, Business Promotion
Division, General Manager, Business
Unit Division

Tetsuo Tsuneishi

Tetsuro Higashi

Toshiki Kawai

Hirofumi Kitayama

Chairman of the Board

Representative Director
President & CEO

Representative Director
Senior Executive Vice President& COO

Representative Director
Senior Executive Vice President
Business Ethics, CSR Promotion

Hirofumi Kitayama

Tetsuro Hori

Gishi Chung

Corporate Director

Corporate Director

Corporate Director
Internal Control

Corporate Director

Hikaru Ito

Vice President & General Manager,
System Development Division,
Deputy General Manager,
Production Division

Tetsuro Hori

Seisu Ikeda (Yoh)Senior Vice President & General Manager,
Finance & Legal Division, Corporate
Strategy, IR,Compliance & Internal Control

Vice President & General Manager, CTBU

Masami Akimoto
Senior Vice President & Deputy General
Manager, Development & Manufacturing
Division
President, Tokyo Electron Kyushu Ltd.

Sadao Sasaki

Tatsuya Nagakubo

Hiroshi Inoue*

Masahiro Sakane*

Corporate Director

Corporate Director

Corporate Director

Outside Corporate Director/
Chairman & Representative
Director, Tokyo Broadcasting
System Holdings, Inc.

Outside Corporate Director/
Councilor, Komatsu Ltd.
* Outside Director

Senior Vice President & Deputy General
Manager, Development & Manufacturing
Division, Deputy General Manager,
SPE Development Division
President, Tokyo Electron Tohoku, Ltd.

Shigetoshi Hosaka
Senior Vice President & General Manager,
Corporate Development Division

Hideyuki Tsutsumi

Audit & Supervisory Board Members

Senior Vice President & General Manager,
Deputy General Manager,
Business Unit Division (ES/TPS)

Barry Mayer
Senior Vice President & General Manager,
Global Strategy
President, Tokyo Electron U.S. Holdings, Inc.

David BroughYoshiteru Harada

Shojiro Mori

Mikio Akaishi*

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member

Takatoshi
Yamamoto*
Audit & Supervisory
Board Member

Ryuji Sakai*
Audit & Supervisory Board
Member/Attorney at law,
Nagashima Ohno & Tsunematsu* Outside Audit & Supervisory Board Member

Kazushi Tahara

Keisuke Koizumi

Senior Vice President & General Manager,
SPE Development Division

Sadao Sasaki

Vice President & General Manager,
Legal/Export & Logistics Control

Senior Vice President &Deputy General Manager,
Global Field Division

Gishi Chung

Masami Akimoto

Vice President & General Manager,
Corporate Strategy

Takeo Sasaki

Kenji Washino

Kenji Washino

Masahiko Hamajima

Senior Executive Vice President,
General Manager, Development &Manufacturing Division, General Manager,
Production Division, Quality
Executive Vice President & General Manager,
Global Field Division

Hikaru Ito

Corporate Data

Senior Vice President & General Manager,
Global Strategy, General Manager,
Europe Region
President, Tokyo Electron Europe Ltd.

Vice President & General Manager,
IT Division

Yoshinobu Mitano
Vice President & General Manager, ESBU

Shingo Tada
Vice President & General Manager, TPSBU

Takeshi Okubo
Vice President & General Manager, SDBU

Toshihiko Nishigaki
Vice President & General Manager, SPSBU

Yuichi Abe
Vice President & General Manager, ATSBU

Kiyoshi Sunohara
Vice President & General Manager, FSBU

Tsuguhiko Matsuura
Vice President & General Manager, FPDBUYoshiaki Horii
Vice President & General Manager,
Planning of Region Strategy

Shinichi Sasahara
Vice President & General Manager, PVE

Yoshifumi Tahara
Vice President & General Manager
President, Tokyo Electron Yamanashi Ltd.

Hiromichi Ito
Vice President & General Manager
President, Tokyo Electron Miyagi Ltd.

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

12

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportFinancial Review
Sales and Income
Operating Environment

was mainly due to the aforementioned exclusion of TED, which

Research and Development

Other Income (Expenses) and Net Income (Loss)

had a domestic sales ratio of approximately 80%, from the scope

R&D expenses were down 9.3% year on year to ¥71.3 billion. The

During fiscal 2015, main sources of other income were ¥1.8 billionof consolidation.

main cause of this decrease was the withdrawal from the PV pro-in gain on sale of property, plant and equipment including the saleduction equipment business. The ratio of R&D expenses to netof land and buildings related to Tokyo Electron’s withdrawal fromchiefly in the United States, despite slowing growth in some

5.1% compared with the previous fiscal year. This was due to thesales dropped from 12.9% in fiscal 2014 to 11.6% in fiscal 2015.

the PV production equipment business, ¥1.6 billion in foreign

emerging Asian countries.

exclusion of TED from the scope of consolidation, which over-This was because R&D expenses diminished while net sales

exchange gain and ¥1.3 billion in interest and dividend income.

In the electronics industry, in which Tokyo Electron operates,

shadowed an increase in orders received of more than 14% in theremained roughly level with those of the previous fiscal year. As

The Company recorded many other expenses for business reorga-sales of new, high-performance smartphones were strong, and themainstay SPE business. The order backlog at the end of March

Tokyo Electron views R&D as a source of growth, the Company

nization and to improve asset efficiency. These expenses mainly

smartphone markets of China and other emerging countries also2015 was ¥295.8 billion, up 11.6% year on year. For orders received

invested not only in strengthening existing business areas, but also

included ¥2.5 billion in loss on impairment of buildings and pro-

expanded. Markets for electronics and semiconductors were also

and order backlog in the SPE and FPD production equipment seg-in new areas that are expected to support future growth.

duction facilities resulting chiefly from revisions to business plans

firm, reflecting increasing demand for data center servers due toments, see Performance by Segment on page 13.

Orders received during fiscal 2015 came to ¥661.0 billion, down

The overall world economy in fiscal 2015 saw gradual recovery,

R&D investment in semiconductor production equipment wasfor a factory in China in the FPD production equipment business,

focused on cutting-edge technologies in order to improve semicon-¥1.6 billion in loss on sales of affiliates’ shares accompanying thether growth of cloud computing. As a result, capital investment by

Gross Profit, SG&A Expenses and Operating Income

ductor speed, capacity, power consumption and cost effectiveness.

exclusion of TED from the scope of consolidation, ¥1.1 billion insemiconductor manufacturers, Tokyo Electron’s main customers,

Cost of sales during fiscal 2015 decreased 9.7% year on year toEfforts to develop key technologies in the areas of etching, deposi-loss on liquidation of subsidiaries related to the PV production

saw considerable growth of 16% compared with the previous year.

¥370.4 billion, while the cost of sales ratio dropped 6.6 percentage

tion and cleaning, which realize multiple patterning for further minia-

equipment business, and ¥1.0 billion in expenses for restructuring

rapid growth in data transmission volumes accompanying the fur-points to 60.4%. As a result, gross profit was up 20.2% year on

turization, 3D structure devices and new materials, contributed to anof business bases due to the closure of the Technology Center

Sales

year to ¥242.8 billion, and the gross profit margin rose consider-increase in Tokyo Electron’s market share in calendar year 2014.

Sendai and Technology Center Tsukuba. As a result, net other

During fiscal 2015, aiming to further increase future profitability,

ably, from 33.0% in fiscal 2014 to a record high of 39.6% in fiscal

Other achievements included progress in the development of pro-income (expenses) came to ¥1.3 billion of net expense in fiscal

Tokyo Electron implemented business reorganization in order to2015. The primary reasons for this improvement were increased

duction equipment for STT-MRAM*, a promising candidate for the2015, compared with ¥44.0 billion of net expense in fiscal 2014.

concentrate management resources on its mainstay semiconduc-competitiveness and profitability in the mainstay SPE business andnext-generation of memory device. Certain products in these areas

tor production equipment (SPE) and flat panel display (FPD) pro-the effect of business reorganization that resulted in the exclusion

were also adopted in customers’ development lines.

duction equipment businesses. As part of this reorganization, theof TED from the scope of consolidation.

As a result, income before income taxes and minority interestscame to ¥86.8 billion, compared with a ¥11.8 billion loss in the

In the advanced packaging field, Tokyo Election has com-previous year. Net income totaled ¥71.9 billion in fiscal 2015, com-

Company sold a portion of its shares of Tokyo Electron Device

SG&A expenses fell 8.9% year on year to ¥154.7 billion. This

menced joint research with the Institute of Microelectronics ofpared with net loss of ¥19.4 billion in fiscal 2014. Net income per

Limited (TED), which operates the electronic components anddecrease consisted of a ¥13.1 billion decrease resulting from theSingapore’s Agency for Science, Technology and Research. This

share was ¥401.08 in fiscal 2015, compared with net loss percomputer networks business, resulting in the reclassification of

exclusion of TED from the scope of consolidation as well as a ¥7.3

research aims to establish a new standard technology in the pack-share of ¥108.31 in fiscal 2014.

TED from a consolidated subsidiary to an equity method affiliate.

billion reduction in R&D expenses reflecting a withdrawal from theaging industry and reduce costs, the greatest remaining obstacle

TED’s exclusion from the scope of consolidation as of fiscal 2015

photovoltaic panel (PV) production equipment business. Althoughto achieving full-fledged high volume manufacturing.

resulted in a year on year decrease in consolidated net sales ofthe exclusion of TED, which had a low ratio of SG&A expenses toapproximately ¥100.7 billion (TED’s net sales in fiscal 2014).

net sales, from the scope of consolidation pushed the consolidat-

accelerating development of inkjet printing systems for manufac-of ¥80.3 billion, compared with loss of ¥10.9 billion in fiscal 2014.

However, buoyed by the favorable market conditions described

ed SG&A expenses ratio up, the ratio of SG&A expenses to net

turing OLED panels. These efforts led to adoptions of such sys-

This was mainly due to income before minority interests of ¥71.9

above, sales in Tokyo Electron’s mainstay SPE and FPD produc-

sales in the mainstay SPE and FPD production equipment seg-tems in a customer’s development lines.

billion, foreign currency translation adjustments of ¥6.6 billion,

tion equipment businesses grew ¥101.8 billion from fiscal 2014.

ments fell considerably due to sales increases. As a result, the ratio

As a result, net sales in fiscal 2015 rose 0.2% year on year toof SG&A expenses to consolidated net sales dropped from 27.7%¥613.1 billion.

in the previous fiscal year to 25.2% in the fiscal year under review.

reflecting the depreciation of the yen, and the ¥3.9 billion gain on* STT-MRAM: Spin Transfer Torque-Magnetoresistive Random Access
Memory (an emerging memory promising for its low power consumption)changes in fair value of investment securities.

234,758

211,445

158,755

201,892

242,774

35.1%

33.4%

31.9%

33.0%

39.6%

Selling, general and administrative expenses

136,888

151,002146,206

169,687

154,661

Operating income

97,87060,443

12,54932,205

88,113Operating margin

14.6%

9.5%

2.5%

5.3%

14.4%

Income (loss) before income taxes and minority interests

99,57960,602

17,767(11,756)

86,828Net income (loss)

71,92436,726

6,076(19,409)71,888

25

11

12

0

13

14

15

71.9

71.9

88.1

97.9

613.1

612.2

9.5

200

 Domestic
 Overseas

40
10

50

20

5.3

5

-19.4

Gross profit

400

60

6.1

¥613,12580

36.7¥612,170

15

32.2¥497,300

12.5¥633,091(Billions of yen)

14.4

60.4

¥668,722

14.6

518.1

Net sales

95.0

2015

450.5

2014

161.6

2013

378.8

2012

Net Income (Loss)
(%)
20

75

118.5

2011

497.3

100
633.1

(Billions of yen)

800

600

Millions of yen

Operating Income andOperating Margin(Billions of yen)

461.7

10.9 percentage points from 73.6% in fiscal 2014. This change

Domestic and Overseas Sales

171.4

5.3% to 14.4%.

486.6 668.7

to ¥88.1 billion, and the operating margin rose considerably, fromshare of total consolidated sales came to 84.5% in fiscal 2015, up

182.2

overseas sales grew 15.0% to ¥518.1 billion. Overseas sales as a

Gross profit margin

In fiscal 2015, Tokyo Electron recognized comprehensive income

In FPD production equipment, R&D investment concentrated onConsequently, operating income increased 173.6% year on year

Domestic sales fell 41.2% year on year to ¥95.0 billion, while

Sales and Income

Comprehensive Income (Loss)

13

14

0

2.5
0

0

11
 Operating Income Operating Margin

12

13

14

15

-20

11

12

15

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

13

CONTENTSCONTENTS

Financial Highlights

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Financial Review

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportFinancial Review
Dividend Policy and Dividends

miniaturization and resulting rising demand for production equip-

M PV (Photovoltaic Panel) Production Equipmentfrom ¥3.8 billion to ¥3.6 billion. Segment loss narrowed to ¥8.8 bil-

It is the policy of Tokyo Electron to pay dividends on the basis ofment manufacturers that have strong technical capabilities.

Tokyo Electron announced in January 2014 that it would withdraw

lion in fiscal 2015 from a loss of ¥46.4 billion in fiscal 2014.

business performance and earnings results. The dividend payout

Segment net sales to external customers increased 20.3% fromfrom the PV production equipment business and has since been

Orders received in this segment decreased ¥1.7 billion year on

ratio has been set at approximately 35% of consolidated net

fiscal 2014 to ¥576.2 billion in fiscal 2015, outpacing the 16%

advancing withdrawal procedures. In fiscal 2015, in anticipation ofyear due in large part to changes in sales terms with customers

income. Reflecting the Company’s strong business results, Tokyo

growth rate of the wafer fab equipment market in 2014. Segment

the completion of major work on delivered equipment, the Company

accompanying business withdrawal procedures. The order back-Electron paid annual dividends for fiscal 2015 of ¥143 per share (anet sales including intersegment sales or transfers were also up

decided to begin dissolving and liquidating TEL Solar AG, the con-log as of March 31, 2015 was down 58.9% to ¥3.7 billion.

payout ratio of 35.7%), its highest ever. Going forward, Tokyo

20.3% to ¥576.2 billion. Segment profit rose 83.1% comparedsolidated subsidiary that mainly handled this business, and wrote off

Electron will continue to repay the support of its shareholders

with fiscal 2014 to ¥136.0 billion, and the segment profit margin

the subsidiary’s debt. As a result, Tokyo Electron recorded a ¥1.0

through profit growth. Note that, because the Company was antic-

rose significantly, from 15.5% in fiscal 2014 to a record high levelbillion loss on liquidation of subsidiaries in this segment.

ipating a business combination with Applied Materials, Inc., it spe-of 23.6%.

cially paid dividends every quarter in fiscal 2015, (per-share

For a business overview of this segment, please see page 8.
M Other
Other sales mainly include group-wide logistics services, facility

Segment net sales to external customers decreased from ¥3.8

Orders received in this segment increased 14.6% to ¥626.8 bil-

million in fiscal 2014 to ¥3.6 billion in fiscal 2015. Segment net

maintenance and insurance. Net sales to external customers

dividends for the first, second and third quarters and the year-end

lion. The order backlog as of March 31, 2015 was up 24.1% year

sales including intersegment sales or transfers also decreased

amounted to ¥0.6 billion, up 15.8% year on year.

were ¥10, ¥30, ¥35 and ¥68, respectively).

on year to ¥260.5 billion.
For a business overview of this segment, please see page 8.

Performance by Segment
M FPD (Flat Panel Display) Production Equipment

Millions of yen
Reportable Segment

smartphones and other mobile devices as well as rising demand

FPD production equipment market grew 20% year on year. In thisfor data center servers. Accordingly, capital investment in wafer fab

context, sales of Tokyo Electron’s inductively coupled plasma (ICP)

equipment for both memory and logic was brisk, growing a con-etch systems, which have a competitive edge among products for2015:

siderable 16% year on year.

high definition, large-sized panels, were favorable.

Net sales

The Company’s market share grew for every product in this seg-

Segment net sales to external customers increased 15.5% year

ment, including etch systems and cleaning systems, which Tokyo

on year to ¥32.7 billion. Segment net sales including intersegment

Electron is focusing on as key areas in which to raise market share.

sales or transfers also increased 15.5% to ¥32.7 billion.

Tokyo Electron’s share of the wafer fab equipment market climbed

Nevertheless, segment loss widened from ¥37 million in fiscal

3.1 percentage points in 2014 to 13.6%. Market share of cleaning2014 to ¥1.3 billion in fiscal 2015, due to additional costs recorded

systems reached 25%, its highest level ever, thanks to sales expan-

for certain products.

sion of strategic products to meet miniaturization needs. In addi-

Orders received in this segment decreased 14.6% year on year

Segment Information

Semiconductor
production
equipment

FPD
production
equipmentPVproduction
equipment

Other¥576,242¥32,710¥3,618———

Total

576,242

32,710

Segment profit (loss)

135,992

Segment assets

305,583

Depreciation and amortization

10,018

Amortization of goodwill

1,150

Sales to external customers
Intersegment sales or transferstion, net sales in the field solutions business, which handles sales ofto ¥35.3 billion. The order backlog as of March 31, 2015 was up

Loss on impairment

parts and used equipment, modifications and maintenance servic-

8.9% to ¥31.6 billion.

Capital expenditures, including
intangible and other assets

es, rose approximately 35% year on year due to the advance of

Selling, General and Administrative
Expenses and Ratio to Net Sales

12

13

14

15

 Selling, General and Administrative Expenses
 Ratio to Net Sales

—

3,618

11,998624,568(11,443)

613,125(1,312)(8,789)1,169

127,060(40,232)

86,82823,751

1,731

1,891

332,956

543,198

876,154

427

6

42

10,493

10,38520,878

—

—

—

1,150

—

1,150

388

509

—

—

897

1,609

2,506

8,530

197

—

23

8,750

5,530

14,280

400

400

200

25

0

0

11

12

13

14

15

3.8

12

13

14

15

The fiscal 2013 annual dividend of ¥51 includes
a commemorative 50 year anniversary dividend of ¥20.

(Times)(Days)

6

150

5

125

3.6

3.9

4

100

3

75

2

50

1

25

0

0

100

0

11

Receivable Turnover andInventory Turnover

4.9

200
50

20

4.9

500

300

80

40

775.5

600
75

783.6

114

71.3

100

800
809.2

125

80

876.2

600

828.6

(Billions of yen)

1,000
143

(Billions of yen)

60

0

11

¥613,125(11,443)

Working Capital andCurrent Ratio

500¥     —

11,443

150

20

10

¥613,125

11,443

(Yen)

78.7

25.2
154.7

151.0

30

Total Assets¥   555

100

51

50

20.5
136.9

100

27.7
169.7

23.9

146.2

29.4

150

Cash Dividends per Share

Consolidated(Billions of yen)

73.2

40

81.5

200

R&D Expenses

70.6

（%）

(Billions of yen)

For a business overview of this segment, please see page 8.

Total

Eliminations
andCorporate

498.1

tal investment in large-sized LCD panels in China grew, and the

451.0

year to a record high of US$340 billion, reflecting strong sales of

414.8

year, mainly due to expansion in demand for TVs. As a result, capi-

482.3

In 2014, overall LCD panel area demand grew nearly 10% year on

In 2014, global sales of semiconductors grew about 8% year on

476.2

M Semiconductor Production Equipment

0

11

12

13

14

15

11
 Working Capital Current Ratio

12

13

14

15

92

100

100

74

77

13

14

87
86

74

11

105

12

 Receivable Turnover
 Inventory Turnover

66

15

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

14

CONTENTSCONTENTS

Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Financial Review

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportFinancial Review
Financial Position and Cash FlowsAs a result, total assets as of March 31, 2015 stood at ¥876.2
billion, up ¥47.6 billion year on year.

Assets, Liabilities and Net Assets¥52.6 billion increase in retained earnings, reflecting the recording

Cash Flowsof ¥71.9 billion in net income and ¥17.9 billion paid in cash divi-

Net cash provided by operating activities came to ¥71.8 billion, up

dends (the total of the fiscal 2014 year-end dividend and the fiscal¥27.4 billion from fiscal 2014. Major contributors were ¥86.8 billion

M Assets

M Liabilities and Net Assets

2015 first, second and third quarter dividends), as well as a ¥6.7

in income before income taxes and minority interests, ¥20.9 billion

Current assets increased by ¥49.4 billion from the end of the previ-

Current liabilities increased ¥2.3 billion from the end of fiscal 2014

billion increase in foreign currency translation adjustments due toin depreciation and amortization, a ¥12.9 billion increase in cus-

ous fiscal year to ¥670.9 billion, reflecting increases of ¥49.5 billion

to ¥172.8 billion at the end of fiscal 2015. This reflected increases

the depreciation of the yen and a ¥10.6 billion decrease in minority

tomer advances and a ¥9.4 billion increase in trade notes andin total liquidity on hand (cash, cash equivalents and short-termof ¥8.5 billion in customer advances, ¥3.5 billion in accrued

interests due partly to the exclusion of Tokyo Electron Device fromaccounts payable. Major negative factors included a ¥26.8 billion

investments with original maturities of less than one year), ¥7.3 bil-

employees’ bonuses and ¥2.8 billion in trade notes and accounts

the scope of consolidation.

increase in inventories, ¥24.2 billion in income taxes paid and alion in inventories and ¥6.9 billion in prepaid expenses and otherpayable, as well as decreases of ¥7.8 billion in income taxes payable

current assets, as well as a decrease of ¥18.2 billion in trade notesand ¥5.1 billion in accrued expenses and other current liabilities.

and accounts receivable. The turnover period for trade notes andNon-current liabilities decreased ¥5.3 billion year on year toaccounts receivable improved from 77 days in fiscal 2014 to 66¥62.2 billion, due mainly to decreases in net liability for retirement

days in fiscal 2015, and the inventory turnover period worsened

benefits of ¥2.6 billion and deferred tax liabilities of ¥1.0 billion.

¥11.4 billion increase in prepaid consumption tax.

As a result, the equity ratio rose 3.2 percentage points from theNet cash provided by investing activities was ¥155.7 billion,

end of March 2014 to 73.0% at the end of March 2015. ROE

compared with ¥19.6 billion used in the previous fiscal year. This

climbed to 11.8% from -3.3% in fiscal 2014.

increase included proceeds of ¥163.3 billion from a net decrease
Capital Expenditures* and Depreciation and Amortization**in short-term investments and ¥11.9 billion used in the payment

slightly from 100 days in fiscal 2014 to 105 days in fiscal 2015.

As of March 31, 2015, Tokyo Electron had no interest-bearing debt

Capital expenditures were ¥13.2 billion in fiscal 2015, a 3.0% year-

for purchase of property, plant and equipment.

Net property, plant and equipment decreased ¥5.4 billion year

(long- and short-term debt), compared with ¥13.5 billion at the end ofon-year increase. The primary factor causing the increase was the

Cash used in financing activities came to ¥18.2 billion, com-on year to ¥106.9 billion due to ¥18.1 billion in depreciation andthe previous fiscal year, due to the exclusion of Tokyo Electron Device,acquisition of process evaluation equipment for R&D, primarily forpared with ¥0.2 billion in fiscal 2014. Major outflows included

amortization and ¥2.1 billion in impairment of fixed assets includingwhich held the debt, from the scope of consolidation.

areas with high growth potential in the SPE business.

¥17.9 billion in dividends paid.
The balance of cash and cash equivalents at the end of Marchproduction facilities at a factory in China in the FPD production

Total liabilities (current liabilities and non-current liabilities) stoodequipment business. These factors more than offset ¥13.2 billion

at ¥235.0 billion, down ¥3.0 billion from the end of the previous fis-due to efforts to restrain capital investment since the previous

2015 stood at ¥317.6 billion, an increase of ¥212.8 billion from thein new fixed asset acquisitions.

cal year.

­fiscal year.

end of fiscal 2014. Total liquidity on hand, which consists of cash,

Investments and other assets increased ¥3.6 billion year on year

Net assets came to ¥641.2 billion at the end of fiscal 2015, up

to ¥98.4 billion, mainly due to a ¥3.9 billion increase in investment¥50.5 billion from the end of fiscal 2014. This was mainly due to asecurities.

Depreciation and amortization decreased 16.1% to ¥20.9 billion

cash equivalents and short-term investments with original maturi-*	Capital expenditures represent only the gross increase in property, plant and equip-

ties of less than one year, increased ¥49.5 billion year on year toment.
**	Depreciation and amortization does not include amortization of goodwill or losses on
impairment.

¥317.7 billion at the end of March 2015.

Millions of yen

Millions of yen

2011

2012

2013

2014

2015

Total current assets¥644,231¥607,051¥521,501¥621,492¥670,883

Financial Position

2011

2012

2013

2014

2015

Cash flows from operating activities¥ 83,239¥ 29,712¥ 84,267¥ 44,449¥ 71,806
155,738

Cash Flows

Net property, plant and equipment

112,552

126,885

135,698

112,344

106,896

Cash flows from investing activities(35,882)(8,352)(141,769)(19,599)

Total investments and other assets

52,422

49,675

118,329

94,756

98,375

Cash flows from financing activities(5,237)(27,335)(10,625)(187)(18,214)

Total assets

809,205

783,611775,528

828,592

876,154

Cash and cash equivalents at end of year

165,051

158,776

85,314

104,797

317,632

ROE

ROA

（%）

(Billions of yen)

（%）

（%）

（%）

14

3.5

800

100

15

15

2.0
400

4.4

2

0.8

0

11

12

 Interest-Bearing Debt
 Debt-to-Equity Ratio

69.8

73.0

75

13

25

1.0

0

0.5
0

14

0

0

11
 Equity Equity Ratio

12

13

14

15

10

4.4

0

0

12

13

14

12

13

150
100

1.8

-5

11

200

50

-3.3

15

250

20

7.7
5

200

300

10.5

6.3

5

350

30
10

50

(Billions of yen)

40
13.1

11.8

10

Total Liquidity on Hand

(Billions of yen)

17.7

1.0
0.6
3.8

4

76.5

1.5

1.4
8.0

6

74.9

578.1

8

70.8

593.0

2.5

2.3

600

586.8

10

3.0

572.7

12

13.3

639.5

13.5

(Billions of yen)

Capital Expenditures andDepreciation and Amortization

317.7

Equity and Equity Ratio

39.1

Interest-Bearing Debt,
D/E Ratio

268.1

641,163240.1

590,614247.6

605,127285.1

598,603

20.9

584,802

24.9

Total net assets (Total shareholders' equity)

13.2

172,812234,99126.6

170,510
237,97812.8

106,670
170,401

21.8

124,794
185,008

39.5

168,038
224,403

24.2

Total current liabilities
Total liabilities

15

ROE = (Net income or loss / Average total equity) × 100

11

12

13

14

15

ROA = (Operating income or loss + Interest and dividend income) /Average total assets x 100

0

11

12

13

 Capital Expenditures Depreciation and Amortization

14

15

11

14

15

Total liquidity on hand = Cash and cash equivalents +Short-term investments

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

15

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate Governance

Financial Section

Corporate Data

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportFinancial Review
Business-related and Other Risks(3) Impact from Research and Development(6) Impact of Intellectual Property Rights(9) Impact from Major Lawsuits or Legal Actions

Through ongoing and proactive R&D investment and activities in

In order to distinguish its products and make them more competi-Tokyo Electron is not currently involved in any lawsuits or other

The following risks may have a material impact on Tokyo Electron’s

cutting-edge technologies—miniaturization, vacuum, plasma, ther-tive, Tokyo Electron has promoted its R&D strategy for the early

legal actions that are likely to significantly influence its businessbusiness performance, stock price, or financial position.

mal processing, coating/developing, cleaning, wafer-transfer anddevelopment of cutting-edge technologies together with its busi-

results. However, in the event that the Company’s business orclean technologies—Tokyo Electron has created advanced tech-ness and intellectual property strategies. This approach hasother activities become the subject of a major lawsuit or other legal(1) Impact from Changes in the Semiconductor Market

nologies. At the same time, by quickly bringing to market new

enabled Tokyo Electron to obtain sole possession of many proprie-action, depending on the outcome of such action, Tokyo Electron’sTokyo Electron has achieved a high profit margin by concentratingproducts incorporating these technologies, Tokyo Electron hastary technologies that have been instrumental to the Company’sbusiness results could be adversely affected.

resources in high-tech fields, including semiconductor production

successfully captured a high market share in each of the productability to capture a high market share and generate high profit mar-equipment, where technological innovation is rapid but Tokyo

fields it has entered and generated a high profit margin. However,gins in each of its product fields. Tokyo Electron’s products incor-(10) Other Risks

Electron can effectively use its strengths. Although technologicaldelays in the launch of new products and other factors could

porate and optimize many of these proprietary cutting-edge

Tokyo Electron is actively engaged in reforming its corporate struc-change is responsible for the semiconductor market’s rapid

adversely affect Tokyo Electron’s business performance.

technologies. There may be cases in which, by avoiding the use ofture so that it can generate profits even when markets contract.

third-party technologies and intellectual property rights, Tokyo

These reforms have entailed creating new high-growth and high-Electron’s business performance could be adversely affected.

return businesses and pursuing higher earnings from existing busi-

growth, Tokyo Electron has actively undertaken structural reforms
to be able to generate profits under any circumstances, including(4) Safety-related Impact

when the market contracts temporarily due to imbalance of supply

Tokyo Electron’s basic philosophy is to always bear in mind safetyand demand. However, order cancellations, excess capacity andand health in the execution of business activities, including devel-(7) Impact of Fluctuating Foreign Exchange Rates

to preserve the environment and worked to restructure its compli-

personnel and increased inventories resulting from an unexpected-

opment, manufacturing, sales, services and management. In

Success in the development of overseas operations has increased

ance, risk management and information security management sys-

ly large market contraction, losses from bad debts resulting fromaccordance with this philosophy, Tokyo Electron works actively

the share of sales generated overseas. As a rule, Tokyo Electrontems. However, as long as it conducts business activities, as withthe worsening of a customer’s financial position, and supply short-and continuously to improve the safety of its products and to elimi-

conducts export transactions on a yen basis to avert exposure topeer companies or companies in different industries, Tokyo Electron

ages resulting from the worsening of a supplier’s management sit-nate any harmful impact on health. However, harm to customers,

foreign currency risks. However, some exports are denominated inis subject to the effect of many other factors. These include theuation, could adversely affect Tokyo Electron’s businessorder cancellations or other circumstances resulting from safety or

foreign currencies. In these cases, Tokyo Electron hedges foreign

world and regional economic environments, natural disasters, war,

performance considerably.

other problems related to Tokyo Electron’s products could

currency risk by using a forward foreign exchange contract whenterrorism, infectious diseases and other unavoidable occurrences,adversely affect Tokyo Electron’s business performance.

an order is received or by other means. However, foreign

financial or stock markets, government or other regulations, supply

exchange rate risks can arise from fluctuations in prices due tochains, market conditions for products and real estate, the ability(5) Impact from Quality Issues

sudden foreign exchange movements, which could have an indi-

to recruit personnel in Japan and overseas, competition over stan-Tokyo Electron has been successful at increasing transactions with

Tokyo Electron actively develops outstanding, cutting-edge tech-rect adverse effect on Tokyo Electron’s business performance.

dardization, and loss of key personnel. Any of these factors could

the leading semiconductor manufacturers worldwide, including

nologies for incorporation in new products that are brought quickly

those in Japan, through the provision of products featuring out-

to market. At the same time, Tokyo Electron works to establish(8) Influence of Corporate Acquisitions

standing, cutting-edge technology and of services offering a higha quality assurance system, efforts that include obtaining ISO 9001

As part of its business strategy, Tokyo Electron conducts corpo-

level of customer satisfaction. However, Tokyo Electron’s sales may

certification, as well as to establish a world-class service system.

rate acquisitions in order to expand into new business areas,from time to time be temporarily concentrated on particular custom-

These actions have resulted in a large number of customers

secure new technologies and business platforms, and strengthen

ers due to the timing of large capital investments of major semicon-

adopting Tokyo Electron’s products. However, because Tokyo

the competitiveness of existing businesses. The Company con-ductor manufacturers. The resulting escalation in sales competition

Electron’s products are based on cutting-edge technologies, andducts due diligence and carefully deliberates each specific acquisi-

could adversely affect Tokyo Electron’s business performance.

due to other factors, many of the technologies developed are intion. However, in the event that the results following an acquisition

unfamiliar fields. The occurrence of unforeseen defects or other

do not meet expectations, Tokyo Electron’s business performanceissues could adversely affect Tokyo Electron’s business performance.

could be adversely affected.

(2) Impact from Concentration of Transactions on
Particular Customers

nesses. At the same time, Tokyo Electron has promoted activities

adversely affect Tokyo Electron’s business performance.

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

16

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year Summary

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportConsolidated Eleven-Year SummaryTokyo Electron Limited and Subsidiaries
As of and for the years ended March 31
Thousands of
U.S. dollars

Millions of yen

2015

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Net sales 1
Semiconductor production equipment
FPD production equipment
PV production equipment
Computer networks
Electronic components and computer networks
Other
Operating income (loss)
Income (loss) before income taxes and minority interests
Net income (loss)
Comprehensive income (loss) 2$5,102,147
4,795,223
272,198
30,107——4,619
733,236
722,543598,219
668,178¥613,125
576,242
32,710
3,618
—
—
555
88,11386,82871,88880,295¥612,170
478,842
28,317
3,806—
100,726
479
32,205(11,756)(19,409)(10,889)¥ 497,300
392,027
20,077
83—
84,665448
12,54917,767
6,076
15,826¥ 633,091
477,873
69,889——84,868461
60,44360,602
36,72636,954¥ 668,722
511,332
66,721——
90,216453
97,87099,57971,92469,598¥ 418,637
262,392
71,361——
84,473411(2,181)(7,768)(9,033)(4,751)¥ 508,082
325,383
88,107——
94,207385
14,711
9,637
7,543
—

¥ 906,092
726,440
68,016——111,181455
168,498
169,220
106,271—¥ 851,975
642,625
100,766—
19,16988,294
1,121
143,979
144,414
91,263—¥ 673,686
486,883
81,176—
17,49786,881
1,249
75,70375,32848,006—¥ 635,710
457,191
75,038—15,96686,2491,266
63,98355,77561,601—

Domestic sales
Overseas sales

790,930
4,311,217

95,046
518,079

161,631450,539

118,504
378,796

171,364
461,727

182,165
486,557

162,609
256,028

208,871299,211

323,946
582,146

313,816
538,159

262,532
411,154

232,678
403,032

173,737
109,711593,742

20,87813,18471,35024,888
12,79978,664

26,631
21,77473,24924,19839,541
81,506

17,707
39,14070,56820,002
14,91954,07423,068
18,10860,98821,41322,70366,073

18,82027,12956,962

19,17013,33549,182

21,4639,876
43,8897,290,955
5,335,456

876,154641,163828,592
590,614775,528
605,127

783,611598,603809,205
584,802696,352
523,370668,998529,265

792,818
545,245

770,514469,811663,243
376,900

644,320
332,165

10,844

12,304

12,201

10,684

10,343

10,068

10,391

10,429

9,528

8,901

8,864

¥   (50.47)—
2,859.37
12.00
180,61139,285¥   42.15
42.07
2,896.55
24.00
180,61142,509¥   594.01
592.71
2,989.70
125.00180,611
43,324¥   511.27
509.84
2,573.72
103.00180,61141,289¥   267.61
267.32
2,112.30
55.00
180,611
46,272¥   343.63
343.54
1,863.28
45.00
180,61160,857

(1.8)
(0.5)
73.5
0.61

1.4
2.9
77.5
0.70

21.4
18.6
67.5
1.16

21.8
16.9
59.7
1.19

13.5
11.2
56.8
1.03

20.3
10.1
51.6
1.05

¥   41,581¥   48,896¥   86,882¥   89,418¥   75,687¥   71,718

Depreciation and amortization 3
Capital expenditures 4
R&D expenses
Total assets
Total net assets (Total shareholders’ equity) 5
Number of employees

U.S. dollars

Net income (loss) per share of common stock:
Basic
Diluted 6
Net assets per share of common stock
Cash dividends per share of common stock
Number of shares outstanding (thousands)
Number of shareholders$ 3.34
3.33
29.68
1.19

Yen

¥ 401.08
400.153,567.23
143.00180,611
20,829¥ (108.31)—
3,225.92
50.00
180,61130,563¥    33.91
33.85
3,309.58
51.00
180,61141,287¥   205.04
204.723,275.14
80.00
180,61142,414¥   401.73
401.103,198.66
114.00180,61144,896%

ROE
Operating margin
Equity ratio
Asset turnover (times)

11.8
14.4
73.0
0.72

(3.3)
5.3
69.8
0.76

1.0
2.5
76.5
0.64

6.3
9.5
74.9
0.79

U.S. dollars

Net sales per employee$  470,500

13.3
14.6
70.8
0.89
Thousands of yen¥ 56,540¥ 49,754¥  40,759

1 From fiscal 2008, Computer networks is included in Electronic components and computer networks. Photovoltaic panel (PV) production equipment was includedin the FPD production equipment until fiscal 2012. Electronic components and computer networks were excluded because Tokyo Electron Device Limited,a former consolidated subsidiary, become an equity method affiliate from fiscal 2015.
2 From fiscal 2011, the Company applied “Accounting Standards for Presentation of Comprehensive Income (Statement No. 25) released by the AccountingStandards Board of Japan (ASBJ). Accordingly, comprehensive income (loss) have been disclosed from fiscal 2010.
3D
 epreciation and amortization does not include amortization and loss on impairment of goodwill.
4 Capital expenditures only represent the gross increase in property, plant and equipment.
5 From fiscal 2007, “Total net assets” has been disclosed in accordance with “Accounting Standard for Presentation of Net Assets in the Balance Sheet”(Statement No. 5) and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Guidance No. 8) released by the AccountingStandards Board of Japan (ASBJ). “Total net assets” through fiscal 2006 represents “Total shareholders’ equity” under the former accounting standards.

¥   59,256¥   64,655

6 From fiscal 2011, the Company calculated net income per share of common stock (diluted) in accordance with “Accounting Standard for Earnings Per Share”(Statement No. 2 issued as of June 30, 2010) and “Guidance on Accounting Standard for Earnings Per Share” (Guidance No. 4 issued as of June 30, 2010)
released by the Accounting Standards Board of Japan (ASBJ). Dilution is not assumed for the years ended March 31, 2014 and 2010.
7 Effective from fiscal 2005, Tokyo Electron changed its method of revenue recognition to receipt of customer confirmation of product set-up and testing ofproducts for Semiconductor and FPD production equipment. The effect of this change decreased net sales, operating income and income before income
taxes by ¥80,956 million, ¥20,541 million and ¥20,563 million, respectively, for the year ended March 31, 2005, compared with the corresponding amounts
which would have been recorded if the previous method had been applied.
8 Effective from fiscal 2005, Tokyo Electron changed its method to account for after-sale repair expenses by recording accrued warranty expenses for
Semiconductor and FPD production equipment. The effect of this change decreased operating income and income before income taxes by ¥635 million and¥13,106 million, respectively, for the year ended March 31, 2005, compared with the corresponding amounts which would have been recorded if the previous
method had been applied.

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

17

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportConsolidated Balance Sheets
Tokyo Electron Limited and Subsidiaries
As of March 31, 2015 and 2014
Thousands of
U.S. dollars

Millions of yen

ASSETS

2015

2014

2015

Current assets:
Cash and cash equivalents

Thousands of
U.S. dollars

Millions of yen

LIABILITIES AND NET ASSETS

2015

2014

2015

¥ 56,479¥ 53,668$  469,993

Current liabilities:¥317,632¥104,797$2,643,189

283

163,350

2,355

Short term borrowings—

11,531—

110,845

129,032

922,402

Income taxes payable

6,197

14,01551,569(379)(1,503)(3,154)

Accrued employees’ bonuses

12,111

8,584

100,782

Inventories

175,588

168,277

1,461,163

Customer advances

48,44339,901

403,121

Deferred income taxes

27,672

25,174230,274

Accrued warranty expenses

10,442

10,072

86,894

Prepaid expenses and other current assets

39,24232,365326,544

Accrued expenses and other current liabilities

39,14032,739325,705

670,883

621,492

5,582,783

172,812

170,510

1,438,064

Deferred tax liabilities

8,314

9,279

69,185Net liability for retirement benefits

51,48054,031

428,393

Other liabilities

2,385

4,158

19,847   Total non-current liabilities

62,17967,468517,425  Total liabilities

234,991

237,978

1,955,489  Common stock   Authorized: 300,000,000 shares
Issued:180,610,911 shares as of March 31, 2015 and 2014

54,961

54,961

457,360  Capital surplus

78,02378,023649,272  Retained earnings

488,816

436,174

4,067,704(9,064)(9,479)(75,426)

Short-term investments
Trade notes and accounts receivable
Allowance for doubtful accounts   Total current assets

Trade notes and accounts payable   Total current liabilities

Non-current liabilities:

Property, plant and equipment:Land

25,022

25,112

208,222

Buildings

152,979

151,634

1,273,022

Machinery and equipment

132,411

128,422

1,101,864

Construction in progress

2,424

3,623

20,171

312,836

308,791

2,603,279

Less: Accumulated depreciation

205,940

196,447

1,713,739   Net property, plant and equipment

106,896

112,344889,540   Total property, plant and equipment

Net assets:
Shareholders’ equity   Treasury stock, at cost   1,344,892 and 1,408,950 shares
as of March 31, 2015 and 2014, respectively

Investments and other assets:
Goodwill

9,067

9,400

75,451

Accumulated other comprehensive income

Investment securities

23,93520,027

199,176   Net unrealized gains on investment securities

9,463

5,593

78,747

Net asset for retirement benefits

8,817

8,904

73,371   Net deferred gains on hedging instruments

122

60

1,015

Deferred income taxes

18,34823,224

152,684   Foreign currency translation adjustments

12,481

5,777

103,861

Intangible assets

18,50020,156

153,949   Accumulated remeasurements of defined benefit plans

4,682

6,982

38,961Other assets

21,592

14,911

179,679

Share subscription rights

1,421

1,644

11,825

Allowance for doubtful accounts

(1,884)(1,866)(15,678)

Minority interests

258

10,8792,147   Total investments and other assets

98,37594,756

818,632   Total net assets

641,163590,614

5,335,466¥876,154¥828,592$7,290,955

Total liabilities and net assets

¥876,154¥828,592$7,290,955

Total assets
See accompanying Notes to Consolidated Financial Statements.

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

18

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements of Comprehensive Income (loss)

Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportConsolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2015 and 2014

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2015 and 2014
Thousands of
U.S. dollars

Millions of yen

Net sales
Cost of sales Gross profit
Selling, general and administrative expenses
Operating income

2015

2014

2015

¥613,125¥612,170$5,102,147

Income (loss) before minority interests

370,351

410,278

3,081,892

Other comprehensive income:

242,774

201,892

2,020,255

Net unrealized gains on investment securities

154,661

169,687

1,287,019

Net deferred gains on hedging instruments

69

92

574

88,11332,205733,236

Foreign currency translation adjustments

6,643

6,867

55,280Remeasurements of defined benefit plans(2,270)—(18,890)

Other income (expenses):
Interest and dividend income

1,281

3,162

10,660

629

1,154

5,234

Gain on sale of property, plant and equipment

1,840

433

15,312Foreign exchange gain (loss), net

1,575(1,229)13,106(2,506)(46,969)(20,854)

Revenue from grants

 Loss on impairment of property, plant and equipment,
goodwill and other assets
Loss on sales of affiliates’ shares(1,609)—(13,389)

Loss on liquidation of subsidiaries(1,070)—(8,904)

Restructuring expenses on facilities(1,046)—(8,704)

Additional payment of custom tax(1,003)—(8,347)

624

(512)

5,193

86,828(11,756)

722,543

14,72615,995

122,543

Other, net
Income (loss) before income taxes and minority interests
Income taxes:
Current
Deferred
Income (loss) before minority interests
Minority interests
Net income (loss)

173(8,538)1,440

71,929(19,213)598,560

41

196

341

¥ 71,888¥ (19,409)$  598,219

Yen

U.S. dollars

Per share of common stock:
Net income (loss) — basic
Net income — diluted
Net assetsCash dividends
See accompanying Notes to Consolidated Financial Statements.

Thousands of
U.S. dollars

Millions of yen¥ 401.08¥ (108.31)$     3.34

400.15—

3.33

3,567.23

3,225.92

29.68

143.00

50.00

1.19

 Share of other comprehensive income of associates accounted forusing equity method
Total other comprehensive incomeComprehensive income (loss)

2015

2014

2015

¥71,929¥(19,213)$598,560

3,868

1,365

32,188

56

—

466

8,366

8,324

69,61880,295(10,889)

668,178

80,224(11,151)

667,587

71

262

591

Total comprehensive income (loss) attributable to:
Owners of the Company
Minority interests
See accompanying Notes to Consolidated Financial Statements.

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

19

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements of Changes in Net Assets

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportConsolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2015 and 2014

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2015 and 2014
Thousands of
U.S. dollars

Millions of yen
Shareholders’ equity

Millions of yen

Accumulated other comprehensive income
Deferred
gains(losses) on
hedging
instruments

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Unrealized
gains oninvestment
securities

Balance as of March 31, 2013

¥54,961¥78,023¥467,921¥(9,589)¥4,214¥ (15)¥ (2,484)

Adjustments due to the changes in fiscal year-end of
consolidated subsidiaries——(3,190)———Cash dividends——(9,139)———Foreign
Accumulated
currency
adjustments
Sharetranslation for retirement subscription
adjustments
benefits
rightsMinority
interests

Total
net assets¥—¥1,375¥10,721¥605,127

—

—

—

—

(3,190)

—

—

—

—

(9,139)(19,409)

Net loss——(19,409)

—

—

—

—

—

—

—

Repurchase of treasury stock

—

—

—

(30)

—

—

—

—

—

—

(30)

Disposal of treasury stock

—

—

(9)

140

—

—

—

—

—

—

131

Other, netBalance as of March 31, 2014
Cumulative effect of changes
in accounting policies
Restated balance

—

—

—

—

1,379

75

8,261

6,982

269

158

17,124¥54,961¥78,023¥436,174¥(9,479)¥5,593¥ 60¥ 5,777¥6,982¥1,644¥10,879¥590,614——(1,102)

—

—

—

—

—

—

(211)

(1,313)54,961

78,023435,072(9,479)

5,593

60

5,777

6,982

1,644

10,668589,301

Cash dividends——(17,923)

—

—

—

—

—

—

—

(17,923)

Net income——

71,888

—

—

—

—

—

—

—

71,888

Repurchase of treasury stocks

—

—

—

(183)

—

—

—

—

—

—

(183)

Disposal of treasury stocks

—

—

(221)

598

—

—

—

—

—

—

377

Other, net

—

—

—

—

3,870

62

6,704

(2,300)(223)(10,410)(2,297)¥54,961¥78,023¥488,816¥(9,064)¥9,463¥122¥12,481¥4,682¥1,421¥   258¥641,163

Total
net assets

Balance as of March 31, 2015

Thousands of U.S. dollars
Shareholders’ equity

Accumulated other comprehensive income

Treasurystock

Unrealized
gains oninvestment
securities

Deferred
gains(losses) on
hedging
instruments

Foreign
Accumulated
currency
adjustments
Sharetranslation for retirement subscription
adjustments
benefits
rightsMinority
interests

Balance as of March 31, 2014 $457,360 $649,272 $3,629,641 $(78,880)$46,542$  499$ 48,074 $58,101$90,530 $4,914,820

Commonstock

Cumulative effect of changes
in accounting policies
Restated balance

CapitalsurplusRetainedearnings$13,681——(9,170)

—

—

—

—

—

—

(1,756)(10,926)

457,360

649,272

3,620,471(78,880)

46,542499

48,074

58,101

13,681

88,774

4,903,894

Cash dividends——(149,147)

—

—

—

—

—

—

—

(149,147)

Net income——

598,219

—

—

—

—

—

—

—

598,219

Repurchase of treasury stocks

—

—

—

(1,523)

—

—

—

—

—

—

(1,523)

Disposal of treasury stocks——(1,839)

4,977

—

—

—

—

—

—

3,138

Other, net

—

—

—

—

32,205516

55,787(19,140)(1,856)(86,627)(19,115)$457,360 $649,272 $4,067,704 $(75,426)$78,747$1,015$103,861 $38,961$11,825

Balance as of March 31, 2015

See accompanying Notes to Consolidated Financial Statements.

$ 2,147 $5,335,466

Cash flows from operating activities:
Income (loss) before income taxes and minority interests
Depreciation and amortization
 Loss on impairment of property, plant and equipment, goodwill
and other assets
Amortization of goodwill
Increase in net liability for retirement benefitIncrease in net asset for retirement benefit
Decrease in allowance for doubtful accounts
Increase in accrued employees’ bonuses
Increase in accrued warranty expenses
Interest and dividend income
Gain on sales of property, plant and equipment
Loss on sales of affiliates’ shares
Increase in trade notes and accounts receivable
Increase in inventories
Decrease in prepaid consumption tax
Increase in accrued consumption tax
Increase in trade notes and accounts payable
Increase in customer advances
Other, net
Subtotal
Receipts from interest and dividends
Interest paid
Income taxes paidNet cash provided by operating activities
Cash flows from investing activities:
Payment for purchases of short-term investments
Proceeds from maturities of short-term investments
Payment for purchase of property, plant and equipment
Proceeds from sale of property, plant and equipmentPayment for acquisition of intangible assets
Proceeds from sales of investment securities
Proceeds from sales of affiliates’ shares
Other, netNet cash provided by (used in) investing activities
Cash flows from financing activities:
Increase in short-term borrowings, net
Proceeds from long-term borrowings
Increase in treasury stock, net
Dividends paid
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Decrease in cash and cash equivalents due to the change infiscal year-end of consolidated subsidiaries
Cash and cash equivalents at end of year
See accompanying Notes to Consolidated Financial Statements.

2015

2014

2015

¥ 86,828
20,878¥ (11,756)
24,888$  722,543
173,737

2,506

46,96920,8541,150
2,784(1,601)(1,081)
3,667
259(1,281)(1,820)1,609(1,318)(26,850)(11,384)
2,707
9,432
12,912(4,972)
94,425
1,621—(24,240)
71,806

4,262
2,887
(654)
(228)
1,396
1,256
(3,162)(303)—(25,358)(32,088)(2,913)
1,123
15,606
19,0832,044
43,052
3,223(84)(1,742)44,4499,570
23,167(13,323)(8,996)30,515
2,155(10,660)(15,145)
13,389(10,968)(223,433)(94,732)
22,52678,489107,448(41,374)785,762
13,489—(201,714)
597,537(24,997)
188,302(11,899)
2,549
(422)
1,093
1,726
(614)
155,738(192,614)
184,071(9,451)897(1,640)111—(973)(19,599)(208,014)
1,566,964(99,018)
21,212(3,512)
9,095
14,363(5,109)1,295,981

—
—
(183)
(17,923)(108)(18,214)3,505
212,835
104,797

7,551
2,000
(30)
(9,139)(569)(187)(3,973)
20,69085,314——(1,523)(149,147)(899)(151,569)
29,167
1,771,116
872,073—¥317,632(1,207)¥104,797—$2,643,189

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

20

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate Governance

Financial Section

Corporate Data

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes to Consolidated Financial Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportNotes to Consolidated Financial Statements
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2015 and 2014

1. Basis of Presentation of Consolidated
Financial Statements

at the contracted rates. Resulting exchange gains and losses areincluded in earnings for the year.
Revenue and expense items are translated at the rates that

The accompanying consolidated financial statements of Tokyo
Electron Limited (hereinafter “the Company”) and its subsidiaries(hereinafter collectively referred to as “Tokyo Electron”) have been
prepared in accordance with the provisions set forth in the
Financial Instruments and Exchange Law of Japan and its related
accounting regulations, and in conformity with accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements ofInternational Financial Reporting Standards.
The Company uses financial statements prepared by foreignsubsidiaries in accordance with International Financial ReportingStandards or U.S. generally accepted accounting principles for the
preparation of the consolidated financial statements, together withadjustment for certain items which are required to be adjusted in
the consolidation process.

approximate those prevailing at the time of the transactions.
The balance sheet accounts of foreign subsidiaries are translat-

The accompanying consolidated financial statements have been
restructured and translated into English from the statutory
Japanese language consolidated financial statements. Some supplementary information included in the statutory Japanese language consolidated financial statements is not presented in theaccompanying consolidated financial statements.
U.S. dollar amounts included herein are solely for the convenience of readers and are presented at the rate of ¥120.17 to$1.00, the approximate rate as of March 31, 2015. The translation
should not be construed as a representation that the Japanese
yen amounts shown could be converted into U.S. dollars at that or
any other rate.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its 46 and 53 subsidiaries as of March 31, 2015
and 2014, respectively.
All significant inter-company accounts, transactions and unrealized profits or losses have been eliminated through consolidation
procedures.
The Company transferred a portion of shares of Tokyo Electron
Device Limited on April 1, April 15, 2014 and May 9, 2014. As aresult, effective on April 1, 2014, the classification of Tokyo
Electron Device Limited changed from a consolidated subsidiary toan equity method affiliate. In accordance with this change, seven
affiliates apply equity method. The fiscal year-end of all entities is
March 31, except for 7 consolidated foreign subsidiaries. Financial
statements provisionally closed for the period ending March 31 areused for these subsidiaries.
(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies aretranslated into Japanese yen at the year-end rates, except for
those hedged by forward exchange contracts, which are translated

ed into Japanese yen at the rates of exchange in effect at the balance sheet date, except for shareholders’ equity accounts, which
are translated at the historical rates. Revenue and expense
accounts of foreign subsidiaries are translated at average rates of
exchange in effect during the year. Resulting translation adjustments are presented in net assets as a component of accumulated
other comprehensive income in the consolidated balance sheets.
(c) Cash equivalents
Tokyo Electron considers all highly-liquid instruments purchasedwith original maturities of three months or less to be cash equivalents.
(d) Short-term investments
Short-term investments consist of short term deposits andl­ow-risk financial instruments with original maturities of more than
three months.
(e) Investment securities
Tokyo Electron examines the intent of holding each security andclassifies those securities as trading securities, held-to-maturity
debt securities or other securities. Tokyo Electron has no trading
securities. Held-to-maturity debt securities are stated mainly atamortized cost. Other securities with market prices are valued atfair market value prevailing at the balance sheet date. The differences between the book and market prices of other securities, netof applicable income taxes, are presented in net assets as a component of accumulated other comprehensive income. Other securities without market value are valued at cost using theweighted-average method.
The cost of sold securities is calculated using the weightedaverage method.
(f) Inventories
Inventories other than raw materials are stated at the lower ofcost, determined by principally the specific identification method, or
net realizable value, which is defined as selling price less estimatedadditional manufacturing costs and estimated direct selling expenses. Raw materials are stated at the lower of cost, determined­principally by the moving-average method, or replacement cost.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciationof buildings, machinery and equipment of the Company and its
domestic subsidiaries is computed using the declining balancemethod, except for buildings acquired subsequent to March 31,
1998 which are depreciated using the straight-line method, basedon the estimated useful lives of assets. Foreign subsidiaries mainly
apply the straight-line method over the estimated useful lives of assets.
Estimated useful lives of property, plant and equipment are as
follows:   Buildings
2 to 60 years   Machinery and equipment
2 to 17 years(h) Intangible assets
Intangible assets are amortized by the straight-line method over(m) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty, andtheir estimated useful lives.
(i) Goodwill
Goodwill is evaluated on an individual basis and amortized by
the straight-line method over a period not exceeding 20 years.

Tokyo Electron accrues such estimated costs when product revenue is recognized. To prepare for future repairs during warranty
periods, estimated after-sale repair expenses over warranty periods are accrued based on the historical ratio of actual repair
expenses to corresponding sales.
(n) Derivatives and hedge accounting
The Company and certain subsidiaries make use of derivatives
in order to manage certain risks arising from adverse fluctuations in(j) Impairment of fixed assets
Tokyo Electron evaluates the carrying value of fixed assets held
for use in the business.
If the carrying value of a fixed asset is impaired, a loss is recognized based on the amount by which the carrying value exceeds
its recoverable amount, being the higher of the net selling price or
the value in use of the assets. Net selling price is determined using
the fair value less disposal costs and value in use is based on the
total amount of discounted cash flows estimated to be generated
from the continuing use of the individual assets or the asset groupand the disposal of the assets.
(k) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amountdetermined based on the historical experience of bad debts withrespect to ordinary receivables, and an estimate of uncollectible
amounts determined by reference to specific doubtful receivablesfrom customers which are experiencing financial difficulties.
(l) Employee Benefits
The Company and its domestic subsidiaries provide defined
benefit plans for their employees. Expected benefits are attributed
to accounting periods by a benefit formula basis. Prior service
costs are charged to earnings on a straight-line basis, beginningfrom the fiscal year in which they are incurred, over a fixed numberof years (four years) within the average remaining years of serviceof employees when the changes occur. Actuarial differences arecharged to earnings on a straight-line basis, beginning from thefollowing fiscal year after they are incurred, over a fixed number ofyears (four years) within the average remaining years of service of
employees when the differences occur.
The provision for accrued pension and severance costs for
directors and audit & supervisory board members of the Company
and its domestic subsidiaries is calculated in accordance withinternal regulations.
The Company and certain domestic subsidiaries decided to discontinue the payment of severance pay for directors and audit &supervisory board members after April 1, 2005, and at the generalshareholders’ meeting in June 2005, it was resolved that the severance pay for directors and audit & supervisory board members
until March 31, 2005 would be paid at the termination of their service and the decision regarding the payment amount for eachdirector and audit & supervisory board member was delegated tothe board of directors and audit & supervisory board members.
The accruals for severance costs for directors and audit & supervisory board members are included in Net liability for retirement benefits in the consolidated balance sheets as of March 31, 2015 and2014, respectively.

foreign currency exchange rates. The amount of derivatives is limited to the extent of foreign currency assets, liabilities and actual
orders, and Tokyo Electron does not trade in derivatives for speculative purposes.
Derivatives are carried at fair value in the consolidated balance
sheet with changes in unrealized gain or loss charged or credited
to earnings, except for those which meet the criteria for hedge
accounting. Unrealized gains or losses on hedging derivative
instruments, net of taxes, are reported in net assets as a component of accumulated other comprehensive income. Receivables
and payables hedged by qualified forward foreign exchange contracts are translated at the corresponding foreign exchange contract rates.
(o) Income taxes
Tokyo Electron records deferred tax assets and liabilities on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used forincome tax purposes, which are measured using the enacted tax
rates and laws which are expected to be in effect when the differences are expected to reverse.
(p) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display) production equipment is principally recognized at the time of the customer confirmation of set-up and testing of products. Revenue
from such equipment not requiring substantial installation is recognized at the time of shipment. Revenue from PV (Photovoltaic
panel) production equipment is mainly recognized based on thepercentage-of-completion method. Service revenue from maintenance is recognized ratably over the term of the maintenance contract.
(q) Per share information
Net income per share and net assets per share are computed
based on the weighted-average number of shares of common
stock outstanding during each year.
Dividends per share has been presented on an accruals basis
and include, in each fiscal year ended March 31, dividends
approved or to be approved after March 31 but applicable to theyear then ended.
(r) Research and development expenses
Research and development expenses are charged to earnings
as incurred and amounted to ¥71,350 million ($593,742 thousand)and ¥78,664 million for the years ended March 31, 2015 and2014, respectively.

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

21

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated
Independent
Independent Auditor’s
Auditor’s Report
ReportNotes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(s) Reclassifications
Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the presentation
used for the year ended March 31, 2015.

3. Change in Accounting Policies and Adoptionof New Accounting Standards
Effective from the year ended March 31, 2015, the Company
and its consolidated domestic subsidiaries adopted article 35 of
the “Accounting Standard for Retirement Benefits” (ASBJ
Statement No.26, May 17, 2012 (hereinafter, “Statement No.26”))
and article 67 of the “Guidance on Accounting Standard for
Retirement Benefits” (ASBJ Guidance No.25, May 17, 2012 (hereinafter, “Guidance No.25”)), and have changed the determinationof retirement benefit obligations and current service costs. In addition, the Company and its consolidated domestic subsidiaries
have changed the method of attributing expected benefit to periods from straight-line attribution to a benefit formula basis anddetermining the discount rates.
In accordance with article 37 of Statement No.26, the effect ofchanging the determination of retirement benefit obligations andcurrent service costs has been recognized in retained earnings at
the beginning of the current fiscal year.
The effect of the adoption of the accounting standards on the
Company’s consolidated financial statements for the year ending
March 31, 2015 is immaterial.

4. Supplemental Information on
the Consolidated Statements of Cash Flows

5. Securities
Other securities as of March 31, 2015 and 2014 are as follows:
Millions of yen

2015:

Cost

  Equity securities

¥8,282  Other

Millions of yen

Thousands of
U.S. dollars

2015

2015

¥51,578$429,208

Non current assets

6,333

52,699Current liabilities(25,311)(210,627)

Current assets

Non current liabilities(9,222)(76,741)

Minority interests(10,420)(86,710)Equity investment interest after saleof shares(7,983)(66,431)

Accumulated other comprehensive income
Loss on sale of affiliates’ shares

Total

2014:

Carrying value¥ 9,835¥18,247

520

648

1,132

1,132

¥11,487¥20,027  OtherTotalCash and cash equivalents(1,285)(10,692)

Net proceeds from sales ofaffiliates’ shares¥ 1,726$ 14,363

2015

2014

2015

¥112,301¥114,289$  934,518

63,28753,988526,645¥175,588¥168,277$1,461,163

The amounts of change in inventory provision included in cost of
sales in the consolidated statements of operations for the years
ended March 31, 2015 and 2014 were a decrease of ¥582 million($4,843 thousand) and an increase of ¥2,296 million, respectively.

7. Loss on Impairment of Property, Plant andEquipment, Goodwill and Other Assets

Cost

Carrying value

For the years ended March 31, 2015 and 2014, the following
loss on impairment has been recognized:$68,919$184,988

Year ended March 31, 2015
(1) Noncurrent assets of Tokyo Electron (Kunshan) Limited  Unlisted stock

13,49013,689  Other

2,429

2,430

$84,838$201,107

Thousands of U.S. dollars

2015:

Noncurrent
Securities with market prices  Equity securities
Securities without market prices

Loss on impairment

Held-to-maturity securities classified as current assets are¥238,300 million ($1,983,024 thousand) and ¥211,801 million asof March 31, 2015 and 2014, respectively.
Reconciliation of held-to-maturity securities as of March 31,
2015 and 2014 to the amounts of short-term investments in the
consolidated balance sheets are as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Held-to-maturity (current)

¥238,300¥211,801$1,983,024

Deposits and low-risk financial instruments with original
maturities of three months
or less

(238,068)(48,500)(1,981,093)

51

49

424

¥    283¥163,350$    2,355

Short-term investments

(2,014)

Finished products
Work in process, raw materials
and supplies
Total

Cost  Unlisted stock

Deposits with original maturities
of more than three months

25,055¥23,935

Thousands of
U.S. dollars

Millions of yen

Securities without market prices

(940)

(242)

¥9,963

Securities with market prices  Equity securities

(13,389)

3,011

60

Noncurrent(113)

Sales price of shares

1,645

60

Millions of yen(1,609)Loss on change in equity¥22,230

1,621

Net loss on devaluation of investment securities was ¥0 million($3 thousand) and ¥308 million for the years ended March 31,
2015 and 2014, respectively.

impairment has been recognized.
(1) Goodwill and Noncurrent assets of TEL Solar Holding AG
Loss onimpairment

Securities without market prices  Unlisted stock

Year ended March 31, 2014
For the year ended March 31, 2014, the following loss on

6. Inventories
Inventories as of March 31, 2015 and 2014 are as follows:

Securities with market prices

Total

Information of assets and liabilities of a deconsolidated subsidiary and the relationship between the sales price of shares and thenet proceeds, from the sales transaction for the year ended March
31, 2015 are as follows:

Carrying value

Noncurrent

Net gain on sale of investment securities was ¥55 million($458 thousand) and ¥74 million for the years ended March 31,
2015 and 2014, respectively.

Location

Tokyo Electron(Kunshan)LimitedUse

Type of Asset

Millions of yen

Thousands of
U.S. dollars

Plant

Buildings andstructures,
machinery andequipment, andother assets¥2,119$17,633

Due to a significant downturn in profitability caused by themarked deterioration in operating conditions, Tokyo Electron(Kunshan) Limited, a subsidiary manufacturing FPD production
equipment, recognized the difference between book value andrecoverable amount of property, plant and equipment as loss on
impairment. The recoverable amount was measured as the net
selling price calculated based on reasonable estimates, such asreal estate appraisals performed by third party valuation experts.
(2) Others
Loss on impairment of ¥388 million ($3,229 thousand) was recognized for other asset groups of Tokyo Electron.

Location

Trübbach, St. Gallen,
Switzerland

Use

Type of Asset

Millions of yen

Plant

Buildings andstructures,
machinery andequipment, andother assets¥32,789

Due to the significant deterioration of the business environment,
sales of TEL Solar Holding AG and its subsidiaries in the PV production equipment business have been below the initial businessplans. Under the current condition, Tokyo Electron performed an
impairment test and recognized the difference between the bookvalue and recoverable amount of property, plant and equipment asloss on impairment. The recoverable amount was measured asvalue in use, but as Tokyo Electron has determined that the­business is not expected to generate any future net cash inflows,
the recoverable amount was assessed at zero.
Further, a loss on impairment was recognized for machinery,equipment and other assets held by TEL Solar Holding AG and its
consolidated subsidiaries, measured as the difference between thebook value and the recoverable amount. The recoverable amount
was measured as the net selling price, but as reutilization or sale ofthese assets would be difficult, the net selling price was assessed atzero.
(2) Goodwill of TEL NEXX, Inc.
Loss onimpairment
Location

Billerica, Massachusetts,
U. S. A.

Use

Type of Asset

Plant

Goodwill, andother assets

Millions of yen¥5,009Under the current condition that sales of TEL NEXX, Inc. in theSPE business have been below the initial business plans, Tokyo
Electron performed an impairment test and recognized the difference between the book value and recoverable amount as loss on
impairment. The recoverable amount was measured as value in
use, and was calculated by discounting future cash flows at
a discount rate of 14.0%.

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

22

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated
Independent
Independent Auditor’s
Auditor’s Report
ReportNotes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(3) Noncurrent assets of business locations to be restructured
Loss onimpairment
Location

Use

Tsukuba, Ibaraki
R&D(Technology Center Tsukuba) center
Sendai, Miyagi(Technology Center Sendai)

R&D
centerOthers—Type of Asset

Buildings andstructures,
machinery andequipment andother assets
Buildings andstructures, landand other assets
Buildings andstructures andother assets

Millions of yen¥4,649Balance at April 1, 2014
and 2013

Restated balance
Service cost¥  293

Tokyo Electron has determined to restructure several domestic
facilities, and as assets within the above asset groups are notexpected to be reutilized in the foreseeable future, Tokyo Electron
performed an impairment test and recognized the difference
between the book value and recoverable amount as loss on
impairment. The recoverable amount for the above asset groups
were measured as the net selling price. For land, buildings andstructures, the net selling price was calculated based on reasonable estimates such as real estate appraisals performed by third
party valuation experts, while for machinery, equipment and otherassets, the recoverable amount was assessed at zero, as reutilization or sale of these assets would be difficult.
(4) Others
Loss on impairment of ¥874 million was recognized for otherasset groups of Tokyo Electron.

Thousands of
U.S. dollars

Millions of yen

Cumulative effect of changes
in accounting policies¥3,355(3) Reconciliation from retirement benefit obligations and plan
assets to liability (asset) for retirement benefits

Defined benefit plans(1) Movement of retirement benefit obligations

2015

2014

2015

¥113,221¥115,296$942,174

2,034—

16,926115,255

115,296

959,100

5,697

6,874

47,4082014

2015

Funded retirement benefit
obligations¥62,213¥60,206$517,709

Plan assets(70,905)(69,540)(590,040)

Funded status(8,692)(9,334)(72,331)

Unfunded retirement benefit
obligations

50,05953,015416,568

Interest cost

1,608

1,785

13,381

Asset ceiling adjustments (note 1)

920

864

7,656

4,793

(9,945)39,885

Benefits paid

(5,138)(3,215)(42,756)

Net liability for retirement benefits at March 31, 2015
and 2014¥42,287¥44,545$351,893(92,328)

Liability for retirement benefits(note 2)

51,10453,449425,264

8,064

Asset for retirement benefits(8,817)(8,904)(73,371)

Net liability for retirement benefits at March 31, 2015
and 2014

Effect of change in scope of
consolidation
Foreign currency exchange
rate changes
Other
Balance at March 31, 2015
and 2014—(11,095)
969

2,031

183

395

1,522

¥112,272¥113,221$934,276(2) Movements of plan assets
Thousands of
U.S. dollars

Millions of yen

Balance at April 1, 2014
and 2013

2015

2014

2015

¥69,540¥60,476$578,680

1,332

1,256

11,084

3,997

3,633

33,261

8. Pledged Assets

Contributions paid by
the employer

3,406

3,306

28,343

Benefits paid

(3,053)(1,726)(25,406)

Tokyo Electron did not hold any assets pledged as collateral asof March 31, 2015 and 2014.

Effect of change in scope of
consolidation(5,542)—(46,118)

Foreign currency exchange
rate changes

952

2,034

7,922

Other

273

561

2,273

¥70,905¥69,540$590,039

Balance at March 31, 2015
and 2014¥42,287$351,893

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Service cost

¥5,697¥6,874$47,408

Interest cost

1,608

1,785

13,381

Expected return on plan assets(1,332)(1,256)(11,084)

Net actuarial gain amortization(2,570)(339)(21,386)

528

108

4,393

¥3,931¥7,172$32,712

Other
Total retirement benefit costs for the fiscal years ended
March 31, 2015 and 2014

(5) Remeasurements of defined benefit plants
Millions of yen

Actuarial losses

Thousands of
U.S. dollars

2015

2015

¥(3,572)$(29,725)(6) Accumulated remeasurements of defined benefit plants

10. Employee Benefits

Millions of yen

2015

The Company and its domestic subsidiaries provide for theiremployees a cash balance plan and a noncontributory retirement
and severance benefit plan as defined benefit plans. Further, certain consolidated overseas subsidiaries provide defined benefit
plans for their employees.

¥44,545

Notes: 1. The asset ceiling adjustment represents plan assets exceeding the asset ceiling for overseas subsidiaries that apply International Accounting Standard 19
Employee Benefits.
2. The provision for accrued pension and severance costs for directors and audit& supervisory board members of ¥376 million ($3,129 thousand) and ¥582
million as of March 31, 2015 and 2014 is not included.

(4) Retirement benefit costs

Expected return on plan assets

There is no short-term borrowings classified as current liabilities
as of March 31, 2015.   Short-term borrowings classified as current liabilities as of March 31, 2014 is ¥11,531 million and theiraverage annual rate is 0.39% as of March 31, 2014.
As of March 31, 2015, Tokyo Electron has unused lines of credit
amounting to ¥114,990 million ($956,894 thousand).
As of March 31, 2014,  Tokyo Electron has unused lines of credit
amounting to ¥143,578 million.

2015

Actuarial loss (gain)

Actuarial gain

9. Short-term Borrowings

Thousands of
U.S. dollars

Millions of yen

Net actuarial gains that are yet
to be recognized (before tax)

¥7,1802014¥11,309

Thousands of
U.S. dollars(7) Plan assets
1. Plan assets comprise
2015

2014

Bonds

46%

50%

Equity securities

22

24Life insurance company generalaccount

20

18

Cash and cash equivalents

2

2

Other

10

6

Total

100%

100%

2. Long-term expected rate of return   Current and target asset allocations, and historical and expected
returns on various categories of plan assets have been considered
in determining the long-term expected rate of return.
(8) Actuarial assumptions
The principal actuarial assumptions at and for the years ended
March 31, 2015 and 2014 are as follows:
2015

2014

Discount rate

1.15%

1.51%

Long-term expected rate of return

2.00%

2.00%

11. Income Taxes
Significant components of the deferred tax assets and liabilitiesof Tokyo Electron as of March 31, 2015 and 2014 are as follows:
Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

Deferred tax assets
Net operating loss carryforwards ¥19,842¥17,383$165,116

Net liability for retirement benefits

17,913

21,461

149,064

Elimination of unrealized profit
in inventories

11,582

9,489

96,380Devaluation of inventories

4,149

4,724

34,526

Accrued employees’ bonuses

3,211

2,532

26,720Loss on impairment of property, plant and equipment, goodwill
and other assets

3,026

3,486

25,181

Accrued warranty expenses

2,734

2,709

22,751Other

10,003

12,413

83,241

Total gross deferred tax assets

72,46074,197602,979

Less valuation allowance(13,506)(10,806)(112,390)

Total deferred tax assets

58,954

63,391

490,589

Deferred tax liabilities

2015

Undistributed earningsof subsidiaries(5,620)(6,877)(46,767)$59,749

Intangible assets identified
through business combination(5,255)(6,686)(43,730)

Net unrealized gains on
investment securities(4,510)(3,096)(37,530)

Net asset for retirement benefits(1,758)(1,620)(14,629)

Other(4,105)(5,993)(34,160)

Total deferred tax liabilities(21,248)(24,272)(176,816)

Net deferred tax assets¥37,706¥39,119$313,773

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

23

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes to Consolidated Financial Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportNotes to Consolidated Financial Statements

Net deferred tax assets are included in the consolidated balance
sheets as of March 31, 2015 and 2014 as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Current assets

¥27,672¥25,174$230,274

Investments and other assets

18,34823,224

152,684

(0)

—

(0)

(8,314)(9,279)(69,185)

Other current liabilities
Non-current liabilities

The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the period inwhich temporary differences become deductible. For assessmentof the realizability of deferred tax assets, management considers
the scheduled reversal of deferred tax liabilities, future estimatedtaxable income, tax planning strategies and level of net operating
loss carryforwards, if any, in accordance with accounting principles
generally accepted in Japan.
Based on the level of historical taxable income and future estimated taxable income over the periods which the temporary differences are deductible, management believes Tokyo Electron willrealize the benefits of these deferred tax assets, net of valuation
allowance, as of March 31, 2015 and 2014.
The Company and its wholly-owned domestic subsidiaries apply
a consolidated tax filing system for corporate tax purposes.
On March 31, 2015, amendments to the Japanese tax regulations were enacted into law. Based on the amendments, the statutory income tax rates utilized for the measurement of deferred tax
assets and liabilities expected to be settled or realized from April 1,2015 to March 31, 2016 and on or after April 1, 2016 are changed
from 35.64% for the fiscal year ended March 31, 2015 to 33.10%
and 32.34%, respectively, as of March 31, 2015.
Due to these changes in statutory income tax rates, net deferred
tax assets (after deducting the deferred tax liabilities) decreased by¥2,134 million ($17,758 thousand), and deferred income tax
expense increased by ¥2,881 million ($23,974 thousand) for the
fiscal year ended March 31, 2015.
Significant components of the difference between the statutory
and effective tax rates for the years ended March 31, 2015 and2014 are as follows:
2015

2014

35.64%

38.01%

Change in valuation allowance(17.51)

17.93

Tax credits(4.35)

38.76

Effect of enacted changes in Japanese
tax rates on net deferred tax assets

3.39(8.68)

Difference in statutory tax rates
of subsidiaries(1.34)(17.72)

Impairment and amortization of goodwill

0.45(130.97)

Statutory tax rate in Japan
Adjustments:

Others, net

0.88(0.76)

Effective tax rate

17.16%(63.43)%

12. Net Assets
Net assets comprises four subsections, which are shareholders’equity, accumulated other comprehensive income, share subscription rights and minority interests.
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 ofthe new shares as additional paid-in capital which is included incapital surplus.
In cases where dividend distribution of surplus is made, thelesser of an amount equal to 10% of the dividend or the excess, ifany, of 25% of common stock over the total of additional paid-in
capital and legal reserve must be set aside as additional paid-in
capital or legal reserve. Legal reserve is included in retained earnings in the accompanying consolidated balance sheets.
Both appropriations of legal reserve and additional paid-in capital used to eliminate or reduce a deficit generally require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal reserve may not be distributed as dividends. All additional paid-in capital and legal reserve may
be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.
The Company is subject to restriction of dividends by theJapanese Corporate Act, which restricts the amount of dividends
to retained earnings on a consolidated basis.
The Company’s articles allow for the distribution of earnings toshareholders on dates other than the mid-term and year-end, by aresolution of the board of directors in accordance with Japaneselaws and regulations.
At the board of directors’ meeting held on May 13, 2015, thedistribution of cash dividends amounting to ¥12,190 million($101,440 thousand) was resolved. Such appropriations have notbeen accrued in the consolidated financial statements as of March
31, 2015 since they are recognized in the period in which they are
resolved at the board of directors’ meeting.

13. Other Comprehensive Income
Other comprehensive income for the years ended March 31, 2015 and 2014 is as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥5,281¥2,199$43,946

0

(78)

0

Sub-total, before tax

5,281

2,121

43,946

Tax expense(1,413)(756)(11,758)

Sub-total, net of tax

3,868

1,365

32,188Deferred gains (losses) arising during the year

95

(269)

791

Reclassification adjustments

3

412

25

Sub-total, before tax

98

143

816

Tax expense

(29)

(51)

(242)

Sub-total, net of tax

69

92

574

Adjustments during the year

6,664

6,867

55,454

Reclassification adjustments

(21)

—

(174)

6,643

6,867

55,280Net unrealized gains on investment securities
Unrealized gains arising during the year
Reclassification adjustments

Net deferred gains (losses) on hedging instruments

Foreign currency translation adjustments

Sub-total, before tax
Tax expense

—

—

—

6,643

6,867

55,280Adjustments during the year

(907)

—

(7,548)

Reclassification adjustments(2,665)—(22,177)

Sub-total, before tax(3,572)—(29,725)

Tax expense

1,302

—

10,835Sub-total, before tax(2,270)—(18,890)

56

—

466

¥8,366¥8,324$69,618

Sub-total, net of tax
Remeasurements of defined benefit plans

Share of other comprehensive income of associates accounted for using equity method
Adjustments during the year
Total other comprehensive income

14. Share Subscription Rights
Stock option plan
The Company’s shareholders have approved annual stock option
plans for directors and selected employees since the year ended
March 31, 1999. The options under the plans vest immediately withrestriction on exercise up to three years after the date of grant, andhave an exercise period of seventeen years from the date of grant.

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

24

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated
Independent
Independent Auditor’s
Auditor’s Report
ReportNotes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

A summary of stock options outstanding and exercisable as of March 31, 2015 and 2014 is as follows:

Millions of yen

2014

2015

Tokyo Electron Limited

Weighted-average exercise price

Number ofsharesOutstanding at the beginning of year

Yen

U.S. dollars

Number ofshares

Weighted-average
exercise price¥104,797

Short-term investments

163,350

163,350

Trade notes and accounts receivable

127,529

127,529

18,247

18,247

Trade notes and accounts payable

53,66853,668

Short-term borrowings

11,531

11,531

(164)

(164)

81

81

¥  661

Granted

—

—

—

—

—

Exercised

88,9001

0.01

20,800

1

Expired (forfeited)

12,2001

0.01

56,8006,468

Outstanding at the end of year

378,200

1

0.01

479,300

1

Exercisable at the end of year

252,100

1

0.01

114,400

1
2014
Weighted-average
exercise priceYen¥3,087
—
—
—
3,087
3,087

Stock options related to Tokyo Electron Device Limited as of March 31, 2015 is excluded because that Tokyo Electron Device Limited
became an equity method affiliate from a consolidated subsidiary.

15. Leases
Future minimum lease payments on non-cancelable operatingleases are as follows:
Millions of yen

Due within one yearThousands of
U.S. dollars

2015

2014

2015

¥3,249¥3,410$27,037

Due over one year

3,660

5,922

30,457

Total

¥6,909¥9,332$57,494

16. Fair Value of Financial Instruments
Policy for Financial Instruments
Tokyo Electron limits its fund management to short-term bankdeposits and low-risk financial instruments, and obtains funds byutilizing bank-loans or liquidating trade-receivables.
Trade receivables, which consist of notes and accounts receivable, are exposed to credit risk in the event of non-performance by
the counterparties. Execution and management of credit risk,
maturity and receivable balance are conducted pursuant to theinternal management rules for credit control. Credit risk of major
customers is assessed on a regular basis.
Short-term investments consist of time deposits and low risk
financial instruments and Tokyo Electron trade with highly-rated
financial institutions to mitigate credit risks.
Investment securities consist of mainly equity interests in listedcompanies exposed to equity market risks. Conditions, including

market prices, for these investment securities are monitored on aregular basis.
Trade payables, which consist of notes and accounts payable,
mainly mature within one year. Trade payables are exposed toliquidity risks which are managed through activities such as implementing cash management plans.
See notes 9 and 17 for detailed discussion on short-term borrowings and derivative financial instruments, respectively.
Fair Value of Financial Instruments
Carrying amount and estimated fair value of financial instruments
as of March 31, 2015 and 2014 are set out below. Fair value offinancial instruments which is practically difficult to estimate areexcluded (see note 5).
Millions of yen
Carrying
amountEstimated
fair value1

Cash and cash equivalents¥317,632¥317,632

Short-term investments

283

283

2015:

Cash and cash equivalents

¥104,797

556,900

65,000———65,00065,000AssetsCash and cash equivalents

$0.01

Outstanding at the beginning of yearGranted
Exercised
Expired (forfeited)
Outstanding at the end of year
Exercisable at the end of year Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥1,503 million)
Investment securities
Liabilities

Derivatives (see note 17)
Hedge accounting not applied
Hedge accounting applied

Thousands of U.S. dollars
Carrying
amountEstimated
fair value1

Cash and cash equivalents$2,643,189$2,643,189

Short-term investments

2,355

2,355

2015:

Assets Trade notes and accounts receivable, net of allowance for
doubtful accounts ($3,154 thousand)
Investment securities

Investment securities

Trade notes and accounts payable

Hedge accounting applied

469,993469,993

Hedge accounting not applied
Hedge accounting applied(17,683)(17,683)

1,681

1,681

Notes: 1. Fair value calculation of financial instruments
Cash and cash equivalents, short-term investments, trade notes and accounts
receivable, trade notes and accounts payable, and short-term borrowings The carrying amounts approximate fair value because of the short maturity ofthese instruments.
Investment securities
The fair values of marketable securities are based on quoted market prices.
     See note 5 for further information by classification of investment securities.
Derivatives      See note 17 for detailed discussion on derivative financial instruments.
2. Maturities of financial assets and securities are as follows:

Cash and cash equivalents
Trade notes and accounts receivable

110,466

110,466

22,23022,23056,47956,479(2,125)(2,125)

202

202

2,355

—

922,402—

1. Derivative financial instruments not designated as hedging
instruments

2015:

Contract
amountFair value

Unrealized gains(losses)¥(1,448)

Sell U.S. dollars¥55,664¥(1,448)

Sell Swiss francs

6,346

34

34

Sell Korean won

1,068

(757)

(757)

Sell Singapore dollars

61

(0)

(0)

Sell Chinese yuan

13

(3)

(3)

Buy U.S. dollars

843

1

1

Buy Taiwan dollars

394

(1)

(1)

Buy Chinese yuan

338

50

50

Buy EURO

135

(1)

(1)

Buy Singapore dollars

33

0

0

Total

¥64,895¥(2,125)¥(2,125)

2014:

Contract
amountWithin 1 year

Fair value

Unrealized gains(losses)¥ 216

Millions of yen

After 1 through5 years¥317,632¥—

Sell U.S. dollars¥55,346

¥ 216

283

—

110,845—

Sell EURO

3,725

(19)

(19)

Sell Korean won

1,068

(508)

(508)

Sell Chinese yuan

102

(7)

(7)

Sell Singapore dollars

57

(0)

(0)
42

Millions of yen
2014:

$—

Millions of yen

Receivables and payables derived from derivative transactions are stated on a net
basis. The figures in parentheses represent net payables.

2015:$2,643,189

Tokyo Electron is subject to risk from adverse fluctuations in foreign currency exchange rates in its operating and financing activities. The Company and certain subsidiaries enter into forward
foreign exchange contracts in order to hedge such risks, but do
not enter into such transactions for speculative purposes. The
Company and its domestic subsidiary implement a ratio analysis of
the total cumulative cash flow fluctuations to assess effectivenessof hedging for all derivative transactions, except for transactions
where the critical terms of the hedging instrument and hedged
item match and the Company could conclude that changes in fairvalue or cash flows are expected to completely offset. Execution
and management of all derivative transactions in charge of financedepartment are conducted pursuant to the internal management rule.
The estimated fair values of the derivative financial instruments
as of March 31, 2015 and 2014 are as follows:

Derivatives (see note 17)

Short-term investments

Derivatives (see note 17)
Hedge accounting not applied

919,248
184,988

After 1 through5 years

17. Derivative Financial Instruments

Millions of yen

Liabilities
Trade notes and accounts payable

919,248
184,988

Liabilities

Assets Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥379 million)

Within 1 year

2015:

Short-term investments

¥1

Number ofshares2014:

Thousands of U.S. dollars

Estimated
fair value1

Yen479,300

Tokyo Electron Device Limited

Carrying
amountWithin 1 year

After 1 through5 years

Cash and cash equivalents

¥104,797¥—

Short-term investments

163,350—

Trade notes and accounts receivable

129,032—

Buy U.S. dollars

6,216

42

Buy Swiss francs

2,213

2

2

Buy Chinese yuan

922

60

60

Buy EURO
Total

385

50

50

¥70,034¥(164)¥(164)

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

25

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate Governance

Financial Section

Corporate Data

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated
Independent
Independent Auditor’s
Auditor’s Report
ReportNotes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Thousands of U.S. dollars

Millions of yen

Contract
amountFair value

Unrealized gains(losses)

Sell U.S. dollars$463,210$(12,050)$(12,050)

Sell Swiss francs

52,809283

283

Sell Korean won

8,887(6,299)(6,299)2015:

Sell Singapore dollars

508

0

0

Sell Chinese yuan

108

(25)

(25)

Buy U.S. dollars

7,015

8

8

Buy Taiwan dollars

3,279

(8)

(8)

Buy Chinese yuan

2,813

416

416

Buy EURO

1,123

(8)

(8)

Buy Singapore dollars
Total

275

0

0

$540,027$(17,683)$(17,683)

Note: The fair values are based on the quoted forward foreign exchange rates.

2. Derivative financial instruments designated as hedging instruments(1) Deferred hedge

2014:

Contract
amountFair value

Monetary assets and liabilities in foreign
currency (Note)

Legal form

¥283

Buy U.S. Dollars

162

—

1

—

¥446

¥—

Total

¥—Note: T he fair value of these derivative financial instruments, which is based on the quoted foreign exchange rates, is included in the carrying value of hedged assets and liabilities.

18. Other Income (Expenses)
See note 7 for further discussion regarding loss on impairment
for property, plant and equipment, goodwill and other assets of¥2,506 million ($20,854 thousand) and 46,969 million recognized
for the years ended March 31, 2015 and 2014.

Millions of yen

2014:

Contract
amount

19. Business Combinations

Fair value

Future transactions denominated ina foreign currency

Business Divestitures

Sell U.S. dollars¥ 9,365¥ (47)

Sell Korean won

115

(54)

Buy U.S. dollars

8,207

0

Buy Swiss francs

2,382

145

Buy EURO

488

37

Buy GBP15

0¥20,572

¥ 81

Total

Share transfer of a subsidiary
1. Outline of the share transfer(1) Name of the company and business description
Name of the company: Tokyo Electron Device Limited
Business description: Sale of electronic components andcomputer networks

Millions of yen

2015:

Thousands of U.S. dollars

Fair value

Contract
amountFair value

Future transactions denominated ina foreign currency
Sell U.S. dollars¥  638¥ (37)$ 5,309

Sell Korean won

74

(51)

616

(424)

Buy Chinese yuan

1,808

326

15,0452,713

Buy EURO

406

(45)

3,379

(375)

Buy U.S. dollars

50

9

416

75

Sell U.S. dollars

1,091

—

9,079

—

Buy U.S. dollars

268

—

2,230

—

¥4,335¥202$36,074$1,681$ (308)

Monetary assets and liabilities in foreign
currency (Note)

Total(2) Reason of the share transfer
In the midst of a rapidly changing business environment, Tokyo
Electron has spent a considerable effort investigating future
growth strategies for both Tokyo Electron and Tokyo Electron
Device Limited as both companies look to develop the businesses going forward. As a result, the Company sold a portionof its shares in Tokyo Electron Device Limited in order to improvethe value of both enterprises. This will enable Tokyo Electron andTokyo Electron Device Limited to plan for a greater concentration of management resources in our core equipment business,and for Tokyo Electron Device Limited to actively drive its development business and overseas expansion in addition to existingsales of electronic components and computer network related
products while becoming even more independent and building
its own growth strategies for the future.

Share transfer

Number of shares transferred

2,342,600 shares

Sales amounts of the shares¥3,011 million($25,055 thousand)Ownership ratio after the share transfer

35.45%

2. Summary of accounting treatment(1) Carrying value of assets and liabilities and primary information
related to the transferred businessMillions of yen

Current assets
Noncurrent assets

Thousands of
U.S. dollars

2015

2015

¥51,578$429,208

6,333

52,699Total assets¥57,911$481,907

Current liabilities¥25,311$210,627

Noncurrent liabilities
Total liabilities(2) Alternative method
The contract amounts of forward foreign exchange contracts,
entered into to hedge future transactions and receivables and payables denominated in foreign currencies that have been translatedby the corresponding contracted rates, are as follows:
Contract
amountApril 1, 2014, April 15, 2014 and May 9, 2014(4) Share transfer information

Sell U.S. dollars
Buy EURO(3) Share transfer date

9,222

76,741¥34,533$287,368(2) Accounting treatment
Responding to treasury stock repurchase announced by Tokyo
Electron Device Limited, Tokyo Electron recognized loss onchange in equity in the amount of ¥242 million ($2,014 thousand) for the difference between the decrease in equity interestof Tokyo Electron Devise Limited and cash receipt, while Tokyo
Electron recognized loss on sale of affiliates’ shares in the amountof ¥1,609 million ($13,389 thousand) for the share transfer.
3. Business segment of the company transferredElectronic components & computer networks
4. Approximate income recorded in the consolidated statement ofoperations for the fiscal year ended March 31, 2015
Income before income taxes and minority interests
¥250 million ($2,080 thousand)20. Segment Information
General information about reportable segments
A reportable segment is a component or an aggregated component of Tokyo Electron. For each of the components, discrete
financial information is available and the operating result is regularly

reviewed by management to make decisions about resources tobe allocated to the segment and assess its performance.
The operation of Tokyo Electron consists of segments by products and services based on business units (BUs), and Tokyo
Electron identifies as a reportable segment, “semiconductor production equipment (SPE)”, “flat panel display (FPD) production
equipment”, “photovoltaic panel (PV) production equipment” and“electronic components and computer networks”.
Products of the SPE segment consist of coater/developers,
plasma etch systems, thermal processing systems, single wafer
deposition systems, cleaning systems used in wafer processing,wafer probers used in the wafer testing process and other semiconductor production equipment. The SPE segment principallydevelops, manufactures, sells and distributes such products.
Products of the FPD production equipment segment consist ofcoater/developers and plasma etch/ash systems used in the manufacture of flat panel displays. The FPD production equipment
segment principally develops, manufactures, sells and distributes
such products.
Products of the PV production equipment segment consist ofphotovoltaic panel production equipment used in the manufactureof thin-film silicon photovoltaic panels. The segment had principallydeveloped, manufactured, sold and distributed such products, but
in March 2014, Tokyo electron has halted development, production and sales activities for new equipment and limited its operations to provide support for equipment previously delivered.
Changes in reportable segment
The electronic components and computer networks segment
operated by Tokyo Electron Device Limited was excluded from
reportable segment for the year ended March 31, 2015 because
Tokyo Electron Device Limited became an equity method affiliate
from a consolidated subsidiary. The equity in net income of affiliates are included in “Eliminations and Corporate”. The prior year
segment information for the year ended March 31, 2014 was prepared based on the new reportable segmentation and is presented
in the “Information about reportable segment net sales, segment
profit (loss), segment assets and other items” section.  
Basis of measurement of reportable segment net sales,
segment profit (loss), segment assets and other items
The accounting policies applied in each reportable segment are
generally consistent with those applied for the preparation of theconsolidated financial statements. Intersegment sales or transfers
are determined based on current market prices. Assets in common use have not been allocated to each reportable segment,
while costs associated with those assets have been allocated toreportable segments on a systematic basis.

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

26

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate GovernanceCorporate Data

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes to Consolidated Financial Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportNotes to Consolidated Financial Statements

Information about reportable segment net sales, segment profit (loss), segment assets and other items
Reportable segment information as of and for the years ended March 31, 2015 and 2014 are as follows:

Thousands of U.S. dollars
Reportable Segment
Semiconductor
production
equipment

FPD
production
equipmentPVproduction
equipment

Other$4,795,223$272,198$30,107$ 4,619———

95,224

95,224(95,224)—

Total

4,795,223

272,198

30,107

99,843

5,197,371(95,224)

5,102,147

Segment profit (loss)

1,131,663(10,918)(73,138)

9,728

1,057,335(334,792)

722,543

Segment assets

2,542,922

197,645

14,405

15,7362,770,708

4,520,247

7,290,955

Depreciation and amortization

83,365

3,553

50

350

87,31886,419173,737

Amortization of goodwill

9,570

—

—

—

9,570

—

9,570

Loss on impairment

3,229

4,235

—

—

7,464

13,39020,854

Capital expenditures, including intangible assets

70,983

1,639

—

191

72,81346,018118,831

Millions of yen

2015:

Reportable Segment

2015:

Semiconductor
production
equipment

FPD
production
equipmentPVproduction
equipment

Other

Total

Eliminations
andCorporate

Consolidated¥32,710¥3,618¥   555¥613,125¥     —

¥613,125———

11,443

11,443(11,443)—

Total

576,242

32,7103,618

11,998624,568(11,443)

613,125

Segment profit (loss)

135,992(1,312)(8,789)1,169

127,060(40,232)

86,828Segment assets

305,583

23,751

1,731

1,891

332,956

543,198

876,154

Depreciation and amortization

10,018427

64210,493

10,38520,878

Amortization of goodwill

1,150

—

—

—

1,150

—

1,150

Loss on impairment
Capital expenditures, including intangible assets

388

509

—

—

897

1,609

2,506

8,530

197

—

23

8,750

5,530

14,280Millions of yen
Reportable Segment

2014:

Semiconductor
production
equipment

FPD
production
equipmentPVproduction
equipment

Other

Total

Eliminations
andCorporate

Consolidated¥478,842¥28,317¥ 3,806¥   479¥511,444¥100,726¥612,170

34——

11,76011,794(11,794)—478,876

28,317

3,806

12,239523,238

88,932

612,170

Net sales
Sales to external customers
Intersegment sales or transfers
Total

Sales to external customers
Intersegment sales or transfers

¥576,242

Intersegment sales or transfers

Consolidated

Net sales

Net sales
Sales to external customers

Total

Eliminations
andCorporate

Segment profit (loss)

74,284(37)(46,426)1,267

29,088(40,844)(11,756)

Segment assets

273,142

21,252

2,145

1,871

298,410530,182

828,592

Depreciation and amortization

10,114

235

10

49

10,40814,48024,888

Amortization of goodwill

1,473

—

2,686

—

4,159

103

4,262

Loss on impairment

5,009

—

32,789—37,7989,171

46,969

Capital expenditures, including intangible assets

8,109

103

857

41

9,110

5,934

15,044$5,102,147 $       — $5,102,147

Notes: 1. “Other” includes all other operating segments which are not included in the reportable segments, including group-wide logistic services, facility maintenance and insurance.
2. (1) For the year-ended March 31, 2014, as described in “Changes in reportable segment”, sales to external customers ¥100,726 million, intersegment sales or transfers ¥1,075
million, segment profit ¥722 million, segment assets ¥57,465 million, depreciation and amortization ¥476, amortization of goodwill ¥103 million, and capital expenditures,
including intangible assets and other assets ¥825 million reported as “the electronic components and computer networks” were included in “Eliminations and Corporate”.  
(2) “Eliminations and Corporate” segment loss totaling ¥40,232 million ($334,792 thousand) and ¥40,844 million for the years ended March 31, 2015 and 2014, respectively,
includes corporate expenses not allocated to any reportable segments. The corporate expenses consist of research and development costs of ¥17,109 million ($142,373
thousand) and ¥19,735 for the years ended March 31, 2015 and 2014, respectively, pertaining to fundamental research and element research, not allocated to any of thereportable segments. In addition, for the year ended March 31, 2015, expenses related to business combination of ¥8,530 million ($70,983 thousand) is included. Further,
impairment loss of ¥1,609 million ($13,390 thousand) and ¥9,171 million are also included for the years ended March 31, 2015 and 2014, respectively. See (4) for additional
information related to impairment loss.
(3) “Eliminations and Corporate” segment assets totaling ¥543,198 million ($4,520,247 thousand) and ¥530,182 million as of March 31, 2015 and 2014, respectively, consist
mainly of cash and cash equivalents, short-term investments and buildings not allocated to any of the reportable segments.
(4) “Eliminations and Corporate” loss on impairment of ¥1,609 million ($13,390 thousand) for the year ended March 31, 2015 is attributable to corporate assets not to be allocated to any of the reportable segments. “Eliminations and Corporate” loss on impairment of ¥9,171 million for the year ended March 31, 2014 is attributable to corporate buildings and structures and other assets that became idle as a result of facility restructuring. See note 7 for further discussion.
(5) “Eliminations and Corporate” capital expenditures totaling ¥5,530 ($46,018 thousand) and ¥5,934 million for the years ended March 31, 2015 and 2014, respectively, consist
mainly of capital expenditures for buildings, machinery and equipment not allocated to any of the reportable segments.

Other Information(1) Domestic and overseas net sales by destination for the years ended March 31, 2015 and 2014 are as follows:
Millions of yen

2015:

Net sales

TaiwanU.S.A.

Korea

Japan

Europe

Other

Total

¥141,620¥135,425¥101,962¥95,046¥62,466¥76,606¥613,125

Note: Sales are classified in countries or regions based on location of customers.
Millions of yen

2014:

Net salesJapan

TaiwanU.S.A.

China

Korea

Europe

Other

Total

¥161,631¥133,736¥104,617¥81,929¥76,401¥33,861¥19,995¥612,170

TaiwanU.S.A.

Korea

Japan

Europe

Other

Total

$1,178,497$1,126,945$848,481$790,930$519,814$637,480$5,102,147

Note: Sales are classified in countries or regions based on location of customers.
Thousands of U.S. dollars

2015:

Net sales(2) Net property, plant and equipment by location as of March 31, 2015 and 2014 are as follows:
Millions of yen

2015:

Property, plant and equipment

Japan

U.S.A.

Other

Total

¥78,492¥15,496¥12,908¥106,896

Japan

U.S.A.

Other

Total

¥82,364¥15,119¥14,861¥112,344

Millions of yen

2014:

Property, plant and equipment

Thousands of U.S. dollars

2015:

Property, plant and equipment

Japan

U.S.A.

Other

Total

$653,175$128,951$107,414$889,540TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

27

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate Governance

Financial Section

Corporate Data

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes to Consolidated Financial Statements

Independent
Independent Auditor’s
Auditor’s Report
ReportNotes to Consolidated Financial Statements
21. Subsequent events(3) Major customer information
Net sales to external customers that represent 10 percent or more of net sales are as follows:
Millions of yen

Related reportable segment

Name of customer

Intel Corporation

Semiconductor production equipment

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

Thousands of
U.S. dollars

2015

2015

¥123,154$1,024,831

97,943815,037

Millions of yen

Related reportable segment

Name of customer

2014

Taiwan Semiconductor
Manufacturing Company Ltd.

Semiconductor production equipment

Intel Corporation

Semiconductor production equipment

84,272Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

80,476¥91,243

Note: The amounts include sales to the customer and its subsidiaries.

Information about reportable segment goodwill
Reportable segment information about amortization of goodwill for the years ended March 31, 2015 and 2014, and unamortized balances
as of March 31, 2015 and 2014 are as follows:
Millions of yen
Semiconductor
production
equipment

2015:

FPD
production
equipmentPVproduction
equipment

Total

Amortization of goodwill¥1,150¥—¥—¥1,150Goodwill

9,067

—

—

9,067

Millions of yen

2014:

Semiconductor
production
equipment

FPD
production
equipmentPVproduction
equipment

Other(Note)

Total

Amortization of goodwill¥1,473¥—¥2,686¥103¥4,262

Goodwill

9,092

—

—

308

9,400

Semiconductor
production
equipment

FPD
production
equipmentPVproduction
equipment

Amortization of goodwill$ 9,570$—$—$ 9,570

Goodwill

75,451——75,451

Note: Other segment is Electronic components & computer networks until fiscal 2014.

Thousands of U.S. dollars

2015:

Total

The termination of the business combination agreement with
Applied Materials, Inc. and the share exchange with TEL Japan GK
In relation to the business combination with Applied Materials, Inc.,Tokyo Electron entered into a Business Combination Agreement on
September 24, 2013 and a Share Exchange Agreement with TEL
Japan GK on May 14, 2014. However, Tokyo Electron, at its board of
directors’ meeting held on April 27, 2015, resolved to terminate theBusiness Combination Agreement and to cancel the Share Exchange
Agreement with TEL Japan GK. This does not have a material impact
on Tokyo Electron’s financial condition or its results of operations.
Share repurchase
At the Board of Directors meeting held on April 27, 2015, Tokyo
Electron resolved to acquire its own shares under Article 156, asapplied pursuant to paragraph 3, Article 165, of the JapaneseCorporation Act as follows.
1. Reason for acquisition of own shares
To enable the implementation of flexible capital policies to meetthe changes in the business environment.
2. Details of acquisition(1) Type of shares to be acquired: Common stock(2) Total number of shares to be acquired: Up to 15.4 million shares(3) Total cost of acquisition: Up to 120 billion yen(4) Period of acquisition: From May 14, 2015 to May 13, 2016(5) Method of acquisition: Acquisition through the market transaction
on Tokyo Stock Exchange

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

28

CONTENTSCONTENTS

Financial Highlights

Financial Review

Business Overview

Consolidated Eleven-Year
Eleven-Year Summary
Summary
Consolidated

Consolidated Statements
Statements ofof Changes
Changes inin NetNet Assets
AssetsConsolidated

Independent Auditor’s Report

To Our Stakeholders

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated
Consolidated Statements
Statements ofof CashCash Flows
Flows

Corporate Governance

Financial Section

Consolidated Statements
Statements ofof Comprehensive
Comprehensive Income
Income (loss)(loss)
Consolidated

Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements

Independent Auditor’s Report

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2015

PAGE

29

CONTENTSCONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Corporate Governance

Financial Section

Corporate Data

Consolidated Subsidiaries / Investor Information

Consolidated Subsidiaries (As of March 31, 2015)

Investor Information (As of March 31, 2015)

JAPAN

Corporate Name and Head Office:Common Stock Listed on:

For Further Information, Contact:• Tokyo Electron Yamanashi Limited

Tokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, JapanThe Tokyo Stock Exchange 1st Section(Stock code: 8035)

Investor Relations
Tokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, Japan
Tel: +81-3-5561-7000• Tokyo Electron Kyushu Limited• Tokyo Electron Tohoku Limited• Tokyo Electron Miyagi Limited• Tokyo Electron TS Limited• Tokyo Electron FE Limited

Independent Auditors:
KPMG AZSA LLC

Established:

Administrator of Shareholders’Register:November 11, 1963

• Tokyo Electron BP Limited

Annual General Meeting of
Shareholders:• Tokyo Electron Agency Limited

June

Common Stock:
U.S.A.
• Tokyo Electron U.S. Holdings, Inc.
• Tokyo Electron America, Inc.

Stock trading unit
100 shares
Authorized
300,000,000 shares
Issued and outstanding 180,610,911 shares
Number of shareholders 20,829• TEL Technology Center, America, LLC• TEL Venture Capital, Inc.
• TEL Epion Inc.

Principal Shareholders:Number ofshares held
(thousands)

Votingshare ratio(%)• TEL FSI, Inc.

The Master Trust Bank of Japan, Ltd. (trust account)
The Bank of New York Mellon as Depositary Bank for DR Holders

18,995
12,66910.59
7.06

EUROPE

Deutsche Bank Trust Company Americas

10,613

5.92

Japan Trustee Services Bank, Ltd. (trust account)

10,095

5.63

Tokyo Broadcasting System Holdings, Inc.

7,727

4.31

• Tokyo Electron Israel Limited

Chase Manhattan Bank GTS Clients Account Escrow

5,889

3.28

• TEL Magnetic Solutions Limited

BNP Paribas Securities (Japan) Limited

3,645

2.03

• TEL Solar AG

The Bank of New York Mellon SA/NV 10

3,544

1.97

ASIA

Citibank, N.A.-NY, as Depositary Bank for Depositary Share Holders
Mizuho Securities Co., Ltd

2,606
2,228

1.45
1.24

Notes: 1. Shares of less than one thousand have been rounded down in the “Number of shares held.”• Tokyo Electron Korea Limited

http://www.tel.com/

Direct mail and inquiries to:
Sumitomo Mitsui Trust Bank, Limited
8-4 Izumi 2-chome, Suginami-ku,
Tokyo 168-0063, Japan
Tel (toll free): 0120-782-031 (available
only in Japan)• TEL NEXX, Inc.

• Tokyo Electron Europe Limited

URL:

Sumitomo Mitsui Trust Bank, Limited
4-1 Marunouchi 1-chome, Chiyoda-ku,
Tokyo Japan

Distribution of Ownership Among
Shareholders:
Treasury stock
0.75%
Other Japanese
corporations
4.95%

Foreign institutions
and others
54.34%

2. Voting share ratio is calculated excluding treasury stock (1,344,892 shares).

• Tokyo Electron Taiwan Limited

Japanese individuals andothers5.01%• Tokyo Electron (Shanghai) Limited• Tokyo Electron (Kunshan) Limited

Japanese financial institutions
and securities companies
34.95%• Tokyo Electron Singapore Pte. Limited

46 consolidated subsidiaries in total, including the above 24 companies

Stock Price and Trading Volume(Yen)(Thousands of shares)

10,0008,000
Stock price
6,000

4,000

2,000
0

100,000
Trading volume

50,0000

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