Tokyo Electron

Annual Report 2012

Page

19

Contents

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Corporate Data

Financial Sectionn Financial Review
n Consolidated Eleven-year Summaryn Consolidated Balance Sheetsn Consolidated Statements of Income
n Consolidated Statements Of Comprehensive Income
n Consolidated Statements Of Changes In Net Assets
n Consolidated Statements of Cash Flowsn Notes To Consolidated Financial Statementsn Independent Auditors’ Report

Financial Review
Sales and Income
Operating Environment
During fiscal 2012, the global economy slowed overall, especially in developed
nations, due to future uncertainty rooted in Europe’s financial crises. However, inthe second half of the fiscal year, there were signs of the beginning of a gradual

Gross Profit, SG&A Expenses and Operating Income (Loss)

Other Income (Expenses) and Net Income

Cost of sales for the period was down 2.8% year on year, to ¥421.6 billion, and theDuring fiscal 2012, Tokyo Electron posted income of ¥1.4 billion in gain on collec-

cost of sales ratio was 66.6%, 1.7 percentage points worse than in fiscal 2011.

tion of written-off receivables and ¥1.1 billion in revenue from development

As a result, gross profit decreased by 9.9% year on year, to ¥211.4 billion, andthe gross profit margin decreased to 33.4%, from 35.1% in fiscal 2011.

grants, and expenses of ¥1.8 billion in provision of allowance for doubtful
accounts and a ¥0.9 billion loss from natural disasters. As a result, other income

SG&A expenses increased by 10.3% year on year, to ¥151.0 billion as a result of(expenses) amounted to a net income of ¥0.2 billion.

recovery, mainly in the U.S. In emerging countries such as China and India, theaggressive spending in research and development. As a percentage of consoli-This contributed to ¥60.6 billion in income before income taxes and minority

speed of growth slowed, but economic growth continued, led by internal demand.

dated net sales, the SG&A ratio increased to 23.9%, from 20.5% in the previous

interests, compared with ¥99.6 billion in fiscal 2011. A net income for fiscal 2012

Japan’s economy quickly began its recovery from the Great East Japan Earthquake

year. Consequently, operating income decreased by 38.2% to ¥60.4 billion andof ¥36.7 billion was recorded, compared to ¥71.9 billion in fiscal 2011. Net income

at an early stage, but the subsequent worldwide economic recession and histori-

the operating margin declined from 14.6% to 9.5%.

per share was ¥205.04 in fiscal 2012, compared with ¥401.73 in fiscal 2011.

Research & Development

Comprehensive Income

tablets have spread widely, resulting in an overall positive performance. However,R&D expenses are included in SG&A expenses. The Company views these expenses

For fiscal 2012, Tokyo Electron posted comprehensive income of ¥37.0 billion,

as sales of PCs and televisions continued to be sluggish, sales of semiconductors

as the source of future growth and as such incurred ¥81.5 billion in R&D expenses

compared with ¥69.6 billion in the previous fiscal year. This mainly reflected aand LCD panels that are key components in these products were not sufficient toin fiscal 2012, up 15.5% year on year.

gain of ¥0.8 billion from changes in fair value of investment securities and acally high yen have slowed this recovery.
In the electronics industry, in which Tokyo Electron serves, smartphones andBreaking down these costs by division, R&D investment in the semiconductor

lead to active capital investments.

production equipment business focused on the development of next-generation

loss of ¥0.9 billion due to foreign currency translation adjustments with highyen appreciation.

Sales

models in various equipment fields, and on the development of original double

Net sales in fiscal 2012 decreased 5.3% year on year to ¥633.1 billion. This wasand multiple patterning technology that helps to promote further chip miniaturiza-

Dividend Policy and Dividends

mainly because memory manufacturers refrained from investments due to sluggish

tion, of film deposition technologies for new materials, and of extreme ultraviolet

It is the policy of Tokyo Electron to pay dividends on the basis of business perfor-

PC sales. Sales in Japan were down 5.9% year on year, to ¥171.4 billion, and over-(EUV) lithography which is a promising next-generation lithography process. Tokyo

mance and earnings results. The dividend payout ratio has been set at approxi-seas sales decreased 5.1% to ¥461.7 billion. Overseas sales as a share of total

Electron’s R&D investments focused not only on existing business segments, but

mately 35% of consolidated net income. As a result, the Company paid anconsolidated sales remained at about the same level, up from 72.8% in fiscal 2011

also on the development of production equipment for 3DI packaging technology,interim dividend of ¥53 (a ratio of 35.6%), and set the year-end dividend at ¥27

to 72.9% in fiscal 2012.

OLED displays, photovoltaic cells and other new product segments.

(a ratio of 48.0%). Thus, the total dividend applicable to fiscal 2012 was ¥80 (aOrders received during the fiscal year decreased by 26.4%, to ¥541.0 billion,

combined ratio of 39.0%). Looking ahead, we will respond to the support of all

and the order backlog at the end of March 2012 decreased 29.8% year on year,

our shareholders through achieving business expansion and earnings growth.

to ¥216.7 billion. Behind these decreases were declines in the willingness to invest
by memory manufacturers and panel manufacturers, the Tokyo Electron Group’s

9,637(7,768)99,57960,602

Net income (loss) ����������������������������������������������������

106,271

7,543(9,033)71,92436,726

633.1

0

08
■ Domestic■ Overseas

09

90

10

60

5

30

–2.2

0

0

0

–5

–30

71.9
7.5

2.9

36.7

60.4

50

9.5

–9.0

97.9

461.7

15

106.3

668.7

418.6

508.1

486.6

300

120

14.6

100

–0.5

171.4

169,220150

600(Billions of Yen)

20
18.6

900

182.2

Income (loss) before income taxes andminority interests���������������������������������������������������

906.1

2012

¥633,091
211,44533.4%
151,00260,4439.5%

256.0

Operating margin����������������������������������������������������

2011¥668,722
234,758
35.1%
136,888
97,870
14.6%

162.6

Operating income (loss) ������������������������������������������

2010¥418,637
108,31625.9%
110,497(2,181)(0.5)%

299.2

Selling, general and administrative expenses������������

2009¥508,082
137,408
27.0%
122,697
14,7112.9%

208.9

Gross profit margin�������������������������������������������������

2008¥906,092
311,298
34.4%
142,800
168,498
18.6%

Net Income (Loss)
(%)

200

582.1

Gross profit�������������������������������������������������������������

(Billions of Yen)

323.9

Net sales�����������������������������������������������������������������

(Billions of Yen)
1,200

Millions of Yen

Sales and Income

Operating Income (Loss) andOperating Margin

14.7

to surplus inventory in LCD panels caused by sluggish sales of TVs.

Domestic and Overseas Sales

168.5

customers, due to surplus inventory in DRAMs caused by sluggish sales of PCs, and

10

11

12

–50

08

09

10

■ Operating Income (Loss)
Operating Margin

11

12

08

09

10

11

12

Tokyo Electron

Annual Report 2012

Page

20

Contents

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Corporate Data

Financial Sectionn Financial Review
n Consolidated Eleven-year Summaryn Consolidated Balance Sheetsn Consolidated Statements of Income
n Consolidated Statements Of Comprehensive Income
n Consolidated Statements Of Changes In Net Assets
n Consolidated Statements of Cash Flowsn Notes To Consolidated Financial Statementsn Independent Auditors’ Report

Financial Review
Performance by Segment■ Electronic Components and Computer Networks■ Others

Net sales (including intersegment sales or transfers) in the segment decreased

Sales in the “Others” segment mainly include group-wide logistics services, leasing■ Semiconductor Production Equipment

5.5% year on year to ¥86.3 billion. Demand for electronic components used in

and insurance.

Net sales (including intersegment sales or transfers) for fiscal 2012 decreased byconsumer electronics and industrial electronic equipment were sluggish except for

6.5% year on year, to ¥477.9 billion. While logic manufacturers made substantial

components used in mobile devices such as smartphones. Increased corporate

investments led by smartphones, tablets and other cutting-edge mobile devices,demand for cloud computing and the increased usage of data centers propelled

memory manufacturers refrained from making investments due to lower PC sales.

sales of computer networks products as well as maintenance services. As a result,

The segment profit declined by 26.3% to ¥89.0 billion and the segment profit

the segment profit decreased 20.5% to ¥2.3 billion and segment profit margin

margin decreased from 23.6% to 18.6%.

declined from 3.2% to 2.7%.

the same level as in fiscal 2011.

The segment’s net sales to external customers decreased 6.5% year on year, to

The segment’s net sales to external customers decreased 5.9% to ¥84.9 billion.

¥477.9 billion. Orders in this segment dropped 23.0% to ¥437.6 billion. The order

Orders in this segment decreased 7.4% to ¥84.3 billion. The fiscal year-end orderbacklog declined 17.6% to ¥188.7 billion as of March 31, 2012.

backlog declined 4.1% to ¥13.8 billion.

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

Net sales to external customers in the segment amounted to ¥0.5 billion, almost

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

■ FPD/PV (Flat Panel Display and Photovoltaic Cell) Production
Equipment

Millions of Yen
Reportable Segment

Net sales (including intersegment sales or transfers) in the segment stood at

Segment Information¥69.9 billion, up 4.7% year on year. The segment profit decreased 65.8% to ¥2.3

2012:billion and the segment profit margin from 10.0% in the previous fiscal year to

Net sales

3.3%. Demand for FPD production equipment for small- and medium-sized

Sales to external customers�����������������������������������������������������������

panels was robust due to strong demand for mobile devices, however, demandIntersegment sales or transfers������������������������������������������������������

for FPD production equipment for large-sized panels was weak due to sluggish
demand for TVs. Sales of PV production equipment rose year on year.
The segment’s net sales to external customers increased 4.7% to ¥69.9 billion.

Total���������������������������������������������������������������������������������������������
Segment profit������������������������������������������������������������������������������
Segment assets�����������������������������������������������������������������������������

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other

Total

Eliminations
and Corporate

Consolidated¥477,873–
477,873
89,020262,789¥69,889–
69,8892,271
21,295¥84,868
1,432
86,3002,312
46,391¥   461
14,56515,026
1,827
1,927¥633,091
15,997649,088
95,430332,402¥–(15,997)(15,997)(34,828)451,209¥633,091–
633,091
60,602
783,611

11,282
13,518

687
672

570
407

170
36

12,70914,633

11,48928,572

24,19843,205

OthersOrders in this segment dropped 75.3% to ¥18.6 billion. The fiscal year-end order

Depreciation and amortization�������������������������������������������������������

backlog declined 78.3% to ¥14.2 billion as of March 31, 2012.

Capital expenditures, including intangible and other assets������������

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

Selling, General and
Administrative Expenses andRatio to Net Sales(Billions of Yen)(%)

Receivable Turnover andInventory Turnover(Billions of Yen)

(Yen)

(Billions of Yen)

(Billions of Yen)

(Days)

100

150

150

40

15.8

482.3

476.2

433.8

400

416.4

783.6

809.2

4.6

441.4

600

696.4

669.0

70.6

4.0

100

3.8

92

96
109

90

87

86

3.2

80

20.5

121

4.9

792.8

81.5

20

100

54.1

60

86
74

400
200

50

40

6.0

800

125

80
30

23.9

(Times)

600

1,000

114

151.0

136.9

Working Capital and Current Ratio

61.0

80

Total Assets

66.1

24.1

Cash Dividends per Share

5.7

26.4

110.5

122.7

120

40

142.8

160

R&D Expenses

2.0

50

0

0

65

10
200

0

0

08

09

10

11

12

■ Selling, General and Administrative Expenses
Ratio to Net Sales

0

12

24

20

0

08

09

10

11

12

08

09

10

0

11

12

0

08

09

10

11

12

08

09

■ Working Capital
Current Ratio

10

11

12

08

09

Receivable Turnover
Inventory Turnover

10

11

12

Tokyo Electron

Annual Report 2012

21

Page

Contents

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Corporate Data

Financial Sectionn Financial Review
n Consolidated Eleven-year Summaryn Consolidated Balance Sheetsn Consolidated Statements of Income
n Consolidated Statements Of Comprehensive Income
n Consolidated Statements Of Changes In Net Assets
n Consolidated Statements of Cash Flowsn Notes To Consolidated Financial Statementsn Independent Auditors’ Report

Financial Review
Financial Position and Cash Flows
Assets, Liabilities and Net Assets■ Assets
Current assets decreased by ¥37.2 billion from the end of the previous fiscal year,to ¥607.1 billion, reflecting decreases of ¥37.4 billion in liquidity on hand (cashand cash equivalents + short-term investments) and of ¥19.5 billion in inventories,
and an increase of ¥13.9 billion in trade notes and accounts receivable. The turnover period for trade notes and accounts receivable increased from 74 days infiscal 2011 to 87 days in fiscal 2012, and the inventory turnover period decreased
from 92 days in fiscal 2011, to 86 days in fiscal 2012.
Net property, plant and equipment increased by ¥14.3 billion year on year, to¥126.9 billion, as ¥24.2 billion in depreciation and amortization was outweighedby ¥39.5 billion in fixed asset acquisitions.
Investments and other assets decreased by ¥2.7 billion year on year, to¥49.7 billion.
As a result, as of March 31, 2012, total assets stood at ¥783.6 billion, adecrease of ¥25.6 billion year on year.

¥5.5 billion in trade notes and accounts payable and ¥5.6 billion in customer
advances. The balance of interest-bearing debt, which consists only of short-termborrowings, stood at ¥4.4 billion as of March 31, 2012. The debt/equity ratio
declined to 0.8%, 0.6 points lower than the end of March 2011.
Non-current liabilities increased by ¥3.8 billion, to ¥60.2 billion.
Net assets increased by ¥13.8 billion year on year, to ¥598.6 billion. This
reflected an increase in retained earnings of ¥13.5 billion resulting from a net
income of ¥36.7 billion and ¥23.1 billion in dividends paid. As a result, the equity
ratio improved from 70.8% at the end of March 2011 to 74.9% as of March 31,
2012, and ROE dropped to 6.3%, from 13.3% in fiscal 2011.

Capital Expenditures*1 and Depreciation and Amortization*2
Total capital expenditures increased by 1.0% year on year in fiscal 2012, to ¥39.5 billion.
• New Miyagi plant (Taiwa-cho, Kurokawa-gun, Miyagi Prefecture)• New Kunshan plant (Kunshan, Jiangsu Province, China)• TEL Technology Center Tsukuba (Tsukuba, Ibaraki Prefecture)• Purchase of evaluation and measuring equipment
Depreciation and amortization increased by 36.7% year on year, to ¥24.2 billion.
*1 Capital expenditures represent only the gross increase in property, plant and equipment.
*2 Depreciation does not include amortization and losses on impairment of goodwill.

■ Liabilities and Net Assets

Cash Flows
Cash flows from operating activities showed a net inflow of ¥29.7 billion, ¥53.5
billion less than in fiscal 2011. The main contributors were ¥60.6 billion in income
before income taxes and minority interests, ¥24.2 billion in depreciation and amortization, and a ¥16.0 billion decrease in inventories. Major negative factors
included a ¥47.6 billion in income taxes paid and a ¥15.5 billion increase in tradenotes and accounts receivable.
Investing activities used net cash of ¥8.4 billion, compared with ¥35.9 billion
used in fiscal 2011. This mainly reflected a ¥36.0 billion outflow to purchase property, plant and equipment and a ¥31.0 billion inflow from a net decrease in shortterm investments.
Financing activities used net cash of ¥27.3 billion, compared with ¥5.2 billion in
fiscal 2011. The main outflow was ¥23.1 billion in dividends paid and ¥3.6 billion
in repayment of short-term borrowings.
As a result, the balance of cash and cash equivalents at the end of March 2012
stood at ¥158.8 billion, a decrease of ¥6.3 billion from the ¥165.1 billion balanceat the end of fiscal 2011. Total liquidity on hand, which consists of cash, cash
equivalents and short-term investments, decreased by ¥37.4 billion year on year,
from ¥285.1 billion at the end of March 2011 to ¥247.6 billion at the end of
March 2012.

Current liabilities decreased by ¥43.2 billion, from the end of fiscal 2011, to¥124.8 billion. This reflected decreases of ¥21.0 billion in income taxes payable,
Millions of Yen

2012¥640,234
104,106
48,478792,818
198,821247,573545,245¥505,687
99,906
63,405668,998
89,272
139,733
529,265¥552,939
92,12851,285696,352
119,162
172,982
523,370¥644,231
112,552
52,422809,205
168,038
224,403584,802¥607,051
126,885
49,675
783,611
124,794
185,008
598,603¥81,030(160,622)(46,016)
65,883¥ 48,285
9,613
(288)
123,940¥ 83,239(35,882)(5,237)
165,051¥ 29,712(8,352)(27,335)
158,776

ROA

Capital Expenditures andDepreciation and Amortization

Total Liquidity on Hand

(%)

(%)

(Billions of Yen)

(Billions of Yen)

21.4

20

21.7

30

40

13.1

10

20

10

18.1

7.7
6.3
2.3

08

09

■ Interest-Bearing Debt
D/E Ratio

200

20

0
1.4

10

11

12

100

–0.2
–1.8

0.8

4.4

1.0

10

0

1.4

8.0

0.7

0

5.1

2

3.8

10

203.6

200
13.3

247.6

20

300

40

285.1

60

30

243.9

30

210.2

80

24.2

572.7

511.8

400

518.4

4

¥116,939(30,186)(27,033)
193,493

74.9

600

535.0

36.1

20

6

2012

ROE

70.8

67.5

6.7
30

2011

39.1

73.5

2010

17.7

77.5

2009

20.0

800

(%)

2008

39.5

(Billions of Yen)

Cash Flows
Cash flows from operating activities������������������������Cash flows from investing activities�������������������������Cash flows from financing activities�������������������������Cash and cash equivalents at end of year�����������������

23.1

8

2011

Equity and Equity Ratio
(%)

40

2010

14.9

(Billions of Yen)

2009

586.8

Interest-Bearing Debt, D/E Ratio

Millions of Yen

2008

22.7
21.4

Financial Position
Total current assets��������������������������������������������������
Net property, plant and equipment��������������������������
Total investments and other assets���������������������������
Total assets�������������������������������������������������������������
Total current liabilities����������������������������������������������
Total liabilities���������������������������������������������������������
Total net assets (Total shareholders’ equity)��������������

0

0

0

08
■ Equity
Equity Ratio

09

10

11

12

–10

09

10

11

12

0

0

–10

08

08

09

10

11

12

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

08

09

10

11

■ Capital Expenditures■ Depreciation and Amortization

12

08

09

10

11

12

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

Tokyo Electron

Annual Report 2012

Page

22

Contents

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan Financial Review
n Consolidated Eleven-year Summaryn Consolidated Balance Sheetsn Consolidated Statements of Income
n Consolidated Statements Of Comprehensive Income
n Consolidated Statements Of Changes In Net Assets
n Consolidated Statements of Cash Flowsn Notes To Consolidated Financial Statementsn Independent Auditors’ Report

Financial Review
Business-related and Other Risks(3) Impact From Research and Development(6) Impact of Intellectual Property Rights

The following are possible risks that may have an impact on Tokyo Electron’s busi-

Through ongoing and proactive R&D investment and activities in cutting-edge

In order to distinguish its products and make them more competitive, Tokyo

ness performance, stock price, or financial position.

technologies—miniaturization, vacuum, plasma, thermal processing, coating/Electron has promoted its R&D strategy for the early development of cutting-edge

developing, cleaning, wafer-transfer and clean technologies—Tokyo Electron has

technologies together with its business and intellectual property strategies. This

(1) Impact From Changes in the Semiconductor Market

created advanced technologies. At the same time, by quickly bringing to market

approach has enabled Tokyo Electron to obtain sole possession of many propri-Tokyo Electron has achieved a high profit margin by concentrating resources in

new products incorporating these technologies, Tokyo Electron has successfully

etary technologies that have been instrumental to the Company’s ability to capture

high-tech fields, including semiconductor production equipment, where techno-

captured a high market share in each of the product fields it has entered and gen-a high market share and generate high profit margins in each of its product fields.

logical innovation is rapid but Tokyo Electron can effectively use its strengths.

erated a high profit margin. However, delays in the launch of new products andTokyo Electron’s products incorporate and optimize many of these proprietary

Although technological change is responsible for the semiconductor market’s rapid

other factors could adversely affect Tokyo Electron’s business performance.

cutting-edge technologies. There may be cases in which, by avoiding the use of

growth, Tokyo Electron has actively undertaken structural reforms to be able tothird-party technologies and intellectual property rights, Tokyo Electron’s businessgenerate profits under any circumstances, including when the market contracts(4) Safety-related Impact

temporarily due to imbalance of supply and demand. However, order cancella-Tokyo Electron’s basic philosophy is to always bear in mind safety and health in thetions, excess capacity and personnel and increased inventories resulting from an

execution of business activities, including development, manufacturing, sales, ser-

(7) Impact of Fluctuating Foreign Exchange Rates

unexpectedly large market contraction, losses from bad debts resulting from thevices and management. In accordance with this philosophy, Tokyo Electron works

Success in the development of overseas operations has increased the share of sales

worsening of a customer’s financial position, and supply shortages resulting from

actively and continuously to improve the safety of its products and to eliminate any

generated overseas. As a rule, Tokyo Electron conducts export transactions on a

the worsening of a supplier’s management situation, could adversely affect Tokyo

harmful impact on health. However, harm to customers, order cancellations or

yen basis to avert exposure to foreign currency risks. However, some exports are

Electron’s business performance considerably.

other circumstances resulting from safety or other problems related to Tokyo

denominated in foreign currencies. In these cases, Tokyo Electron hedges foreign

Electron’s products could adversely affect Tokyo Electron’s business performance.

currency risk by using a forward foreign exchange contract when an order isperformance could be adversely affected.

(2) Impact From Concentration of Transactions on Particular
Customers(5) Impact From Quality Issues

fluctuations in prices due to sudden foreign exchange movements, which could

Tokyo Electron has been successful at increasing transactions with the leading

Tokyo Electron actively develops outstanding, cutting-edge technologies for incor-

have an indirect adverse effect on Tokyo Electron’s business performance.

semiconductor manufacturers worldwide, including those in Japan, through theporation in new products that are brought quickly to market. At the same time,

provision of products featuring outstanding, cutting-edge technology and of ser-Tokyo Electron works to establish a quality assurance system, efforts that include(8) Other Risks

vices offering a high level of customer satisfaction. However, Tokyo Electron’s sales

obtaining ISO 9001 certification, as well as to establish a world-class service

Tokyo Electron is actively engaged in reforming its corporate structure so that it

may from time to time be temporarily concentrated on particular customers due tosystem. These actions have resulted in a large number of customers adopting

can generate profits even when markets contract. These reforms have entailed

the timing of large capital investments of major semiconductor manufacturers. The

Tokyo Electron’s products. However, because Tokyo Electron’s products are based

creating new high-growth and high-return businesses and pursuing higher earn-

resulting escalation in sales competition could adversely affect Tokyo Electron’s

on cutting-edge technologies, and due to other factors, many of the technologies

ings from existing businesses. At the same time, Tokyo Electron has promoted

business performance.

developed are in unfamiliar fields. The occurrence of unforeseen defects or otheractivities to preserve the environment and worked to restructure its compliance,

issues could adversely affect Tokyo Electron’s business performance.

risk management and information security management systems. However, as

received or by other means. However, foreign exchange rate risks can arise fromlong as it conducts business activities, as with peer companies or companies indifferent industries, Tokyo Electron is subject to the effect of many other factors.
These include the world and regional economic environments, natural disasters,
war, terrorism, unavoidable occurrences, financial or stock markets, government
or other regulations, supply systems of suppliers, market conditions for products
and real estate, the ability to recruit personnel in Japan and overseas, competition
over standardization, and loss of key personnel. Any of these factors could
adversely affect Tokyo Electron’s business performance.