Diversity

the Key to Growth
ANNUAL REPORT 2023 (PDF Version)
For the year ended December 31, 2023

Profile
Since its establishment in 1950, Star Micronics Co., Ltd. has worked
diligently to “generate the greatest impact from the least materials.”
In order to achieve its aspirations, Star Micronics Co., Ltd. (the “Company”)
has continued to deliver a steady stream of high-added-value products
based on its core technologies of small-scale precision processing andassembly. Currently, the Company is engaged in the Special Products
business including point-of-sale (POS) printers and the Machine Tools
business including CNC automatic lathes.
From each of the sales and manufacturing perspectives,
the Company is also actively engaged in global business development.
Today, Star Micronics maintains a ratio of overseas sales to all sales of
89% and a ratio of overseas production to all production of 81%.
Working toward its next leap forward, the Company is leveraging
its core technologies to promote a wide range of measures aimed atboth creating new businesses and expanding existing businesses.
Star Micronics is committed to contributing to the sustainable
development of society as a leading small and medium-sized enterprisethat seeks to excel on the world stage.

Contents
Corporate Philosophy, Purpose, Management Policy,
Action Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 01

Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 02

Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 04

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 04

Consolidated Eleven-Year Summary . . . . . . . . . . . . . . . . . 34

Related Information by Geographical Region . . . . . . . . . 05

Management’s Discussion and Analysis . . . . . . . . . . . . . . . 36

To Our Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06

Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 42

Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Consolidated Statement of Income . . . . . . . . . . . . . . . . . . 44

Medium-Term Management Plan . . . . . . . . . . . . . . . . . . 10

Consolidated Statement of Comprehensive Income . . . . . 44

Review of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Consolidated Statement of Changes in Equity . . . . . . . . . . 45

Special Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . 46

Machine Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Notes to Consolidated Financial Statements . . . . . . . . . . . 47

Research & Development . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . 73

Solution Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Stock Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Forward-looking Statements
Statements in this annual report with respect to Star Micronics’ plans, strategies and beliefs as well as all other statements that are nothistorical facts are forward-looking statements involving risks and uncertainties. These forward-looking statements rely on a number ofassumptions concerning future events. The important factors that could cause actual results to differ materially from such statements include,
but are not limited to, general worldwide economic conditions, competitive pressure on sales and pricing, and movements of currency
exchange rates.

Corporate Philosophy
A company and its employees must constantly evolve through a process ofsteady development while also making every effort possible to improve the livesof each individual. This growth must happen together.

PurposeContribute to the sustainable development of society as a “leading small andmedium-sized enterprise” that seeks to excel at the world stage
As a technology group, Star Micronics strives to provide new value through unique technologies
that increase corporate value. At the same time, the Company will enrich the lives of its employees
by providing a place where diverse engaged employees can contribute their best. Our goal as agroup is to stand at the forefront of Japan’s small and medium-sized enterprises by generating ahigh level of productivity that rivals large companies as we contribute to the sustainable
development of society.

Management Policy

1

Do not pursue scale unnecessarily; position capital efficiency and labor productivity

2

Maintain the ability to continuously offer new value to society in response to

as primary evaluation indicatorschanges in the environment

3

Constantly look to the global market for each business, and position “global niche” at

4Invest in building an environment that allows employees to realize theirfull potential and the pursuit of unique technologies from a long-term

the core of the Company’s strategy

perspective, regardless of generational environment

5

Strive to become a company that perpetually evolves in harmony with society
through its products and its people

Action Guidelines

Act with initiativeand courage

Continue learning

Pursue technology

Focus on teamproductivity

Annual Report 2023 STAR MICRONICS CO., LTD.

01

HISTORY
1950

Star Seisakusho Co., Ltd.
Established in Tegoshi, Shizuoka (current Tegoshi, Suruga-ku, Shizuoka-shi) with a capital of ¥500,000, six employees and five automatic lathes, began the manufacture and saleof such products as wristwatch and camera parts as a small workshop factory.

1958

Began sales of automatic lathes.
After finalizing automatic lathes, began sales with the catchphrase, “automatic lathes made by users for users.”

1960

Tokai Seimitsu Co., Ltd.
Established Tokai Seimitsu Co., Ltd. in a partnership with Citizen Watch Co., Ltd.
Evolved as a factory specializing in the manufacture of watch screws.

1962

Began the export of automatic lathes.
Exported the first unit to the UK. Cultivated overseas sales channels and steadily increased market share.

1965

Changed the company’s name to Star Micronics Co., Ltd.
Absorbed Tokai Seimitsu Co., Ltd. and changed the company’s name to Star Micronics Co., Ltd.

1971

Began the manufacture and sales of electronic buzzers.
Widely adopted as a buzzer for clocks. Electronic buzzers extensively used in mobile phones as an incoming call sound source. Captured a large market share throughout the
1990s.

1976

Began the manufacture and sales of NC automatic lathes.
Began the manufacture and sale of NC automatic lathes. Incorporating innovative ideas and mechanisms, extremely well received for precision accuracy.

1979

Began the manufacture and sale of small printers.
Entering the digital printer field, began the manufacture and sale of products in a bid to respond to the information age and the widespread use of personal computers.

1981

Listed company stock on the Second Section of the Nagoya Stock Exchange.
Began the manufacture and sale of large-scale printers.
Entered the printer market in earnest.

1984

Listed company stock on the First Section of the Nagoya Stock Exchange. (Delisted in 2006.)
Built the new Kikugawa Factory.
Built a new machine tools production base in Kikugawa-cho, Ogasa-gun (current Kikugawa-shi), Shizuoka Prefecture.
Installed state-of-the-art rationalization system machines and contributed to improved productivity by enabling continuous automated operations.

1989

Established Star Micronics Manufacturing Dalian Co., Ltd.
Established a subsidiary in Dalian, China to engage in the manufacture of printers.
Became the fourth foreign company to enter the Dalian Economic and Technological Development Zone.

1990

Listed company stock on the First Section of the Tokyo Stock Exchange.
Listed on the First Section of the Tokyo Stock Exchange after 40 years of operation.
(Shift to the Prime Market from the First Section due to the market restructuring of the Tokyo Stock Exchange in April 2022.)

2000

Began the manufacture and sale of microphones, speakers and receivers.
Developed a full lineup of micro audio components for mobile phones, and aggressively cultivated the market.

2004

Began the manufacture of CNC lathes as finished products
at Star Micronics Manufacturing Dalian Co., Ltd.
Began assembling finished products in China ahead of competitors to reduce costs and strengthen production capacity.

02

Annual Report 2023 STAR MICRONICS CO., LTD.

2012

Established Star Micronics Manufacturing (Thailand) Co., Ltd.
Established a subsidiary to manufacture machine tools in Nakhon Ratchasima, Thailand. Set up a machine tools production system across three bases in Japan, China andThailand in response to the expansion of emerging markets in Asia.

2013

Launched Apple ® iOS Compatible MFi Certified PrinterDeveloped a printer that can be connected to iOS devices via Bluetooth® amid the growing global demand for tablet POS systems using smartphones and tablet devices. Buoyedby the rush of inquiries prior to release, product widely accepted by the market.
*1 Apple is a trademark of Apple Inc., registered in the U.S. and other countries.
*2 IOS is a trademark or registered trademark of Cisco in the U.S. and other countries and is used under license.
*3 The Bluetooth® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc. and any use of such marks by Star Micronics Co., Ltd. is under license.

2018

Established Star Marketing Japan Co., Ltd.
Established Star Marketing Japan Co., Ltd. as a sales subsidiary in Shimbashi, Tokyo in a bid to further develop and expand the mPOS market in Japan. Through activities in thecity center, responded quickly to the diverse needs of customers.

2020

Completed construction of a new head officeCompleted construction of a new head office with a view to upgrading and expanding the Company’s Business Continuity Plan (BCP) by taking full advantage of such high disasterprevention capabilities as a seismic isolation structure that can handle long periods of seismic motion and an emergency power supply that can continue for a long period of time.
In addition, actively introduced new work styles through a variety of measures including the adoption of information communication technology (ICT) to help create a paperlessoffice and free address system.

Completed construction of the Solution Center
Completed construction of the Solution Center to strengthen before- and after-sales service and product quality. As a new base for the Machine Tools Segment, the Solution Centercan serve as a permanent display of various automatic lathes while accommodating multiple functions. The Center is equipped with a wide range of showrooms, a dedicated NC
training room, and evaluation, testing and other rooms enabling the use of actual machines for instruction and process testing.

2022

Shift to the Prime Market from the First Section of the Tokyo Stock Exchange.

2023

Converted Smart Solution Technology, Inc. into a wholly owned subsidiary
Included Smart Solution Technology, Inc., located in Shinjuku-ku, Tokyo, in the Company’s scope of consolidation as a wholly owned subsidiary.

NET SALES(Millions of yen)

¥62,723
million¥52,304
million¥73,884
million¥78,196
million2 /1991

2/20012/2008

12/2023

1990

2000

100,000
80,00060,00040,00020,000
0 1951
Precision Products

1960
Machine Tools

1970
Components

1980

2010

2023

Special Products*1 Data up to the fiscal year ended February 28, 1970 is based on the total of each segment.
*2 Data from the fiscal year ended February 29, 1972 to the fiscal year ended February 28, 2005 is classified into the three Precision Electronic Equipment, Machine Tools and Precision Products segments. Effective from the fiscal year ended
February 28, 2006, operations were reclassified into four business segments with Precision Electronics Equipment separated into Special Products and Components. However, data from the fiscal year ended February 29, 1972 to the fiscal year
ended February 28, 2005 is based on the four business segments for comparative purposes.
*3 Effective from the fiscal period ended December 31, 2018, Star Micronics Co., Ltd. changed its account settlement date from the end of February to December 31.
*4 In conjunction with its decision to dissolve the Precision Products Division, Star Micronics Co., Ltd. took steps to revise the classification of its business segments in 2020. Effective from 2021, the Company reclassified the three Special
Products, Machine Tools, and Precision Products segments into the two Special Products and Machine Tools segments.

Annual Report 2023 STAR MICRONICS CO., LTD.

03

HIGHLIGHTS

Financial Highlights
Related Information
by Geographical Region

Financial Highlights
Star Micronics Co., Ltd. and Consolidated Subsidiaries
For the years ended December 2021, 2022 and 2023

Millions of yen

Change(%)

Thousands
ofU.S. dollars

2023/2022

2023

2021

2022

2023

¥64,360¥87,368¥78,196-10.5$550,676

Operating income

7,415

13,925

10,351-25.7

72,894

Net income attributable toowners of the parent

5,740

10,299

8,175

-20.6

57,570Return on sales

8.9%

11.8%

10.5%

Capital expenditures

1,926

3,390

2,680

-20.9

18,873

Depreciation and amortization

2,127

2,414

2,710

12.3

19,085

Total assets

82,361

99,53993,399-6.2

657,739

Total equity

61,72873,08880,3479.9

565,824

Equity ratio

74.1%

73.0%

85.6%
Change (%)

U.S. dollars

For the year :Net sales

At year-end :Yen
Per share :Basic net income¥150.83¥271.14¥218.89

-19.3

$1.54

Diluted net income

142.38270.01

218.17

-19.2

1.54

Cash dividends
applicable to the year

58.00

70.00

60.00

-14.3

0.42

Common shares issued

44,091,334

42,465,134

41,921,434

Number of shareholders

10,727

11,776

10,920Stock information :Note : The rate of ¥142 to US$1, prevailing on December 31, 2023, has been used for translation into U.S. dollar amounts.

NET SALES(Millions of yen)

(Millions of yen)

(Millions of yen)

87,36845,671

10,29910,351

04

’20

’21

’22

’23

Annual Report 2023 STAR MICRONICS CO., LTD.

’19

’23

56

58

58

’19

’20

’21

60

4,054
1,732

2,173

’19

70

8,175
5,740

7,415

5,817

CASH DIVIDENDS APPLICABLE
TO THE YEAR
(Yen)

13,92578,19664,36060,652NET INCOME ATTRIBUTABLETO OWNERS OF THE PARENTOPERATING INCOME

’20

’21

’22

’23

’19

’20

’21

’22

’22

’23

HIGHLIGHTS

Related Information by Geographical Region
Related Information
by Geographical Region

Financial Highlights
Star Micronics Co., Ltd. and Consolidated Subsidiaries
For the years ended December 2021, 2022 and 2023

Net Sales by Geographical Region
Millions of yen
2021

2022

2023

Change(%)

Thousands
ofU.S. dollars

2023/2022

2023

Japan

¥8,072¥9,037¥8,402-7.0$59,169

USA

17,31527,904

21,952-21.3

154,592

Germany

6,076

8,743

10,422

19.2

73,394

China

14,543

17,112

10,333-39.6

72,768Others

18,354

24,572

27,087

10.2

190,753

Total

64,36087,36878,196-10.5

550,676

Note :The rate of ¥142 to US$1, prevailing on December 31, 2023, has been used for translation into U.S. dollar amounts.

Japan

10.7%

Japan

Others(Millions of yen)

34.7%
Net Salesby Region

USA

8,072

28.1%

2023
China

13.2%

2021

Germany

9,037

8,402

2022

2023

13.3%

USA

Germany(Millions of yen)

(Millions of yen)

27,904
17,3152021

2022

21,952

8,743
6,076

2021

2023

China

10,422

2022

2023

Others(Millions of yen)

(Millions of yen)

14,5432021

17,1122022

10,33318,3542023

2021

24,5722022

27,0872023

Annual Report 2023 STAR MICRONICS CO., LTD.

05

TO OUR SHAREHOLDERS
Mamoru Sato

Representative Direc tor,
President and CEO

Building a Foundation for Change
In 2023, operating results in both the Machine Tools and Special Products segments were weak, with a downturn in sales
and significantly lower profits compared with the previous year. This was mainly due to growing concerns surrounding thethreat of an economic recession owing to such factors as the prolonged upswing in interest rates in the U.S. and Europe
as well as deteriorating market conditions and slowing investment in China. Moving forward, the outlook for the futureremains uncertain.
2024 is the final year of our First Medium-Term Management Plan, a roadmap for building a foundation for change over
the three-year period from 2022 to 2024. Recognizing the need to further solidify our foundation, we will redouble efforts
to bring about a sustainable society and enhance corporate value by putting into practice our corporate philosophy,
growing together with employees, and contributing to society.

01 Operating Results in 2023
Looking at 2023, the outlook for the economy remained uncertain throughout the period under review. Despite an overall
modest recovery amid signs of a lull in the surge in resource prices and prolonged inflation, this uncertainty largely
reflects growing concerns surrounding the threat of an economic recession owing to the prolonged upswing in interest
rates in the U.S. and Europe, deteriorating market conditions and slowing investment in China, and fluctuations in foreign
currency exchange rates.
In each of the major markets in which the Star Micronics Group
operates, demand for POS printers was generally weak. In

NET SALES

addition, demand for the Group’s mainstay machine tools in(Millions of yen, %)overseas markets, which had previously remained high, stalled

87,368with little or no forward momentum. Exacerbating these difficult
trends, demand in Japan also failed to recover.
Under these circumstances, the Star Micronics Group reported net–32.2%

25,71017,428sales of ¥78,196 million for the year under review, down 10.5%
compared with the previous year. Despite the overall impact ofdepreciation in the value of the yen, this was mainly due to a
decline in sales of the Company’s mainstay machine tools. From a
profit perspective, operating income declined 25.7%, to ¥10,351
million. Net income attributable to owners of the parent fell 20.6%,
to ¥8,175 million.

Annual Report 2023 STAR MICRONICS CO., LTD.

17,841+0.4%

21,81021,713+20.4%

17,540’22

the Company’s scope of consolidation and the Special Products

06–20.4%

22,405

Meanwhile, Smart Solution Technology, Inc. (SST) was included in
Segment effective from the year under review.

78,196

1Q

21,117

’23
2Q

3Q

4Q

02 Business Overview
In the Machine Tools Segment, sales of CNC automatic lathes decreased. Notwithstanding progress from the beginningof the year under review to reduce the order backlog from the previous year mainly in the U.S. and European markets,
this decrease was ostensibly due to delays in market recovery in China. By geographic region, sales in the U.S. declined
overall owing to sluggish market conditions, which largely reflected such factors as the prolonged upswing in interest
rates. In addition, sales in the European market increased significantly centered mainly on automotive-related products.
Meanwhile, sales decreased substantially in the Asian market. This was essentially attributable to weak sales ofautomotive- and telecommunications-related products on the back of the continued cautious approach toward capital
investment in China over the latter half of the previous year and other factors. Sales declined significantly in thedomestic market, for the most part due to the continued lackluster performance of the automotive sector.
Accounting for each of the aforementioned factors, sales and income declined year on year. In specific terms, sales
decreased 10.6% compared with the previous year, to ¥62,085 million. Operating income declined 15.5%, to ¥10,350
million.
Turning to the Special Products Segment, sales of POS printers declined. This largely reflected the downturn in mPOS
demand, which had remained robust. Looking at trends by geographic region, sales in the U.S. market decreased
substantially owing to the downturn in mPOS demand. Sales in the European market were essentially unchanged fromthe previous year due to the impact of such factors as the yen’s depreciation. Meanwhile, despite weak market
conditions throughout the domestic market, sales in Japan increased significantly compared with the previous year
owing to the inclusion of SST in the Company’s scope of consolidation.
Accounting for these factors, sales decreased 10.3% compared with the previous year, to ¥16,111 million. Operating
income declined substantially year on year, to ¥1,953 million, down 48.0%.

03 Outlook for the Following Year
Looking ahead, conditions throughout the global economy are expected to remain uncertain. In addition to ongoing
concerns surrounding such geopolitical risks as the prolonged crisis in Ukraine and military conflicts in the Middle East,
this is due to a variety of factors, including anxieties toward a slowdown in economic activities owing to the impacts ofcontinued inflation and the tightening of global monetary policy.
Under these circumstances, and in the context of the Company’s consolidated business performance for the coming
year, sales in the mainstay Machine Tools Segment are forecast to decline. Despite expectations of a recovery mainly
for automotive-related products in Japan and an anticipated gradual positive turnaround overseas toward the latter halfof the coming year, this forecast decline is amid sluggish capital investment demand across all regions since theprevious year. In the Special Products Segment, sales areprojected to decline. While sales are expected to increase due to

NET SALES AND OPERATING INCOME

new products, this forecast downturn largely reflects the overall(Millions of yen)weak nature of market conditions especially in the U.S.
consolidated results in the coming year is a downturn. In specific’21

will be JPY150.

NET SALES

’22

’23

7,000

’20

65,800exchange rate will be JPY135 and the yen/Euro exchange rate

10,351

Forecasts are based on the assumptions that the yen/US dollar

2,173

37.6%, to ¥5,100 million in the year ending December 31, 2024.

7,415

and net income attributable to owners of the parent to also drop

13,925operating income is forecast to decline 32.4%, to ¥7,000 million

45,671the year under review, to ¥65,800 million. On a year-on-year basis,

64,360terms, we expect a decrease in net sales of 15.9% compared with

78,19687,368Taking into account the aforementioned factors, our outlook for’24(target)OPERATING INCOME

Annual Report 2023 STAR MICRONICS CO., LTD.

07

04 About the Medium-Term Management Plan
The Star Micronics Group formulated its Medium-Term
Management Plan in 2022 as part of a review of its
Corporate Philosophy, Purpose, Management Policy, andAction Guidelines to empower employees to make decisions
and act autonomously as it seeks to become a company
that grows sustainably together with society. At the sametime, we formulated a Vision for 2030. (Please refer to pages
10-14 of the Company’s Medium-Term Management Planfor details.)
In order to realize its Vision for 2030, the Company has
divided the next nine years into three-year periods. In
working toward “building a foundation for change,” “driving
change,” and “realizing our vision” over each period, respectively, Star Micronics has formulated the first Medium-Term
Management Plan covering the three years from 2022 to 2024. Details of issues to be addressed and progress in 2023,
the second year of the Company’s First Medium-Term Management Plan, are presented as follows.
Positioning the mPOS and food delivery markets as a principal area of operations, the Star Micronics Group will work tofurther expand sales of printers and peripheral equipment while at the same time refining software technologies in a bid
to continue providing new value to customers. Through these means, the Group will endeavor to become a total solution
provider for store operations in the Specialty Products Segment.
In 2023, the Star Micronics Group expanded its product lineup, including label printers and peripheral equipment, while
undertaking plans for new products. Moving forward, the Group will further step up its new product planning activities.
In the Machine Tools Segment, the Group will strengthen the production system in Thailand and China, position the
Kikugawa Factory as a sustainable factory that nurtures people, develops technology, and grows together with society
and promote large-scale renovation in order to meet robust demand for facilities and equipment. At the same time, steps
will be taken to delve deeper into hardware technologies and adopt software technologies, and to further cement theGroup’s position as a leading manufacturer of automatic lathes.
In addition to the start of operations at the Asia Solution Center in Shanghai, steps were completed to upgrade andexpand facilities and equipment at the Company’s factory in Thailand as a part of efforts to strengthen the production
system. These initiatives were geared toward reinforcing sales in 2023. In 2024, plans are in place to establish a sales
subsidiary in India with the aim of cultivating the Indian market. Moreover, renovation work is finally scheduled tocomment at the Group’s Kikugawa Factory.
As far as new business is concerned, the Group will focus on uncovering opportunities in the three production DX, store
DX, and logistics DX domains while aiming to construct a new business model mainly through M&As.
In 2023, Star Micronics completed steps to include SST, a company with strengths in software and system development,in the Company’s scope of consolidation as a wholly owned subsidiary. To use this as a foothold to explore
opportunities in each of the three DX domains, we will work to improve the DX capabilities of the entire Group andaccelerate the pace of new business creation while incorporating SST’s technologies.
From a Group-wide perspective, energies will be directed toward strengthening the management platform, reforming
human resource systems that allow employees to maximize their potential, and constructing R&D structures andsystems to continuously create proprietary technologies, while vigorously moving forward with initiatives to addressmaterial issues based on the Sustainability Policy.
At the start of 2023, we launched the Development Headquarters and initiated activities in a bid to establish R&D
structures and systems. As far as strengthening the management platform is concerned, we also established adesignated department with management planning functions. In addition to further promoting these activities, we planto put in place a new human resource structure and systems in 2024.
Positioned as KPIs, we are targeting cumulative operating cash flow of ¥20-¥25 billion, an average consolidated annual
operating income per employee of ¥6 million, ROE of 10.0% or more, a ratio of R&D expenses to net sales of 5.0%, andnon-consolidated annual education and training outlays per employee of ¥100,000 over the three-year period from 2022
to 2024. In the second year, 2023, operating cash flow came in at ¥7.1 billion on a single-year basis and ¥14.6 billion on

08

Annual Report 2023 STAR MICRONICS CO., LTD.

a cumulative basis. On a single-year and average basis, consolidated annual operating income per employee, ROE, theratio of R&D expenses to net sales, and education and training outlays per employee came in at ¥6.19 million and ¥7.28
million, 10.7% and 13.1%, 2.4% and 2.3%, and ¥70 thousand and ¥80 thousand, respectively.
We will continue to aggressively reform our business and management on an ongoing basis and make concertedGroup-wide efforts to enhance our corporate value.

05 Corporate Governance and Shareholder Returns
The Board of Directors of the Company consists of three internal directors and four outside directors, and thus theoutside directors already account for the majority. Star Micronics has also put in place the non-mandatory Nomination
and Compensation Committee as an advisory body to the Board of Directors to enhance the transparency and objectivityof procedures related to the nomination and compensation of directors and executive officers and to further enhance
corporate governance.
Star Micronics positions the return and distribution of profits to shareholders as an important management priority. Ourbasic policy is to maintain payment of a progressive and stable annual dividend of at least ¥60 per share as well as aconsolidated total payout ratio of at least 50%, including the repurchase of own shares.
Guided by this policy, Star Micronics plans to pay a period-end dividend of ¥30 per share. Coupled with the interim
dividend of ¥30 per share, the Company will pay an annual dividend of

CASH DIVIDENDS PER SHARE¥60 per share for the year under review, unchanged from the previous(Yen)year, excluding the previous year’s special dividend.

70
54

56

58

58

Looking ahead, and once again in line with its policy, Star Micronics

60

plans to pay an interim and period-end dividend of ¥30 per share for anannual dividend of ¥60 per share for 2024.
As far as the Company’s internal reserves are concerned, Star Micronics
is committed to enhancing its corporate value while increasing
shareholders’ profits. At the same time, the Company will look toengage in a variety of activities including investment in future growthfields in a bid to ensure its sustainable growth.

’18

’19

’20

’21

’22

’23

CASH DIVIDENDS PER SHARE

In working toward achieving its established goals, the Star Micronics
Group kindly requests the continued support and understanding of all
stakeholders.
March 2024

Mamoru Sato

Representative Director, President and CEO

Annual Report 2023 STAR MICRONICS CO., LTD.

09

STRATEGY

Medium-Term Management Plan
Star Micronics put in place a medium-term management plan in February 2022.
Taking stock of its Corporate Philosophy, Purpose, Management Policy, and Action Guidelines, the Company hasoutlined its Vision for 2030 based on the structure of this Philosophy and created a roadmap to realize this Vision.

Vision for 2030
Drawing on its corporate philosophy and the management base,human resource systems, and R&D capabilities that underpin its
multi-business structure, Star Micronics is targeting net sales of¥100.0 billion and operating income of ¥20.0 billion.

Special Products Segment

Machine Tools Segment

New Business

Secure stable revenue
while serving as the driving
force behindcommercialization of theservice business

Generate continuous
cash as a core business

Evolve as a promising
mainstay third pillar of
business

Diverse management team in which each individual exhibits
characteristics that exemplify the Company’s action guidelines
Environment in which all employees can maximize their potential
regardless of gender, age, or race
R&D capabilities to continuously create unique technologies

10

Annual Report 2023 STAR MICRONICS CO., LTD.

Vision Roadmap
First Medium-Term
Management Plan
2022-2024

Second Medium-Term
Management Plan
2025-2027

Third Medium-Term
Management Plan
2028-2030

Building a foundation
for change

Driving change

Realizing our vision• Commercialize peripheral
areas• Nurture the service business
into an earnings stream using
software technology• Become a total solution
provider for store
operations• Expand in areas outside theautomobile industry• Commercialize peripheral
areas• Strengthen software
technologies• Establish a position as aleading manufacturer of
automatic lathes• Uncover and commercialize
new segments by utilizing theCompany’s own resources andcollaboration with othercompanies• Create new businesssegments• Target net sales of ¥10.0
billion• Target operating incomeof ¥1.5 billion• Put in place a diversity
management structure andsystems• Reform the corporate
culture based on new
human resource structuresand systems• Continue to strengthen
the management
platform

Special Products Segment• Make deeper inroads into themPOS/food delivery market• Uncover peripheral areas• Strengthen software
technologies through various
measures including M&As
Machine Tools Segment• Strengthen the production
system• Delve into hardware
technologies• Promote the adoption ofsoftware technology
New Business• Uncover and commercialize
new segments mainly
through M&As

System Maintenance• Strengthen the management
platform• Strengthen R&D structuresand systems• Reform human resource
systems

Annual Report 2023 STAR MICRONICS CO., LTD.

11

Progress of “Building a Foundation for Change”
In formulating the First Medium-Term Management Plan, Star Micronics has positioned the three years from 2022 to 2024
as a period for building a foundation for change in a bid to realize its Vision for 2030. Progress in 2023, the second year of
the Medium-Term Management Plan, and plans for 2024 are presented as follows:First Medium-Term Management
Plan 2022-2024

Building a foundation
for change

2023

2024

Progress

Plans

SpecialProducts
Segment• Make deeper inroads into themPOS/ food delivery market• Uncover peripheral areas• Strengthen software technologies
through various measures including
M&As• Commenced label printer sales• Considered new product proposals• Strengthened SW development capabilities• Put in place and undertook stable cloudenvironment operations• Expand label printer sales• Promote the planning and development of
new products• Promote the construction of acloud-revenue model

MachineTools
Segment• Strengthen the production system• Delve into hardware technologies• Promote the adoption of software
technology• Cultivate the Indian market• Completed work to expand production
capacity at the Thailand factory• Formulated domestic factory renovation plans• Promoted the development of HW・SW
technology• Developed a sales strategy for India• Start construction of domestic factories• Promote the development of HW・SW
technology• Establish a sales base in India• Uncover and commercialize new
segments mainly through M&As

• Promoted activities for each business domain
Logistics DX: Considered service proposals
Production DX: Promoted the development ofprocessing estimation support
softwareStore DX: Expanded SST’s service business• Continued activities at each business domain
Logistics DX: Consider service proposals (PoC)
Production DX: Promote the development ofadditional functions
Store DX: Expand and develop new services• Strengthen the management platform• Strengthen R&D structures andsystems• Reform human resource systems• Strengthened business management systems• Established the Development Headquarters• Put in place a new human resource structureand systems• Strengthen business management systems• Put in place a new human resource
structure and systems

New
Business

SystemMaintenance*DX: Digital Transformation, HW: Hardware, SW: Software

In addition, progress of each KPI is presented as follows:

KPI

12

Target(Next three-year
cumulative/average)

2022 Actual

2023 Actual2024 Forecast

Operating cash flow
(cumulative)¥20.0 billion– ¥25.0 billion¥ 7.5 billion¥ 7.1 billion(cumulative ¥21.6 billion)

Operating income
per employee(consolidated)¥6.00 million¥8.37 million¥6.19 million(average 6.22 million)

ROE

10.0% or more

15.4%

10.7%

(average 10.8%)

Ratio of R&D expenses
to net sales

5.0%

2.3%

2.4%

(average 2.5%)

Education and training
outlays per employee(non-consolidated)¥100 thousand¥89 thousand¥ 70 thousand(average ¥101 thousand)Annual Report 2023 STAR MICRONICS CO., LTD.

¥ 7.0 billion¥4.11 million
6.4%

3.0%

¥143 thousand

Business Strategy[ Special Products Segment ]First Medium-Term Management Plan 2022-2024 KPIs
Target(Next three -year average)

2022 Actual

2023 Actual

ROA

20.0%

26.4%

13.0%

Operating income ratio

18.0%

20.9%

12.1%

2024 Forecast
9.7%(average 16.4%)

8.8%(average 13.9%)

Principal Initiatives
1. Explore and expand sales of products other than printers used in stores
2. Strengthen cloud-related technologies with an eye to external alliances
3. Optimize production and logistics through reorganization of EMS partners

2023 Progress
1. Expanded the lineup of label printers and peripheral equipment and undertook new product planning
2. Undertook stable operation of Star Micronics Cloud Service (SMCS) and reinforced development capabilities
3. Considered the optimization of production and logistics through reorganization of EMS partners

2024 Plans
1. Expand sales of new products (label printers, etc.) and further promote planning; promote development with an eye towarddemonstration experiments
2. Build a Star Micronics Cloud Service (SMCS) revenue model
3. Promote the optimization of production and logistics through reorganization of EMS partners[ Machine Tools Segment ]First Medium-Term Management Plan 2022-2024 KPIs
Target(Next three -year average)

2022 Actual

2023 Actual

ROA

15.0%

19.6%

15.4%

Operating income ratio

15.0%

17.6%

16.7%

2024 Forecast
12.0%(average 15.7%)

15.2%(average 16.5%)

Principal Initiatives
1. Globally expand the Company’s Solution Center; establish solution centers in Europe and Asia; build a user support system incollaboration with Japan
2. Promote the development of mechanical technology and before/after-sales service support software
3. Expand production capacity through three manufacturing bases(1) Undertake a large-scale renovation of domestic factories(2) Increase floor area at the Company’s Dalian factory(3) Upgrade and expand facilities and equipment at the Company’s factory in Thailand
4. Expand sales in the Indian market

2023 Progress
1. Started operations at the Asia Solution Center; completed design of the Europe Solution Center
2. Promoted the development of mechanical technology (medical application, etc.) and processing estimation support software;
promoted the creation of digital content
3. Increased capacity by expanding production at three manufacturing bases(1) Undertook a large-scale renovation of domestic factories (completed the formulation of plans; started existing factory
demolition work)(2) Completed steps to expand facilities and equipment at the Company’s factory in Thailand
4. Formulated a sales strategy for India

Annual Report 2023 STAR MICRONICS CO., LTD.

13

2024 Plans
1. Commence construction of the Europe Solution Center; coordinate with both solution centers in Japan and Asia (upgrade andexpand before/after-sales services)
2. Commence operation of processing estimation support software and promote the development of mechanical technologies(medical application, etc.); commence providing digital content
3. Increase capacity by expanding production at three manufacturing bases(1) Commence construction the Kikugawa South Factory (core component factory)(2) Put in place detailed plans for the Makinohara Factory (machinery assembly factory)
4. Establish a sales base in India[ New Business ]Create new business value that contributes to improving business efficiency of customers
Principal Initiatives Develop and commercialize new business proposals mainly through the use of M&A’s
Target Consider a new services revenue model and transition to the execution phase

New Business Domains
Business Domain
Logistics DX

Store DX

Production DX

Value Provided/Business Process

2023 Progress

Provide systems to streamline the processes ofsmall and medium-sized warehousing anddistribution operations

Considered new service businesses and began
searching for potential service partners

Provide hardware and software (systems) thatstreamline store operations

Included Smart Solution Technology, Inc. (SST)in the Company’s scope of consolidation as awholly owned subsidiary; promoted PMI;
expanded sales of store DX services

Provide new services related to the Machine
Tools Segment

Promoted the development and internal
introduction of processing estimation support
software in cooperation with the Machine Tools
Segment

Cash Allocation
Drawing on its operating cash flow and cash on hand over the three years of the First Medium-Term Management Plan,
Star Micronics will allocate ¥11 billion to growth investments as a part of efforts to carry out the aforementioned principal
initiatives and ¥11 billion or more to address certain concerns including the return of profits to shareholders.

Fund Allocation Plan (2022–2024)

Operating cash
flow ¥21.6 billion

Growthinvestments
Cash allocation
resources¥22.0–26.0 billion

New businessdevelopment costs¥1.0–5.0 billion

Capital investment(organic)¥7.0 billion

Machine Tools Segment:
Domestic factories
Investment in large-scalerenovation¥3.0 billion(continue investment also from 2025)

Cash on hand

Shareholder
returns, etc.

Total returns and agile
capital efficiency(dividends + share buybacks)¥11.0 billion
or moreConsidering the use of sustainablefinance as a resource for thelarge-scale renovation of domestic
factories from 2025

Star Micronics shareholder return policy is to maintain payment of a progressive and stable annual dividend of at least ¥60
per share as well as a consolidated total payout ratio of at least 50%, including the repurchase of own shares.

14

Annual Report 2023 STAR MICRONICS CO., LTD.

Review of Operations

SPECIAL PRODUCTS
Point-of-sale (POS) printers used at such places as restaurants are the main
products in the Special Products Segment. In recent years, demand for mobile POS(mPOS) printers that are compatible with tablet terminals, smartphones, and otherdevices has been expanding. mPOS products are available under the mCollection™
brand, which not only includes printers but also such peripheral devices as cash
drawers. In addition to conventional receipt applications, the product lineup includes
label printers. Moreover, the Company also offers Star Micronics Cloud Services(SMCS), a cloud-based service for printers through its Special Products Segment.
In April 2023, Smart Solution Technology, Inc. (SST), a company that is active in thetouch point solution business, was newly included in Star Micronics’ scope of
consolidation.

SALES BY SEGMENT

NET SALESOPERATING INCOME &OPERATING INCOME RATIO(Millions of yen)

(Millions of yen, %)17,95915,57020.6%

12,542

20.9%

16,111
12.9% 13.2%

11,721

’19

’20

’21

’22

’23

14.7%

3,754

2,283

1,614

1,546

’19

’20

12.1%
1,953

’21

’22

’23

OPERATING INCOMEOPERATING INCOME RATIOBusiness Environment and Results in 2023
Turning to the Special Products Segment, sales of POS printers
declined in 2023. This largely reflected the downturn in mPOS
demand, which had remained robust. Looking at trends bygeographic region, sales in the U.S. market decreased
substantially. Despite the impact attributable to depreciation in
the value of the yen, this decline in sales in the U.S. was mainly due
to the downturn in mPOS demand. While market conditions were

SPECIAL PRODUCTS SEGMENT SALESBY GEOGRAPHICAL REGION(Billions of yen)generally weak, sales in the European market were essentially

18.0
15.6

unchanged from the previous year due to a variety of factors,
including depreciation in the value of the yen. Turning to the Asianmarket, sales were for the most part also the same year on year.

12.5

Meanwhile, despite weak market conditions throughout the

5.6

domestic market, sales in Japan increased significantly compared

3.2
0.9
2.8

with the previous year owing to the inclusion of SST in the
Company’s scope of consolidation.
Accounting for each of the aforementioned factors, net sales in
the Special Products Segment decreased 10.3% compared with

’19

11.7

16.1

10.9

8.5

3.9
0.9
2.2

3.8
1.2
2.1

3.7
1.2
2.7

’21

’22

’23

8.6

6.4
2.6
0.9
1.8
’20

THE AMERICASEUROPE

ASIA

JAPAN

the previous year, to ¥16,111 million (US$113,458 thousand).
From a profit perspective, operating income fell 48.0% year on
year, to ¥1,953 million (US$13,753 thousand).

Annual Report 2023 STAR MICRONICS CO., LTD.

15

Outlook for 2024 and Business Strategies
In 2024, overall sales in the Special Products Segment are projected to decline. Despite expectations of an upswing insales attributable to new products and an increase in sales in Japan on the back of contributions from SST, this forecast
downturn largely reflects the overall weak nature of market conditions especially in the U.S.
Star Micronics has positioned the mPOS and food delivery markets as areas on which to focus. As far as each of thesemarkets are concerned, the Company released the TSP100IV SK, a linerless sticky label printer that supports
repositionable labels, in November 2023 and a new model in the mC-Print®3 series of thermal mPOS printers in January
2024. Designed specifically for linerless sticky labels that can be easily removed and reapplied, the TSP100IV SK,
addresses the label printing needs of restaurants and retail stores. Moving forward, Star Micronics will work to further
increase its share in the expanding label printer market.
From a business results perspective, net sales are projected to come in at ¥14,870 million, down 7.7% compared with thecurrent fiscal year. On the earnings front, operating income is forecast to decline 32.9% year on year, to ¥1,310 million.

Sales Volume of POS Printers by Region
2022

POS printer mC-Print3(Thousands of units)

Change2023

The Americas

341

257

-24.6%

Europe135106-21.5%

Asia

50

41

-18.0%

Japan

56

53

-5.4%

Total

583

459

-21.3%

mobile POS (mPOS)

Food delivery
Small andmedium-sized stores

Restaurant

Cloud server
Order

Receipt
mobile POS(mPOS)
Card

Electronicmoney

Order slip

Cash

Delivery service

Release of TSP100IV SK, a Linerless Sticky Label PrinterStar Micronics released a linerless sticky label printer that supports
repositionable labels to meet the label needs of restaurants and retailstores in February 2024. Various types of labels are currently in use
throughout today’s market. Linerless labels, in particular, are becoming
increasingly popular owing to their convenience, reduced peeling time, andeco-friendly attributes that help eliminate excess waste. Turning to thetypes of linerless labels, sticky labels, which have weak adhesiveness, aredistinguished by their removeable and re-appliable qualities. As such,
sticky labels can be used in a variety of ways. This includes theirtemporary use as a slip for order cooking, which can then be attached tothe delivery bag after cooking is completed. By responding to these needs
through this product, we will work to further increase our share in the
expanding label printer market.

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Annual Report 2023 STAR MICRONICS CO., LTD.

Review of Operations

MACHINE TOOLSIn the Machine Tools Segment, Star Micronics’ Swiss-Type CNC
Automatic Lathes are ideally suited for precision component
processing with high accuracy and are used in the processing of awide range of components including automotive parts as well as
communication equipment and medical components. Star Micronics
has put in place solutions that consistently address users’ needs byleveraging the latest technologies including its proprietary Star
Motion Control System and web-based application that optimizes andmonitors machine operations, respectively.
CNC automatic lathe video https://youtu.be/5eJjAH6Z2vA

CNC automatic lathe video https://youtu.be/5eJjAH6Z2vASALES BY SEGMENT

NET SALESOPERATING INCOME &OPERATING INCOME RATIO(Millions of yen)

(Millions of yen, %)69,409

79.4%

17.6%

62,085

14.1%

48,79044,921

12,2497.9%

33,950

16.7%

14.1%

10,350

6,858

6,333
2,697
’19

’20*

’21*

’22

’19

’23

’20*

’21*

’22

’23

OPERATING INCOMEOPERATING INCOME RATIOBusiness Environment and Results in 2023
In the Machine Tools Segment, sales of CNC automatic lathes decreased in 2023. Notwithstanding progress from the
beginning of the year under review to reduce the order backlog from the previous year mainly in the U.S. and European
markets, this decrease was ostensibly due to delays in market recovery in China. By geographic region, sales in the U.S.
declined overall owing to sluggish market conditions, which largely reflected such factors as the prolonged upswing ininterest rates. In addition, sales in the European market increased significantly centered mainly on automotive-related
products. Sales volume exceeded 1,000 units for the first time in 14 years. Meanwhile, sales decreased substantially in the
Asian market. This was essentially attributable to weak sales of automotive- and telecommunications-related products on
the back of the continued cautious approach toward capital investment in China over the latter half of the previous year
and other factors. Sales declined significantly in the domestic market, for the most part due to the continued lackluster
performance of the automotive sector.

Segment decreased 10.6% compared with the previous year, to

MACHINE TOOLS SEGMENT SALESBY GEOGRAPHICAL REGION¥62,085 million (US$437,218 thousand), while operating income

69.4

Accounting for these factors, net sales in the Machine Tools(Billions of yen)declined 15.5% year on year, to ¥10,350 million (US$72,887
thousand).
* In conjunction with its decision to dissolve the Precision Products Division, Star
Micronics Co., Ltd. took steps to revise the classification of its business segments in
2020. Effective from 2021, the Company reclassified the three Special Products,
Machine Tools, and Precision Products segments into the two Special Products andMachine Tools segments. Meanwhile, turning to segment information in 2020, theamount included in the Precision Products Segment is now included in the Machine
Tools Segment.

44.9
11.4
13.1

33.9
7.6
7.8

14.5
5.9

14.7

’19

’20*

THE AMERICAS

48.8
9.2
13.6

17.9
20.8

20.2

23.9

3.8 5.8
’21*

6.8
’22

EUROPE

62.1
14.6
26.5
15.4
5.6
’23
ASIA

JAPAN

Annual Report 2023 STAR MICRONICS CO., LTD.

17

Outlook for 2024 and Business Strategies
Under these circumstances, and in the context of the Company’s consolidated business performance for the coming year,
sales in the mainstay Machine Tools Segment are forecast to decline in 2024. Despite expectations of a recovery mainly
for automotive-related products in Japan and an anticipated gradual positive turnaround overseas toward the latter half ofthe coming year, this forecast decline is amid sluggish capital investment demand across all regions since the previous
year.
Looking ahead, Star Micronics will move forward with plans to undertake the large-scale renovation of its domestic
factories. In specific terms, the Company will undertake work on the Kikugawa South Factory to boost manufacturing ofcore components and on the Makinohara Factory to engage in body assembly, thereby expanding production capacity
through three manufacturing bases. In addition, the Asia
Solution Center commenced operations in 2023, andpreparations are underway for the Europe Solution Center.
Building on these endeavors, Star Micronics is also
strengthening its sales structure by enhancing beforeand after-sales services in Japan, Europe, and Asia.
Furthermore, we are planning to establish a machine tool
sales subsidiary in India, where demand for CNC
Swiss-type automatic lathes is expected to grow.
As far as business results are concerned, net sales in the
Machine Tools Segment are forecast to decline 18.0%
compared with the year under review, to ¥50,930 million.
Operating income is anticipated to decrease 25.4% year
on year, to ¥7,720 million.
CNC Swiss-Type
Automatic Lathe SL-10

Release of SP-20, a CNC Swiss-Type Automatic LatheStar Micronics developed the SP-20, a CNC Swiss-Type Automatic Lathecapable of supporting parts machining in various industries such as
automobiles, hydraulic/pneumatic equipment, and general machinery.
Global sales commenced in December 2023. Currently, the existing SB
and SR series comprise models that can accommodate volume zone
light multifunction machining up to 20 mm. With the growing
diversification of market needs, however, Star Micronics has upgradedand expanded its lineup in response to feedback from its customers andcalls for the machining of components up to around 23 to 25 mm using
20 mm class models as well as the need for a few more tools.
On the day of the release, the Company hosted a press conference forthe media and held a preview for domestic distributors. At the preview,
participants listened intently to explanations and asked questions infront of the actual equipment, providing a sense that the product was
attracting high expectations.

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Annual Report 2023 STAR MICRONICS CO., LTD.

RESEARCH & DEVELOPMENT
Establishment of the Development Headquarters
As its Vision for 2030, the Star Micronics Group aims to achieve net sales of ¥100 billion and operating income of ¥20
billion through a tri-lateral business structure supported by a management base, human resource systems, and R&D
capabilities founded on its corporate philosophy. In working to achieve this Vision, we have positioned “building afoundation for change” as the theme of the First Medium-Term Management Plan covering 2022 to 2024, and haveincluded the strengthening of R&D structures and systems as a key issue for structural enhancement.
In light of the aforementioned, we established the new Development Headquarters that serves as the core for businesscreation and intellectual property strategies in 2023, and have since expanded our staff lineup. Currently, we are pioneeringbusinesses under the themes of production DX, store DX, and logistics DX. As a result of these efforts, we have completed
a processing work-hour estimation system for the Machine Tools Segment, and successfully welcomed Smart Solution
Technology, Inc. (SST), into the Group.

SST Joins the Group,
Bringing with It Outstanding Technology Development Capabilities
Following the completion of acquisition procedures for all shares in April 2023, SST became a member of the Star
Micronics Group. Guided by its corporate philosophy of Technology to Culture, SST pursues technologies that enrich thetouch points of society and is engaged in the creation of solutions that integrate the virtual world of mobile communicationand the Internet with the real world of businesses, stores, and users. In addition to the design and development of
hardware, SST also boasts outstanding technology development capabilities across such wide-ranging fields as softwaredevelopment for control purposes, systems development for various services, and mobile application development.
By brining SST’s products and services together with our global supply chain, sales network, and solid quality assurance
system, we foresee DX capability improvements throughout the Company, and aim to create and build new businesssegments with future potential. In this manner, we will contribute to the sustainable development of society through themutual use of management resources that leverage the respective strengths of both companies.
Expected Synergies (Current assumption)
Purpose

Short-term

Mid-term

ActionImpact on business results• Acquire new customers (existing business)• Explore new sales channels for the Special Products• Understand each other’s products and services

Segment’s products and SST’s products• Plan for cross-selling• Continue to promote collaboration with the Special• Strengthen R&D capabilities• Expand new customers

Products Segment• Plan and develop new products and software/services in each DX• Improve profitability through the stock business• Accelerate efforts in the software and service sectors

business domain• Build new business segments• Create new businesses that utilize technical development capabilities• Refine into a business that will become a promising thirdand core technologies

pillar• Share product development technology and know-how

Long-term• Discover products and services that solve customers’ problems

Smart Solution Technology, Inc., Corporate Profile
Company name

Smart Solution Technology, Inc.

Location

1-15 Kagurazaka, Shinjuku-ku, Tokyo

Representative’s

Susumu Yamakawa

title and name

Representative Director, President

Business activities

Touch point solution business(1) Development and sale of the PitTouch series of proprietary Smart terminals(2) Development and sales of Zeetle CS, a sales promotion service for stores,
and TrustSound, an authentication service using proprietary audio
communication technology

The PitTouch Series is used as a contactless IC
card time clock terminal for attendance
management systems and as a transit pass
information reader for expense settlement
systems. Moreover, it is also used as an

Paid-in capital¥52 million

Date ofDecember 27, 2012

authorization terminal for in-store sales promotion
point services targeting smartphone users.

establishment

Annual Report 2023 STAR MICRONICS CO., LTD.

19

SOLUTION CENTER
Equipped with a full range of functions, Star Micronics has established the Solution Center in Kikugawa City, Shizuoka
Prefecture, for the purpose of providing before and after-sales services to users, collecting technical information, andstrengthening marketing in the Machine Tools Segment.
The Solution Center is equipped with a showroom, where state-of-the-art equipment is permanently on display, a dedicatedNC school room for machine operation training, evaluation testing and measurement rooms, reception rooms equippedwith a web conference system, a conference room that can accommodate approximately 100 people, and a sales officefor the Machine Tools Segment.
In addition to new product presentations for news media and new product previews for domestic distributors, the Solution
Center hosts a variety of events attended by numerous customers. While providing sales support by conducting
processing technology and maintenance workshops for distributors and engineers, the Center also works to increasecustomer satisfaction by providing optimal solutions that encompass a wide range of areas, including test processing andoperator training.
In addition, the Solution Center places considerable emphasis on such aspects as web-based information disseminationand service. The Center can also help upgrade and expand online services while serving as a venue for holding online
private shows and providing remote support via customers’ smartphones.
Moving forward, Star Micronics will continue to directly provide services to its users both on a face-to-face as well as online
basis.
Utilizing the remote support application, acty, to connect customers’ smartphones to the Solution Center call center

The customer’s smartphone

Star Micronics sales staff PC

For more information about the Solution Center, please refer to the following URL.
https://star-m.jp/eng/products/lathe/solutioncenter/index.html
A video of the Solution Center is also provided at the following URL.
https://m.youtube.com/watch?v=ZrhXF8qKPpk&feature=youtu.be

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Annual Report 2023 STAR MICRONICS CO., LTD.

Looking beyond Japan, Star Micronics is promoting plans to establish solution centers in Europe and Asia in order toexpand its Solution Center network globally. As a part of these plans, the Asia Solution Center was completed at Shanghai
Xingang Machinery Co., Ltd. (Shanghai Xingang) in Shanghai, China, in September 2023. Plans are also underway toestablish the Europe Solution Center at Star Micronics AG (SMAG) in Zurich, Switzerland.
Star Micronics will work to boost sales of machine tool products by upgrading and expanding its before and after-sales
services while at the same time working to build a user support system by collaborating with each solution center.

Shanghai Xingang Machinery Co., Ltd.
Construction of the Asia Solution Center was completed at Shanghai Xingang, a Group company responsible for the saleof machine tools in the Chinese market. While serving as a showroom that can support sales and bolster proposal
capabilities, the Asia Solution Center will help solidify relationships with distributors and uncover latent demand.
The Asia Solution Center will not only strengthen sales activities by hosting a variety of events, including product briefingsand private viewings, but also reinforce before and after-sales services by staging training sessions on the latest
technologies that address customers’ needs as well as workshops to improve the technical expertise of distributors.
Moreover, through the Asia Solution Center, the Star Micronics Group will put forward processing technologies andhigh-value-added applications that help solve customers’ issues and improve customer satisfaction.

Asia Solution Center

Showroom

NC school

Large conference room

Star Micronics AG
Star Micronics has decided to construct a new building
at SMAG. In addition to expanding the existing
showroom and increasing the number of machines to be
exhibited, plans are also in place to set up a workshop
area to hold sessions for sales representatives. In thismanner, this new facility will serve as a solution center tohelp showcase the Group’s operations in Europe. By
providing before-sales services and further reinforcing
its ability to propose various applications, Star Micronics

Europe Solution Center (conceptual image)is looking to expand its market share in Europe. The
facility is scheduled to open in 2025.
Annual Report 2023 STAR MICRONICS CO., LTD.

21

SUSTAINABILITY
In formulating its Medium-Term Management Plan in February 2022, Star Micronics provided details of the Group’s
Sustainability Policy. Under this Policy, the Star Micronics Group aims to help bring about a sustainable society andenhance corporate value by putting into practice the core concept of the Company and employees growing
together and contributing to society. At the same time, Star Micronics identified specific material issues andtargets from each of the environmental, social, and governance (ESG) perspectives.
In order to put our corporate philosophy and basic sustainability policy into practice, we have partially revised thecontents of the existing Star Micronics Group Code of Conduct and renamed it the Star Micronics Group
Sustainability Code of Conduct, which came into effect in March 2023.

SUSTAINABILITYENVIRONMENT
Material issues

Targets• Addressing climate change by reducing CO2 emissions• Creating environmentally friendly products• Reducing greenhouse gas emissions• Promoting disclosure under TCFD and other frameworks• Creating new businesses and products leveraging
proprietary technologies

2023 Progress• Building an emission data management system• Declared our endorsement of the TCFD and implemented disclosure.

Carbon Neutral
Star Micronics has set a goal to reduce greenhouse gas emissions in a bid to address climate change. The Company plansto reduce greenhouse gas emissions by 46%, compared with 2013, by 2030 and achieve carbon neutrality by 2050 throughvarious measures including the renewal of production bases in Japan and the introduction of renewable energy. In 2023,
we put in place an emission data management system within the Group, including all consolidated subsidiaries.
Operations under this system commenced in 2024.

Addressing Climate Change
Greenhouse Gas Reduction Target

CO2 emissions(Scope 1 and 2, including non-consolidated
and major consolidated subsidiaries)

100%

2030 Target
Reduce by 46%

80%(t-CO2)(compared with 2013)• Renew production bases• Introduce and increase the useof renewable energy, etc.

60%

2019
15,10540%2050 Target
Carbon Neutral

20%

0%

2013

2030

*Scope 1 and 2, including non-consolidated and major consolidated subsidiaries

22

Annual Report 2023 STAR MICRONICS CO., LTD.

2050

2020
9,923

2021

2022

2023

11,642

12,10911,565

Environmentally Friendly Products
In its Special Products Segment, Star Micronics offers a lineup of printers that facilitate the practice of environmentallyfriendly product manufacturing. The Company released TSP100IV SK, a linerless sticky label printer that supports
repositionable labels in 2023. This environmentally friendly printer addresses the need for linerless sticky labels that canbe peeled off and repositioned even after the label has been applied, eliminating the need for wasteful liner paper.
In its Machine Tools Segment, Star Micronics engages in thoroughgoing research not only in the planning and design
processes that determine product performance, but also in the procurement of parts and the manufacturing process inorder to respond optimally to environmental considerations throughout the entire life cycle of its products. To support ourcustomers’ environmental initiatives, we have also included functions to reduce waste and power usage during
processing. In addition to Star Motion Control and Step Cycle Pro, we have developed various functions that help reduce
power consumption, including Eco Mode, which lowers power consumption while the machine is idling.

Use cases of TSP100IV SK

SD-26 equipped with ECO Mode function

Information Disclosure Based on the TCFD Recommendations[ Introduction ]Formulated in February 2022, the Star Micronics Group’s Sustainability Policy is based on the concept of the Company andemployees growing together and contributing to society. In putting into practice this fundamental concept, we recognize
the importance of not only the economic, but also the social and environmental aspects of our business activities as we
help bring about a sustainable society and enhance corporate value. As a company that operates in countries and regions
throughout the world, we also recognize the critical need to address such issues as climate change. In order to meet the
expectations and demands of our stakeholders, we have identified and are promoting initiatives to address climate change
by reducing CO2 emissions and create environmentally friendly products as material priority issues.
Against this backdrop, the Star Micronics Group expressed its support for the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD) in February 2023. With this in mind, we are promoting initiatives to analyze
the impact of climate change on our business, together with subsequent risks and opportunities, based on a variety of
scenarios. We are then reflecting our findings in business strategies.

Annual Report 2023 STAR MICRONICS CO., LTD.

23

[ Governance ]The Group established the Sustainability Committee as abody to make decisions on important matters related toEnvironmental Management Framework

climate change. Chaired by the representative director,

Board of Directors

president and CEO, and comprised of full-time directors
and executive officers, the Committee identifies material
sustainability issues, including climate change, setstargets for the resolution of these issues, and promotes

Reporting

ReportingRiskcoordination

Sustainability Committee
Policy and plan
presentation

ReportingGroup-wide initiatives. Details of decisions made by theEnvironmental Sub-committee

Sustainability Committee as well as counter and related

Promotionmeasures are disseminated to each division and Group
company

throughthesubordinate

Risk Management Committee

Promotion

Reporting

Reporting

Divisions and Group Companies

Environmental

Sub-committee.
The results of activities at each division and Group company are regularly reported to the Sustainability Committee throughthe Environmental Sub-committee to enhance efficacy and implementation.
As a part of the oversight function, the Sustainability Committee reports regularly to the Board of Directors on theperformance and progress of activities.

Environmental Management Framework Meeting Structure
Meeting structure

24

Main role

Composition

Frequency

2023 Results

Board ofDirectors• Supervision of measures toaddress environmental issues inthe execution of business
operations

All Board members

In principle monthly

11 times

Sustainability
Committee• Identify material sustainability
issues• Identify climate change risks andopportunities• Put in place a climate change
activity policy• Monitor the status of eachdivision’s efforts to address climatechange• Report on the status of climatechange risk and opportunity
activities to the Board of Directors

Chairperson:
Representative Director,
president and CEO
Committee members:
Full-time directors andexecutive officers

Semi-annually(extraordinary sessions
held as required)

3 times

Environmental
Sub-committee• Evaluate climate change risks andopportunities• Formulate climate change risk andopportunity countermeasures

Members selected ineach divisionSemi-annually(extraordinary sessions
held as required)

3 times

Risk
Management
Committee• Determine policies to address
emerging risks• Report to the Board of Directors on
the Committee’s deliberations

Chairperson:
Representative Director,
president and CEO
Committee members:
Full-time directors andexecutive officers

Semi-annually(extraordinary sessions
held as required)

2 times

Annual Report 2023 STAR MICRONICS CO., LTD.

[ Risk Management ]Climate change risks are evaluated and managed by the Sustainability Committee. Information is also shared with the Risk
Management Committee as necessary.
While climate change risks are identified by the Sustainability Committee, the Environmental Sub-committee evaluates theimpact of these risks and considers countermeasures, which are then rolled out to each division and Group company.
The results of the Sustainability Committee’s deliberations are regularly reported to the Board of Directors, which advises
and supervises the Sustainability Committee’s efforts.

[ Strategies ]The Star Micronics Group adopts a medium- to long-term approach when conducting scenario analyses to identify climatechange risks and opportunities. In this manner, every effort is made to properly reflect the impact of risks and opportunities
in strategic plans.
In specific terms, the Group refers to scenarios* published by the International Energy Agency (IEA) and theIntergovernmental Panel on Climate Change (IPCC) aimed at achieving the objective put forward under the Paris
Agreement of holding the average increase in global temperatures to well below 2°C above pre-industrial levels andpursuing efforts to limit the temperature increase to 1.5°C. Accordingly, the Group is conducting two analyses, based on a
1.5°C scenario and a 4°C scenario that assumes greenhouse gas emissions at the current level, to assess the significanceof the impact on business activities.
* Main reference scenarios
・ 1.5℃ scenario: IEA NZE, IPCC 1-1.9

・ 4℃ scenario: IPCC SSP5-8.5

Risks and Opportunities Identified
Classification

Item

Financial Impact
1.5 ˚C

4 ˚C

Countermeasures

Transition Risk
Physical risks
Opportunities

Introduction of a carbon tax

Surge in commodity prices and an increase in costs fueledby higher direct and indirect expenses owing to theintroduction of a carbon tax.

Large

Small

• Switch to energy-saving equipment• Promote operating efficiency

Tighten GHG emissions
regulations

Increase in various costs (including capital expenditures
and R&D expenses) in line with efforts to comply withenvironmental regulations

Large

Small

• Switch to energy-saving equipment

Change in the energy mix

Increase in energy costs commensurate with a decreasein the share of fossil energy

MediumSmall• Switch to energy-saving equipment• Promote operating efficiency

Customer reputation

Decrease in sales due to changes in customer needs andproduct demand as a result of fluctuations in the weather

MediumSmall• Create environmentally friendly products

Investor reputation

Increase in costs associated with the disclosure of
information on efforts to address environmental and otherissuesMediumSmall• Enhance corporate value through the proactive
disclosure of ESG information

Increase in averagetemperatures

Increase in facility management, utility, and other costs
associated with rising temperatures

Small

Medium• Switch to energy-saving equipment• Promote operating efficiency

Intensification of extreme
weather conditions

Decrease in sales and increase in restoration costs due tothe shutdown of production plants and supplier damage
attributable to floods and torrential rains

MediumLarge• Strengthen BCP measures

Products and services

Increase in sales owing to the market release of productsthat comply with regulations and upswing in demand

Large

Small

• Create environmentally friendly products

Incidence of new component machining needs in line withthe shift to EVs; increase in sales on the back of optimal
processing machine sales

Large

Small

• Create environmentally friendly products

Resource efficiency

Decrease in manufacturing costs due to switch toenergy-saving equipment and improved operating
efficiency

MediumSmall• Switch to energy-saving equipment• Promote operating efficiency

Intensification of extreme
weather conditions

Increases in demand for air conditioning equipment aswell as orders for machine tools from plants producing
related parts resulting in higher sales

Small

Medium• Create environmentally friendly products

Increase in sales on the back of steps taken to strengthen
the service structure and systems and growing reputation
among customers for prompt after-sales service

MediumLarge• Strengthen the service network

Annual Report 2023 STAR MICRONICS CO., LTD.

25

[ Indicators and Targets ]1. Indicators
The Star Micronics Group uses greenhouse gas emissions as an indicator to manage climate-related risks andopportunities.
2. Targets
The Star Micronics Group has set targets for the reduction of scope 1 and 2 GHG emissions of 46% in 2030 compared with
2013 and virtually zero emissions by fiscal 2050. To this end, the Group is promoting reductions in greenhouse gas
emissions in a bid to achieve the 1.5°C scenario.
As part of this effort, Star Micronics has been promoting the selection and concentration of its global production basenetwork and is working to improve productivity since 2013. Through these and other means, the Group is endeavoring to
reduce GHG emissions.
Looking ahead, plans are in place to renew domestic production bases. The Group is committed to strengthening
measures aimed at achieving reduction targets. These efforts include the use of renewable energy while striving to
improve production efficiency by introducing energy-saving equipment and promoting DX.
3. Results
Results in reducing scope 1 and 2 GHG emissions are presented as follows:(Thousands of t-CO2)
20.0

17.3

–33%

15.0

2030 Target
Reduce by 46%(Actual)
11.5(compared with 2013)
9.3

10.0

2050 Target
Carbon Neutral

5.0

0.0

2013

2023
(Actual)

2030

2050

* Scope 1 and 2, including non-consolidated and major consolidated subsidiaries* Taking into consideration such factors as the review of calculation rules in 2023 and subsequent recalculation, including past performance results, published data has beenchanged.

26

Annual Report 2023 STAR MICRONICS CO., LTD.

SUSTAINABILITY

SOCIETY

Material issues

Targets• Fostering and utilizing diverse human resources• Setting targets for women in management and monitoring
progress; career training and support• Expanding and sustaining education and training programsfor global HR development

2023 Progress• Completion of detailed design of new personnel system• Expansion of education and training programs

Human Resource Strategy
Guided by its Sustainability Policy, Star Micronics places considerable emphasis on its human resource strategy based on
the core concept of the Company and employees growing together and contributing to society. In 2023, the Company
continued to push forward the following strategies in an effort to achieve its HR strategy goals of building an environment
in which all employees can maximize their potential regardless of gender, age, or race.

HR Strategy Goals
Building an environment in which all employees can maximize their potential regardless ofgender, age, or race
1. Constructing new human resource systems
Strategy

Progress and Plans• Rolling out a system for professionals (specialist training)• Rolling out a benefit framework commensurate with roles
and responsibilities• Completing the detailed design of a new human resource
structure and systems (to be introduced in 2025)• Taking steps to reform the Company’s retirement benefits
and pension plan (introducing a defined contribution
pension plan)• Extending the retirement age (currently implementing a
progressive transition from the age of 60 to 65)

2. Enhancing diversity
Strategy• Enhancing women’s empowerment (KPI: 10% or more
women in managerial positions* by 2030)* Equivalent to or above the position of subsection leader• Fostering a corporate climate and changing awareness(manager training, developing flexible and diverse working
styles, etc.)

Progress and Plans• Increasing the percentage of women in management(2021: 1.8% ⇒ 2022: 5.9% ⇒ 2023: 5.9%)• Appointing female directors• Promoting diverse work styles (expansion of flex andwork-from-home systems)

Annual Report 2023 STAR MICRONICS CO., LTD.

27

Ratio of Female Workers (Non-consolidated)
2019

(%)

2020

2021

2023

2022

Employees

19.9

19.5

19.8

20.3

21.4

Managers

1.1

1.1

1.8

5.9

5.9

Promoting diverse work styles
Star Micronics has introduced the following systems to promote diverse and flexible work styles among employees.
System name

Overview

Remote working

A system that allows employees to work from their homes or a comparable location.

Satellite office work
system

A system that allows employees to work at other offices that differ from their designated offices.

Flextime work system

A system that allows employees to decide their own daily work start and end times.

Medical leave system

A leave system that can be used in addition to annual paid leave in cases where long-term outpatient(hospitalization) treatment is required due to infertility treatment or intractable diseases, etc.

3. Reinforcing education and training programs:
Developing employee autonomy, global human resource
Strategy

Progress and Plans• Enhancing upskilling and reskilling initiatives• Strengthening global human resource development(establishing a medium- to long-term HR development
cycle)• Increasing education and training outlays per employee• Introduced DX-related training to promote the DX strategy
of each business segment (reskilling)• Expanded self-enlightenment support system to support
employees who “continue to learn” (encouragement toacquire qualifications, distance learning, online learningassistance, etc.)• Expanded public training to nurture autonomous personnel(promoting cross-border learning through joint training
with other companies, women-related training, etc.)

Expenses Allocated for Education and Training (Non-consolidated)
2019

28

2020

2021

2022

2023

Education and training
outlays per employee (Yen)¥27,179¥37,462¥52,731¥89,084¥70,334

Total training expenses(Thousands of yen)

¥13,209¥16,858¥22,780¥40,266¥33,765

Annual Report 2023 STAR MICRONICS CO., LTD.

Activities Aimed at Further Instilling Action Guidelines within the GroupStar Micronics renewed its Corporate Philosophy, Purpose, Management Policy, and Action Guidelines in
February 2022. To this end, management undertook repeated discussions in its bid to complete this renewal
and to put in place an autonomous organization that is capable of driving new growth. As a part of efforts tobetter convey its thoughts in an easy-to-understand manner, the Company published and distributed aphilosophy book to employees.
We also held a general meeting of employees, attended by roughly 450 employees, during which we
presented the 2023 Action Guidelines Award to those employees who embody our action guidelines. Under
its Action Guidelines, Star Micronics calls on all of its employees to act with initiative and courage, tocontinue learning, to pursue technology, and to focus on team productivity. Action Guidelines awards were
presented to the top three vote-getters in a preliminary survey for each category. In addition to many
employees voting in the awards survey, the Company received numerous messages outlining their reason
for voting.
We will again hold a general meeting of employees and the Action Guidelines Awards in 2024. Moving
forward we will continue to strengthen activities to disseminate the Action Guidelines within the Company.

ACTION GUIDELINES

Act with initiativeand courage

Philosophy Book

Continue learning

Pursue technology

Focus on teamproductivity

General meeting of employees

Annual Report 2023 STAR MICRONICS CO., LTD.

29

SUSTAINABILITYCORPORATE GOVERNANCE
Material issues

Targets• More rigorous corporate governance• Building a more fair and transparent governanceframework by addressing Corporate Governance Code
guidelines

2023 Progress• Disclosed details of a skills matrix for directors• Strengthened the diversity of the Board of Directors (comprised of a majority of external directors, including female
directors)• Continuing to enhance transparency through the Nomination and Compensation Committee

At Star Micronics, our basic approach to corporate governance is based on fulfilling our social responsibilities as a company. To
this end, we strive to achieve appropriate and efficient management with a view to the sustained enhancement of corporate value
and the realization of a sustained society, and to distribute the results of these efforts appropriately to shareholders and otherstakeholders.
Star Micronics has adopted the structure of a company with an audit and supervisory committee in order to strengthen the
supervisory function of its Board of Directors and to enhance its corporate governance capabilities.
Furthermore, an executive officer system was introduced to Star Micronics to speed up and raise the efficiency of businessexecution even further, and ensure that management as an organization is flexible and capable of prompt, rational decisions for
executing business.
The Board of Directors is comprised of four Directors (one of whom is an independent Outside Director, excluding Directors who
serve as Audit and Supervisory Committee Members) and three Directors who serve as Audit and Supervisory Committee
Members (all of whom are independent Outside Directors), and is responsible for appropriate and efficient management
decisions while supervising the execution of Directors’ duties from an independent standpoint.
The Audit and Supervisory Committee is comprised of three independent Outside Directors. In addition to auditing the activities
of Directors in the general conduct of their duties, the Audit and Supervisory Committee is responsible for auditing the Company’s
accounting statements and related documentation and preparing audit reports in accordance with audit policies and plans
determined by the Audit and Supervisory Committee. Moreover, the Committee undertakes audits in conjunction with accounting
auditors as well as internal audit and related departments.
The Company has put in place the Nomination and Compensation Committee as an arbitrary advisory body to the Board of
Directors to increase the transparency and objectivity of procedures related to the nomination and compensation paid to Directors
and Executive Officers. The Nomination and Compensation Committee is comprised of five Directors (four of whom are
independent Outside Directors) appointed through a resolution of the Board of Directors. The Committee deliberates and reports
on matters related to the selection, dismissal and compensation paid to Directors and Executive Officers in line with Board of
Directors’ consultations.

30

Annual Report 2023 STAR MICRONICS CO., LTD.

STAR MICRONICS’ CORPORATE GOVERNANCE SYSTEM
General Meeting of Shareholders
Selection/Dismissal

Report/Opinion

Selection/Dismissal

Selection/Dismissal

Audit/Supervise

Board of Directors
Consultation

Audit and Supervisory
Committee

Cooperate

Accounting
Auditor(Independent
Auditor)ReportAudit Office

Audit and Supervisory
Committee Members

Selection/
Dismissal/
Monitoring
ReportInstructInternal Audit

Report Management
CouncilPresident andAdviseCEO
ReportAudit

Directors
who do not serve concurrentlyas Audit and Supervisory Committee Members

Instruct

Executive
Officers
ReportInstruct

ReportReportRisk Management Committee

ReportNomination andCompensation
Committee

Supervision/
Consultation

Sustainability Committee

ReportDepartment incharge ofReportcompliance
Education/
Awareness
Training

Instruct

ReportInstruction/
Education/
Awareness Training

Report/ProposalBusiness Segments/Group Companies

Compensation of Directors and Audit and Supervisory Committee Members
Members of the Board of Directors at Star Micronics are compensated in accordance with the Company’s earnings
performance. Their package consists of basic compensation that is paid monthly on a fixed basis, a yearly bonus asperformance-based compensation and stock compensation provided as a medium- to long-term incentive. In view of thetasks that they are asked to perform, Directors who concurrently serve as Audit and Supervisory Committee Members andOutside Directors receive only the basic compensation.
The standard amount of basic compensation paid to Directors (excluding Directors who concurrently serve as Audit andSupervisory Committee Members) is determined by a resolution of the Board of Directors based on the Company’s
performance as well as the status and position of each Director. Together with the bonus payment outlined below, thebasic compensation paid to each Director shall not exceed ¥300 million annually. Of this total, the amount paid to Outside
Directors shall not exceed ¥20 million annually.
The amount of basic compensation paid to each Director who concurrently serves as an Audit and Supervisory Committee
Member shall not exceed ¥30 million annually and is determined through deliberations by the Audit and Supervisory
Committee.
The total amount of bonuses paid to Directors is calculated by multiplying profit attributable to owners of the parent by apayment rate determined by the Company so as to function as an incentive to improve business performance. The amountof each bonus paid to individual Directors (excluding Directors who concurrently serve as Audit and Supervisory
Committee Members and Outside Directors) shall be determined in line with the status and position of each Director basedon the calculation method determined by the Board of Directors. After consulting with the Nomination and Compensation
Committee, an arbitrary advisory body that is comprised of a majority of independent Outside Directors, and in line with theCommittee’s report, the Company resolved that the payment of Directors’ bonuses fell within the scope of
performance-based compensation stipulated under Article 34, Paragraph 1.3 of Japan’s Corporation Tax Act at a Board of
Directors’ meeting held on March 28, 2024.
Turning to the matter of stock compensation, an amount is allocated in line with the status and position of each Director

Annual Report 2023 STAR MICRONICS CO., LTD.

31

(excluding Directors who serve as Audit and Supervisory Committee Members as well as Outside Directors) as determinedby a resolution of the Board of Directors. This amount shall comprise Ordinary Stock Options granted as a medium-term
incentive and not exceed ¥20 million annually.
Meanwhile, in addition to granting incentives in a bid to improve the Company’s corporate value on a sustainable basis,
Star Micronics allocates an amount of Restricted Stock that shall not exceed ¥80 million annually in line with the status
and position of each Director (excluding Directors who serve as Audit and Supervisory Committee Members as well as
Outside Directors) as determined by a resolution of the Board of Directors as a long-term incentive to further promoteshared value with its shareholders.

Breakdown of Compensation of Directors and Audit and Supervisory Committee Members

Director rank

Totalcompensation,etc. (¥ million)

Total compensation
by category (¥ million)
PerformanceFixed
based
compensation
Compensation

Stock
Options

Non-monetary
Restrictedcompensation,Stocketc. in items
Compensationon the left

Headcountof those
eligible

Directors(excluding Audit andSupervisory Committee
Members)(excluding Outside
Directors)

149

83

40

—

25

25

2

Directors(Audit and Supervisory
Committee Members)(excluding Outside
Directors)

—

—

—

—

—

—

—

Outside Directors andAudit and Supervisory
Committee Members

33

33

—

—

—

—

4

Notes:
1. The figures for Restricted Stock Compensation and Performance-based Compensation are the monetary amounts recorded as expenses in the fiscal
year under review.
2. The aforementioned amount of Director compensation does not include salaries paid to Directors who are also employees of the Company.

Internal Control System
Star Micronics strives to maintain an internal control system that will enable proper and efficient management to drive acontinuous increase in corporate value. As far as its compliance structure and systems are concerned, in addition toformulating the Star Micronics Group Sustainability Code of Conduct (https://star-m.jp/eng/files/code_of_conduct.pdf),
the Company is working to ensure thoroughgoing compliance through various measures. This includes putting in placerules and organizations. In addition, a department dedicated to corporate social responsibility (CSR) spearheads ourcompliance activities. This department plays a central role in providing reminders and education on compliance to theGroup’s Directors, Executives and Employees, and is charged with holding periodic committee meetings and monitoring
the status in regard to the Group’s adherence with all relevant laws and regulations. Star Micronics also has an appropriate
internal control and whistleblower system for ensuring the reliability of its financial reporting, as stipulated in the Financial
Instruments and Exchange Law of Japan.

32

Annual Report 2023 STAR MICRONICS CO., LTD.

Risk Management
Star Micronics approaches the management of material risks such as legal issues, natural disasters, environmental
considerations and export management in an organized and systematic manner. Departments and individuals are
assigned as needed to manage a specific risk, and take responsibility for establishing rules and manuals, and so forth, formanaging the risks. They also implement programs to alert, educate and prepare the Group’s Directors, Executives andEmployees against the risks. There is also a committee which meets periodically to monitor and manage risks for theGroup.

STAR MICRONICS’ RISK MANAGEMENT SYSTEM
Board of Directors

Audit and Supervisory
Committee

Audit/Supervise

OpinionDirectors who do not serve
concurrently as Audit andSupervisory Committee
members

Report/Discuss

Risk Management Committee
Chairman: President (CRO)Members: Management Council member

Approve/Instruct
Seismic
Risk Management
Sub-Committee

Information Security
Risk Management
Sub-Committee

Committee
Secretariat

Recommend/Report

Export Control
Risk Management
Sub-Committee

Compliance
Risk Management
Sub-Committee

EnergyConservation
Sub-Committee

Annual Report 2023 STAR MICRONICS CO., LTD.

33

Consolidated Eleven-Year Summary
Star Micronics Co., Ltd. and Consolidated Subsidiaries
Eleven fiscal years

Dec. 2023

Dec. 2022

Dec. 2021

Net sales¥78,196¥87,368¥64,360

Cost of sales

47,47253,526

41,756

Selling, general and administrative expenses

20,373

19,917

15,189Operating income

For the year:

10,351

13,925

7,415

Other income (expenses) – net

750

287

549

Income before income taxes

11,101

14,212

7,964

Income taxes

2,928

3,823

2,174

Net (loss) income attributable to noncontrolling interests

(2)

90

50

Net income attributable to owners of the parent

8,175

10,2995,740

Net cash provided by operating activities

7,127

7,523

9,601

Net cash (used in) provided by investing activities(2,039)(2,633)

741

5,088

4,890

10,342(5,054)(4,624)(7,559)Basic net income¥218.89¥271.14¥150.83

Diluted net income

218.17270.01142.38Cash dividends applicable to the year

60.00

70.00

58.00

Current assets¥73,357¥80,073¥65,707

Net property, plant and equipment

15,903

15,697

14,309Total assets

93,39999,53982,361Long-term liabilities

1,644

1,347

1,128

Total equity

80,34773,08861,728Highest¥1,936¥1,858¥1,893Lowest

1,560

1,318

1,416

Equity ratio (%)

85.6

73.0

74.1

Return on equity (%)

10.7

15.4

10.4

Dividend payout ratio (%)

27.4

25.8

38.5

Dividend on equity (%)

2.9

4.0

3.9

Free cash flows
Net cash (used in) provided by financing activities
Per share:

At year-end:

Stock exchange price per share of common stock:

Selected financial indicators:*Effective from the fiscal period ended December 31, 2018, Star Micronics Co., Ltd. changed its account settlement date from the end of February to
December 31. As a transitional period, the consolidated fiscal period for the fiscal period ended December 31, 2018 is based on and presented for the
10-month period from March 1, 2018 to December 31, 2018 for companies that fall within the scope of consolidation whose conventional accountsettlement date is February 28 and the 12-month period from January 1, 2018 to December 31, 2018 for companies that fall within the scope of
consolidation whose account settlement date is December 31.

34

Annual Report 2023 STAR MICRONICS CO., LTD.

Millions of yen (Except for per share data)

Dec. 2020

Dec. 2019

Dec. 2018

Feb. 2018

Feb. 2017

Feb. 2016

Feb. 2015

Feb. 2014¥45,671¥60,652¥65,940¥60,773¥48,937¥54,458¥50,958¥43,482

30,34938,33040,47838,51130,82533,55831,35528,047

13,14916,50515,75016,052

14,505

15,165

14,126

12,829

2,173

5,817

9,712

6,210

3,607

5,735

5,477

2,606

715

(485)

(1,029)

149

224

(383)

605

40

2,888

5,332

8,683

6,359

3,831

5,352

6,082

2,646

1,131

1,486

1,764

487

572

1,530

1,285

1,400

25

(208)

124

91

78

101

101

103

1,732

4,054

6,795

5,781

3,181

3,721

4,696

1,143

6,843

5,124

6,089

8,923

5,338

3,107

4,326

2,597

(1,253)(3,150)(2,950)(5,013)813(1,074)(2,501)(2,455)

5,590

1,974

3,139

3,910

6,151

2,033

1,825

142

(2,136)(3,015)(3,766)(2,926)139(2,180)(1,568)(1,394)¥ 49.07¥113.72¥186.04¥155.68¥ 81.77¥ 87.98¥111.36¥ 27.17

42.46

99.34

163.42136.90

74.69

87.69

111.05

27.14

58.00

56.00

54.00

52.00

48.00

46.00

44.00

34.00

¥54,893¥56,830¥59,914¥59,635¥53,172¥50,367¥50,533¥41,233

14,272

15,542

15,521

14,076

12,926

14,36015,30914,327

71,622

76,39479,93577,36368,351

67,82870,26159,303

1,266

9,675

10,046

9,697

9,935

2,021

617

524

49,82250,79049,31247,44743,75550,20051,90345,698Yen¥1,720¥1,893¥2,270¥2,480¥1,770¥2,238¥1,885¥1,422

945

1,258

1,332

1,588

1,023

1,125

1,115

857

68.2

65.2

60.3

60.1

62.8

72.7

72.4

75.5

3.5

8.3

14.3

12.9

6.9

7.4

9.8

2.7

118.2

49.2

29.0

33.4

58.7

52.3

39.5

125.1

4.1

4.1

4.1

4.3

4.1

3.9

3.9

3.4

Annual Report 2023 STAR MICRONICS CO., LTD.

35

Management’s Discussion and Analysis

OVERVIEW (Years ended December 31, 2023 and 2022)
Business Environment

Cash Dividends per Share(Yen)

Looking at 2023, the outlook for the economy remained
uncertain throughout the period under review. Despite an
overall modest recovery amid signs of a lull in the surge
in resource prices and prolonged inflation, this uncertainty
largely reflects growing concerns surrounding the threatof an economic recession owing to the prolonged
upswing in interest rates in the U.S. and Europe,
deteriorating market conditions and slowing investment
in China, and fluctuations in foreign currency
exchange rates.

Net Sales(Millions of yen)

2022

2023

Change (%)¥87,368¥78,196(10.5)

In each of the major markets in which the Star Micronics
Group operates, demand for POS printers was generally
weak. In addition, demand for the Group’s mainstay
machine tools in overseas markets, which had previously
remained high, stalled with little or no forward momentum.
Exacerbating these difficult trends, demand in Japan also
failed to recover.

Operating Income(Millions of yen)

2022

2023

Change (%)¥13,925¥10,351(25.7)

Despite the overall impact of depreciation in the value ofthe yen, operating income came in at ¥10,351 million
owing mainly to a decline in sales of the Company’s
machine tools.

Net Income Attributable toOwners of the Parent(Millions of yen)

2022

2023

Change (%)¥10,299¥8,175(20.6)Net income attributable to owners of the parent
amounted to ¥8,175 million largely reflecting the decreasein net sales.

36

Annual Report 2023 STAR MICRONICS CO., LTD.

2022

2023

Change (yen)

¥70

¥60

¥(10)

The annual cash dividend for the year under review was¥60 per share. Excluding the special dividend paid for 2022,
this annual dividend is unchanged from the previous year.

Total
Assets(Millions of yen)

2022

2023

Change (%)¥99,539¥93,399(6.2)

Total assets as of December 31, 2023 decreased
compared with the end of the previous year. This largely
reflected the decline in trade notes and accounts
receivable as well as inventories.

Free
Cash Flows(Millions of yen)

2022

2023

Change (%)¥4,890¥5,0884.0

While the Company experienced a year-on-year downturnin net cash provided by operating activities owing to avariety of factors, including a decline in profits as well aslarger capital expenditures and acquisition investments
than in the previous year, free cash flows came in at¥5,088 million on the back of sales of marketablesecurities and withdrawal of time deposits.
Free cash flows = Operating cash flows + Investing cash flows

CapitalExpenditures(Millions of yen)

2022

2023

Change (%)¥3,390¥2,680(20.9)

Capital expenditures amounted to ¥2,680 million. Thislargely included expenditure on production equipment toexpand capacity in the Machine Tools Segment andconstruction of a new building at an overseas subsidiary.

Net
Sales by Region(Millions of yen)

2022

2023

Change (%)

Japan
USA
GermanyChina¥ 9,037
27,904
8,743
17,112¥ 8,402
21,952
10,422
10,333(7.0)(21.3)
19.2(39.6)

Others

24,572

27,087

10.2

INCOME ANALYSIS

million (US$334,310 thousand), a decrease of ¥6,054
million, or 11.3%, compared with the previous year.
On this basis, gross profit fell ¥3,118 million, or 9.2%,
year on year, to ¥30,724 million (US$216,366 thousand).
Selling, general and administrative (SG&A) expenses
were ¥20,373 million (US$143,472 thousand), up ¥456
million, or 2.3%, compared with the previous year.
Taking into account the aforementioned factors,
operating income declined ¥3,574 million, or 25.7%,
year on year, to ¥10,351 million (US$72,894 thousand).

Despite the downturn in net sales, operating
income exceeded ¥10 billion for a second
consecutive year
Star Micronics reported consolidated net sales of¥78,196 million (US$550,676 thousand) in 2023, down
¥9,172 million, or 10.5%, compared with the previous
year. Despite this downturn from the record high in 2022,
net sales were the Company’s third highest in the year
under review. Looking at economic conditions
throughout 2023, the outlook for the economy remained
uncertain. Despite an overall modest recovery amid signsof a lull in the surge in resource prices and prolonged
inflation, this uncertainty was largely due to growing
concerns surrounding the threat of an economic
recession owing to the prolonged upswing in interest
rates in the U.S. and Europe, deteriorating market
conditions and slowing investment in China, andfluctuations in foreign currency exchange rates. Against
this backdrop, demand for POS printers was generally
weak in each of the major markets in which the Star
Micronics Group operates. In addition, demand for theGroup’s mainstay machine tools in overseas markets,
which had previously remained high, stalled with little orno forward momentum. Exacerbating these difficult
trends, demand in Japan also failed to recover. Under
these circumstances, the cost of sales came to ¥47,472

Posted the Company’s second highest net
income attributable to owners of the parent
In 2023, other income – net came to ¥750 million(US$5,282 thousand), up from ¥287 million in theprevious year. In the year under review, Star Micronics
reported a foreign exchange gain – net of ¥23 million(US$162 thousand).
As a result, income before income taxes amounted to¥11,101 million (US$78,176 thousand), a decrease of¥3,111 million, or 21.9%, compared with the previous
year. Net income attributable to owners of the parent after
deducting income taxes and the net loss attributable tononcontrolling interests came to ¥8,175 million(US$57,570 thousand), a downturn of ¥2,124 million,
or 20.6%, year on year.
Basic net income per share was ¥218.89 (US$1.54)
and diluted net income per share was ¥218.17 (US$1.54).

Operating Income andOperating Income Ratio

Net Income per Share

Cash Dividends per Share

(Billions of yen, %)

(Yen)

(Yen)

15.9%

70

11.5%
9.6%

13.9

’19

’20

’21

’22

Operating Income
Operating Income Ratio’23

142.38150.83

2.2

42.46
49.07

5.8

10.4
7.4

99.34
113.72

4.8%

’19

’20

’21

’22

56

58

58

’19

’20

’21

60

218.17218.89270.01
271.14

13.2%

’23

’22

’23

Basic Net Income
Diluted Net Income

Annual Report 2023 STAR MICRONICS CO., LTD.

37

Stable dividend of ¥60 per share, unchanged fromthe previous year
Star Micronics set its annual cash dividend at ¥60(US$0.42) per share. Excluding the special dividend paidfor 2022, this annual dividend is unchanged from theprevious year. In addition, the Company’s consolidated
total payout ratio came in at 51.6% for the year underreview. Looking ahead, Star Micronics plans to pay aninterim and year-end cash dividend of ¥30 per share eachfor an annual cash dividend of ¥60 per share for 2024.
Under its basic dividend policy, Star Micronics istargeting a consolidated total payout ratio of at least 50%.
This includes the continuous payment of a progressive
and stable annual dividend of at least ¥60 per share aswell as the repurchase of own shares. As far as theCompany’s internal reserves are concerned, Star
Micronics is committed to enhancing its corporate value
while increasing shareholders’ profits. At the same time,
the Company will look to engage in a variety of activities
including investment in future growth fields in a bid toensure its sustainable growth.

FINANCIAL POSITION & LIQUIDITY
Decrease in total assets owing to the decline insuch accounting line items as trade notes andaccounts receivable as well as inventories
Total current assets stood at ¥73,357 million (US$516,598
thousand) as of December 31, 2023, down ¥6,716 million,
or 8.4%, compared with the end of the previous year. The
downturn in total current assets largely reflected
year-on-year decreases of ¥4,142 million, or 18.2%, to¥18,556 million (US$130,676 thousand) in trade notes
and accounts receivable and ¥3,324 million, or 13.2%,
to ¥21,763 million (US$153,260 thousand)in inventories.
The balance of property, plant and equipment climbed¥206 million, or 1.3%, compared with the end of theprevious year, to ¥15,903 million (US$111,993 thousand)owing mainly to the year-on-year increase in land of ¥481
million, or 24.0%, to ¥2,489 million (US$17,528 thousand)and in buildings and structures of ¥803 million, or 5.0%,
to ¥16,884 million (US$118,902 thousand).
The balance of investments and other assets grew¥370 million, or 9.8%, compared with the previous
year-end, to ¥4,139 million (US$29,148 thousand).
Accounting for each of these factors, the balance of
total assets as of the end of the year under review

38

Annual Report 2023 STAR MICRONICS CO., LTD.

decreased ¥6,140 million, or 6.2%, compared with theend of the previous year, to ¥93,399 million(US$657,739 thousand).

Decrease in liabilities owing to downturns in suchaccounting line items as payables and income
taxes payable
Total current liabilities stood at ¥11,408 million(US$80,338 thousand) as of December 31, 2023,
a decrease of ¥13,696 million, or 54.6%, compared withthe previous year. This decrease was mainly due toyear-on-year downturns of ¥10,158 million, or 57.0%,
to ¥7,652 million (US$53,887 thousand) in payables andof ¥2,103 million, or 87.0%, to ¥314 million (US$2,211
thousand) in income taxes payable.
Total long-term liabilities climbed ¥297 million,or 22.0%, compared with the end of the previous year,to ¥1,644 million (US$11,577 thousand).

Increase in equity owing to the accumulation ofretained earnings
Total equity increased ¥7,259 million, or 9.9%, comparedwith the end of the previous year, to ¥80,347 million(US$565,824 thousand). Despite the impact of suchinitiatives as the payment of cash dividends as well as thepurchase and disposal of treasury stock, this increase intotal equity was largely attributable to the year-on-year
upswings in retained earnings of ¥5,552 million, or 11.1%,
to ¥55,401 million (US$390,148 thousand), and in foreign
currency translation adjustments of ¥3,693 million,or 109.7%, to ¥7,059 million (US$49,711 thousand).
Accounting for the increase in total equity, the equity
ratio came in at 85.6%, up 12.6 percentage points year
on year. Equity per share as of December 31, 2023
climbed ¥249.77 compared with the previous year-end,to ¥2,178.54 (US$15.34).

CASH FLOWSContinued capital expenditure and returns toshareholders on the back of ample operating
cash flow
Net cash provided by operating activities came to ¥7,127
million (US$50,190 thousand) in the year under review.
The principal cash inflows came from income before
income taxes of ¥11,101 million (US$78,176 thousand),depreciation and amortization of ¥2,710 million(US$19,085 thousand), the decrease in trade receivables

Total Assets

Equity and Return on Equity

Cash Flows(Billions of yen)(Billions of yen, %)(Billions of yen)

99.5
76.4

71.6

82.4

15.4%

9.6

93.4
10.7%

10.4%

(1.3)

3.5%

’19

’20

’21

’22

’23

’19

’20

EquityROEof ¥6,390 million (US$45,000 thousand), and the decrease
in inventories of ¥4,711 million (US$33,176 thousand),
which exceeded the major cash outflows that emanatedfrom the decrease in trade payables of ¥11,762 million(US$82,831 thousand) and income taxes – paid of ¥5,143
million (US$36,218 thousand).
Net cash used in investing activities came to ¥2,039
million (US$14,359 thousand). This largely reflectedpurchases of property, plant and equipment of ¥2,321
million (US$16,345 thousand) and proceeds from saleof shares of subsidiaries and associates resulting inchange in scope of consolidation of ¥383 million(US$2,697 thousand).
Net cash used in financing activities amounted to¥5,054 million (US$35,592 thousand). This was mainly
due to dividends paid to shareholders of ¥2,628 million(US$18,507 thousand) and payments for purchase oftreasury stock of ¥2,002 million (US$14,099 thousand).
Taking into account the aforementioned activities aswell as foreign currency translation adjustments on cash
and cash equivalents ¥1,836 million (US$12,930
thousand) and the net increase in cash and cash
equivalents of ¥1,870 million (US$13,169 thousand),cash and cash equivalents at end of year stood at¥31,434 million (US$221,366 thousand).

6.8

’22

7.1

(2.6)

(2.0)

’22

’23

0.7

(3.2)

’21

7.5

80.3

73.1

50.8

61.7

49.8

8.3%

5.1

’23

’19

’20

’21

Operating Cash Flows
Investing Cash Flows

CAPITAL EXPENDITURES AND
R&D EXPENSES
Investment in equipment to expand capacity in
the Machine Tools Segment and construction ofa new building at an overseas subsidiary in 2023
In 2023, capital expenditures, which totaled ¥2,680 million(US$18,873 thousand), were largely directed toward
investments in equipment to expand capacity in the
Machine Tools Segment and to construct a new building
at an overseas subsidiary. In 2024, Star Micronics plans toundertake capital expenditures of ¥5,545 million focusing
mainly on a large-scale renewal of the Company’s
Kikugawa Factory in the Machine Tools Segment andconstruction of the Europe Solution Center.
Special Products—Capital expenditures in the Special
Products Segment decreased ¥104 million compared withthe previous year, to ¥502 million (US$3,535 thousand).
In 2024, the Company is budgeting expenditures of ¥448
million in this segment for molds used in maintenance andrenewal work.
Machine Tools—Capital expenditures in the Machine
Tools Segment declined ¥556 million compared with theprevious year, to ¥2,042 million (US$14,380 thousand).
In 2024, the Company plans to undertake capital
expenditures of ¥4,886 million. This includes thelarge-scale renewal of the Company’s Kikugawa Factoryand construction of the Europe Solution Center.

Annual Report 2023 STAR MICRONICS CO., LTD.

39

New product development in each segment
Underpinned by its precision processing and assembly
technologies nurtured over the years, the Star Micronics
Group is engaged in a range of research and development
activities that seek to further create added value, including
the development of products and technologies that are
directly related to its current operating segments, and thelaunch of new businesses.
The principal results of research and development
undertaken during the year under review were as follows,with total research and development expenses amounting
to ¥1,849 million.
Special Products Segment—In the current fiscal year,
Star Micronics developed the TSP100IV SK linerless sticky
label printer and the MCP31CI/CBI as the latest model inthe mC-Print®3 series.
The TSP100IV SK is a desktop label printer specificallydesigned for use with repositionable sticky label paper.
Doing away with the use of a backing that is later
discarded as waste, repositionable labels are able toaddress a wide range of needs, including situations where
consumers desire to remove product labels attached toreusable containers, as well as situations wheremagazines and documents require temporary identification. Moreover, by specializing in linerless sticky labels,
this model achieves a far more compact design thanexisting models.
The MCP31CI/CBI is a printer for mobile POSs that
support store operations. By increasing the maximum
printing speed to 400mm/second from the 250mm/
second of existing models, the MCP31CI/CBI greatly
shortens the paper output time. Moreover, it is equippedwith a next-generation USB-C, thereby enabling
connection to any iOS, Android™, Windows®, or otherdevice with USB connectivity. In addition, this model isdesigned with the environment in mind, offering support
for environmentally friendly paper as the recommended
option, doing away with plastic packaging materials, andusing smaller individual packaging boxes to reduce CO2
emissions during transport.
Research and development expenses for the Special
Products Segment totaled ¥780 million.
Machine Tools Segment—In the current fiscal year, Star
Micronics developed the SP-20, a new model of CNC
Swiss-Type Automatic Lathe, capable of supporting parts
machining in various industries such as automobiles,
hydraulic/pneumatic equipment, general machinery, andmedical devices.
The SP-20 employs a gate-shaped tool post configured

40

Annual Report 2023 STAR MICRONICS CO., LTD.

to surround the guide bush as the tool post for front sidemachining. Up to 8 turning tools can be mounted on thefront side, and the back side is equipped with a 7-spindle
cross-drilling unit. Of the 7 spindles on this cross-drilling
unit, there are 5 cartridge-type positions, and a wide
variety of tool units can be mounted according to theshape of the workpieces. In addition, a 4-spindle type and5-spindle type are available for the sleeve holder for drilling
tools on the upper section, so you can select the typeaccording to the purpose of the drilling. To support
increasingly diverse parts machining needs, you canoptionally select to enable machining of bars up to 25.4
mm. In addition, both the main axle shaft and back axle
shaft are designed with torque boosting specifications,
thereby enabling high-load machining. In order to reduce
the environmental footprint, this model is equipped with
Eco Mode, which reduces standby power consumption
when the machine is idling.
From a software perspective, Star Micronics hasdeveloped various user-convenience and workability
improving functions, which the Company is starting toequip on all machine models. These include Step Cycle
Pro for improving productivity via chip-breaking
operations, an Eccentric Turning function for machining
eccentric shapes using cutting tools, Easy Edit for
enabling the creation of simple on-machine programs,
and a B-connect function for connecting automatic
material supply devices via an ethernet IP for integrated
control with the main machine unit.
Research and development expenses for the Machine
Tools Segment amounted to ¥941 million.
Development Headquarters—In the current fiscal year,
under the theme of production DX, Star Micronics
developed a machining estimation support system that iscompliant with the Company’s machine tools. Developed
for the SB-20R, the Company’s top-selling machinemodel, this system’s logic is integrated with the know-how
of engineers, thereby enabling it to automaticallyestimate machining processes and machining durations.
By employing this program, users can expect to reduce
work-hours by 70% compared with estimations
conventionally performed by people. Moreover, theCompany also developed a database function with theability to centralize management of estimate request datafrom customers (input) and estimate results data (output).
Under the theme of store DX, the Company welcomed
Smart Solution Technology, Inc. (SST), into the Special
Products Segment. SST provides services for restaurant
and retail establishments; develops, manufacturers, andsells terminals for attendance management services; andpossesses sound wave-based data communications
technologies. As a store DX solution for which synergistic
outcomes with the Special Products Segment are
expected, SST developed Kirokuru, a QSC* checking tool
for restaurant chain establishments, which it launched on
the market during the second half of the year. Employing
this service allows users to potentially reduce work-hours
by approximately 70% compared with work-hours
involved in existing QSC checking approaches, which will
help improve store operations and boost sales.

Under the theme of logistics DX, the Company
proposed a planning service related to logistics
management for retail establishments, and began data
analysis for partner companies after developing a
prototype version.
Research and development expenses came to¥126 million.
* QSC: Quality, Service, Cleanliness

SALES FRAMEWORK AND NET SALESBY REGIONNet Sales by Region

Japan
10.7%

A significant portion of the Company’s products are sold ininternational markets. Star Micronics is actively engaged in
expanding its business globally and has establishedproduction and sales bases in various regions. Details of
the Group’s principal bases are presented as follows:

Others
34.7%
USA
28.1%

China
13.2%
USA

U.K.

SpecialProducts

Star Micronics
America, Inc.

Star Micronics
Europe Ltd.

Machine
Tools

Star CNC
Machine Tool
Corp.

Star Micronics
GB Ltd.

Germany

Star Micronics
GmbH

FranceStar Machine
Tool FranceSAS

Maintaining a high ratio of overseas sales as aproportion of total sales
Star Micronics’ ratio of overseas sales as a proportion of
total sales edged down 0.4 of a percentage pointcompared with the previous year, to 89.3% in the year
under review.
By region, net sales in the U.S. amounted to ¥21,952
million (US$154,592 thousand), a decrease of ¥5,952
million, or 21.3%, year on year.
Net sales in Germany totaled ¥10,422 million(US$73,394 thousand), an increase of ¥1,679 million,
or 19.2%, compared with the previous year.
Net sales in China came to ¥10,333 million (US$72,768
thousand), a year-on-year decline of ¥6,779 million,
or 39.6%.
In Japan, net sales came to ¥8,402 million (US$59,169
thousand), a drop of ¥635 million, or 7.0%, year on year.

Switzerland

Star Micronics
AG

Germany
13.3%

China

ThailandStar Precisions Ltd.

Star Micronics
Southeast Asia
Co., Ltd.

Shanghai
Xingang
MachineryCo., Ltd.

Star Micronics(Thailand) Co.,Ltd.

Star Micronics
Manufacturing
Dalian Co., Ltd.

Star Micronics
Manufacturing(Thailand) Co.,
Ltd.

Overseas Sales andProportion of Total Sales(Billions of yen, %)82.5%

87.4% 87.5% 89.7% 89.3%
78.3

50.0

’19

69.8

56.3
39.9

’20

’21

’22

’23

Overseas Sales
Proportion of Total Sales

Annual Report 2023 STAR MICRONICS CO., LTD.

41

Consolidated Balance SheetStar Micronics Co., Ltd. and Consolidated Subsidiaries
December 31, 2023

Thousands of
U.S. dollars (Note 1)

Millions of yen

Assets2023

2022¥ 31,434¥ 29,565

2023

Current assets:
Cash and cash equivalents (Note 17)
Marketable securities (Notes 5 and 17)
Short-term investments (Notes 6 and 17)$ 221,366

34
287

505

2,021

18,556

22,698130,676

39

52

274

Other

588

1,293

4,141

Allowance for doubtful receivables

(198)

(133)

(1,394)

Receivables (Notes 7 and 17):
Trade notes and accounts receivable
Unconsolidated subsidiaries and associated companies

21,76325,087

153,260

Prepaid expenses and other

Inventories (Note 8)

888

972

6,254

Total current assets

73,35780,073

516,598

2,489

2,008

17,528Property, plant and equipment:
Land
Buildings and structures

16,88416,081

118,902

Machinery and equipment

21,611

21,979152,190

Lease assets (Note 16)

149

121

1,049

Construction in progress

144

216

1,014

Other

2,190

1,902

15,423

43,46742,307306,106(27,564)(26,610)(194,113)

15,903

15,697111,993

Investment securities (Notes 5 and 17)

361

839

2,542

Investments in unconsolidated subsidiaries and associated companies

404

395

2,845

Total
Accumulated depreciation
Net property, plant and equipment

Investments and other assets:

Deferred tax assets (Note 14)

498

425

3,507

Asset for retirement benefits (Note 10)

1,655

1,300

11,655

Other assets

1,221

810

8,599

4,139

3,769

29,148¥ 93,399¥ 99,539$ 657,739

Total investments and other assets
Total
See notes to consolidated financial statements.

42

Annual Report 2023 STAR MICRONICS CO., LTD.

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and equity

2023

2022

2023

¥ 3,672¥12,988$ 25,859

3,980

4,821

28,028Current liabilities:
Payables (Note 17):
Trade notes and accounts payable
Unconsolidated subsidiaries and associated companies
Other

1

Current portion of long-term debt (Note 9)

387

334

2,726

Income taxes payable (Note 14)

314

2,417

2,211

Contract liabilities

332

966

2,338

Accrued expenses

896

1,550

6,310

Other

1,827

2,027

12,866

11,40825,10480,338Long-term debt (Note 9)

770

884

5,422

Liability for retirement benefits (Note 10)

116

101

817

Deferred tax liabilities (Note 14)

615

316

4,331

Total current liabilities
Long-term liabilities:

Other

143

46

1,007

1,644

1,347

11,577		 and 42,465,134 shares in 2022

12,722

12,72289,591

Capital surplus

10,94911,711

77,106

275

352

1,937

55,401

49,849390,148(7,638)(6,608)(53,789)

167

108

1,176

7,059

3,366

49,711

Total long-term liabilities
Commitments and contingent liabilities (Note 16)
Equity (Notes 11, 12 and 24):
Common stock – authorized, 158,000,000 shares;		 issued, 41,921,434 shares in 2023

Stock acquisition rights (Note 12)
Retained earnings
Treasury stock – at cost,		 5,215,874 shares in 2023
		 and 4,809,548 shares in 2022
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Total

1,304

1,481

9,183

80,23972,981565,063

Noncontrolling interests

108

107

761

Total equity

80,34773,088565,824¥93,399¥99,539$657,739

Total
See notes to consolidated financial statements.

Annual Report 2023 STAR MICRONICS CO., LTD.

43

Consolidated Statement of Income
Star Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2023

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net sales
Cost of sales (Note 10)
Gross profit
Selling, general and administrative expenses (Notes 10 and 15)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Foreign exchange gain (loss) – net
Gain on sale of property, plant and equipment
Gain on revision of retirement benefit plan
Loss on disposal of property, plant and equipment
Other – net
Other income (expenses) – net
Income before income taxes
Income taxes (Note 14):
Current
Deferred
Total income taxes
Net income
Net (loss) income attributable to noncontrolling interests
Net income attributable to owners of the parent

2023

2022

2023

¥78,196
47,47230,724
20,373
10,351¥87,368
53,52633,842
19,917
13,925$550,676
334,310
216,366
143,472
72,894

361
(30)
23
15
203
(78)
256
750
11,101

180
(32)
(76)
33
(20)
202
287
14,212

2,542
(211)
162
105
1,430
(549)
1,803
5,282
78,176

2,693
235
2,928
8,173
(2)
¥ 8,175

3,893
(70)
3,823
10,38990¥10,299

18,965
1,655
20,62057,556(14)$57,570Yen

Per share of common stock (Notes 2.t, 11 and 20):
Basic net income
Diluted net income
Cash dividends applicable to the year

¥218.89218.17
60.00

U.S. dollars (Note 1)¥271.14270.01
70.00

$1.54
1.54
0.42

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
Star Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2023

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net income
Other comprehensive income (Note 19):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive gain in associates
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to (Note 19):
Owners of the parent
Noncontrolling interests
See notes to consolidated financial statements.

44

Annual Report 2023 STAR MICRONICS CO., LTD.

2023

2022

2023

¥ 8,173¥10,389$57,556

59
3,690
(177)
11
3,583
¥11,756

24
3,893
1,004
65
4,986
¥15,375

415
25,986(1,247)78
25,232$82,788¥11,751
5¥15,251
124$82,75434

Consolidated Statement of Changes in Equity
Star Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2023

Thousands

Outstanding
number ofshares ofcommonstock

Balance, December 31, 2021

Millions of yen
Accumulated othercomprehensive income (loss)

Commonstock

CapitalsurplusStockacquisitionrightsTreasurystock–
at costUnrealized
gain onavailable-forsale securities¥(7,067)¥ 84(7,067)84

38,724¥12,722 ¥13,854¥421 ¥41,814

38,724

12,722

421

Cumulative effect ofaccounting change
Restated balance

Retainedearnings

Foreigncurrencytranslation
adjustments

Definedretirement
benefit
plans

Total

¥ (830) ¥  477

¥61,475(11)13,85441,803

Noncontrollinginterests¥ 253 ¥61,728

(11)
(830)

477

61,464

Total
equity(11)
253

61,717

Net income attributable toowners of the parent

10,29910,29910,299Cash dividends,¥70.0 per share(2,253)(2,253)(2,253)Purchase of treasury stock(1,221)

Disposal of treasury stock153(1,958)(1,958)(1,958)

9

206

215

215

Retirement of treasury stock(2,211)

2,211

Purchase of shares of
consolidated subsidiaries

60

60

60

Sales of shares of
consolidated subsidiaries

(1)

(1)

(1)

Net change in the year
Balance, December 31, 2022

(69)
37,656¥12,722 ¥11,711

24¥352 ¥49,849¥(6,608)

¥108

1,004

5,155

¥3,366 ¥1,481

4,196¥72,981¥ 107 ¥73,088

(146)

5,009

Net income attributable toowners of the parent

8,175

8,175

8,175

Cash dividends,¥60.0 per share(2,623)(2,623)(2,623)Purchase of treasury stock(1,093)

Disposal of treasury stock

143

Retirement of treasury stock(2,001)(2,001)(2,001)

11

198

209

209

(773)

773

Net change in the year
Balance, December 31, 2023

(77)
36,706¥12,722 ¥10,949

59¥275 ¥55,401¥(7,638)

¥167

3,693

(177)

3,498

¥7,059 ¥1,304¥80,2391

3,499¥ 108 ¥80,347

Thousands of U.S. dollars (Note 1)
Accumulated othercomprehensive income (loss)

Commonstock

Balance, December 31, 2022

Capitalsurplus$89,591 $82,472

Treasurystock–
at costUnrealized
gain onavailable-forsale securities$2,479 $351,049 $(46,535)$  761StockacquisitionrightsRetainedearnings

Foreigncurrencytranslation
adjustments

Definedretirement
benefitplans

Noncontrolling
Total interests

Total
equity$23,704 $10,430 $513,951$753 $514,704

Net income attributable to owners of
the parent

57,57057,57057,570Cash dividends, $0.42 per share(18,471)(18,471)(18,471)

Purchase of treasury stock(14,092)(14,092)(14,092)

Disposal of treasury stock

78

1,394

1,472

1,472

Retirement of treasury stock(5,444)

5,444$89,591 $77,106$1,937 $390,148 $(53,789)

Net change in the year
Balance, December 31, 2023

(542)

415
$1,17626,007(1,247)

24,633$49,711 $ 9,183 $565,063

8

24,641$761 $565,824

See notes to consolidated financial statements.

Annual Report 2023 STAR MICRONICS CO., LTD.

45

Consolidated Statement of Cash FlowsStar Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2023

Thousands of
U.S. dollars (Note 1)

Millions of yen

2023

2022

2023

¥ 11,101¥14,212$ 78,176

Operating activities:
Income before income taxes
Adjustments for:
Income taxes – paid

(5,143)(2,465)(36,218)

Depreciation and amortization

2,710

2,414

19,085Gain on revision of retirement benefit plan(203)

(1,430)(Allowance for) reversal of provision for doubtful receivables

42

(23)

296

Loss (gain) on sale and disposal of property, plant and equipment

63

(12)

444

Decrease (increase) in trade receivables

6,390(1,728)45,000Decrease (increase) in inventories

4,711(5,880)33,176(11,762)(57)(82,831)

(392)

100

(2,762)

(390)

962

(2,746)

Total adjustments(3,974)(6,689)(27,986)

Net cash provided by operating activities

7,127

7,523

50,190(2,321)(2,170)(16,345)

69

148

486

Change in assets and liabilities

Decrease in trade payables(Decrease) increase in liability for retirement benefits
Other – net

Investing activities:
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchases of marketable and investment securities
Proceeds from sale of marketable and investment securities
Proceeds from sale of shares of subsidiaries and associates resulting inchange in scope of consolidation
Other – net
Net cash (used in) provided by investing activities

(200)
600

4,225

(383)
(4)

(411)

(2,697)(28)(2,039)(2,633)(14,359)

Financing activities:
Decrease in short-term bank loans
Repayments of long-term borrowings
Dividends paid to shareholders
Dividends paid to noncontrolling shareholders of consolidated subsidiaries
Payments for purchase of treasury stock
Disposal of treasury stock

(106)

(91)
(2,628)(641)(2,251)(18,507)

(6)

(10)

(42)

(2,002)(1,960)(14,099)

61

119

430

(373)

(522)

(2,627)(5,054)(4,624)(35,592)

Foreign currency translation adjustments on cash and cash equivalents

1,836

2,100

12,930Net increase in cash and cash equivalents

1,870

2,366

13,169Other – net
Net cash used in financing activities

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See notes to consolidated financial statements.

46

(15)

Annual Report 2023 STAR MICRONICS CO., LTD.

29,56427,199208,197¥ 31,434¥29,565$221,366

Notes to Consolidated Financial Statements
Star Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2023

1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forthin the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordancewith accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as
to application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which is morefamiliar to readers outside of Japan.
In addition, certain reclassifications have been made in the consolidated financial statements of the year ended
December 31, 2022 to conform to the classifications used in the year ended December 31, 2023.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Star
Micronics Co., Ltd. (the “Company”) is incorporated and operates. The translation of Japanese yen amounts into
U.S. dollar amounts is included solely for the convenience of readers outside Japan and has been made at the rate of¥142 to $1, the approximate rate of exchange at December 31, 2023.
Such translation should not be construed as a representation that the Japanese yen amounts could be
converted into U.S. dollars at that or any other rate.

2. Summary of Significant Accounting Policies
a. Consolidation

The consolidated financial statements as of December 31, 2023, include the accounts of the Company and its 18(17 in 2022) significant subsidiaries (together, the “Group”).

		
Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able
to exercise control over operations are fully consolidated, and those companies over which the Group has the ability
to exercise significant influence are accounted for by the equity method.
		
Investment in one (one in 2022) associated company is accounted for by the equity method. Investments in
the remaining associated companies are stated at cost. If the equity method of accounting had been applied tothe investments in these companies, the effect on the accompanying consolidated financial statements would not
be material.
		All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is also eliminated.

b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements
Under Accounting Standards Board of Japan (“ASBJ”) Practical Issues Task Force (“PITF”) No. 18, “Practical Solution
on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements,”
the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions andevents under similar circumstances should in principle be unified for the preparation of the consolidated financial
statements. However, financial statements prepared by foreign subsidiaries in accordance with either International
Financial Reporting Standards or generally accepted accounting principles in the United States of America (Financial
Accounting Standards Board Accounting Standards Codification—“FASB ASC”) tentatively may be used for the
consolidation process, except for the following items that should be adjusted in the consolidation process so thatnet income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of
goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity throughother comprehensive income; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value
model of accounting for property, plant and equipment and investment properties and incorporation of the costmodel of accounting; and (e) recording a gain or loss through profit or loss on the sale of an investment in an equity
instrument for the difference between the acquisition cost and selling price, and recording impairment loss throughprofit or loss for other-than-temporary declines in the fair value of an investment in an equity instrument, where aforeign subsidiary elects to present in other comprehensive income subsequent changes in the fair value of aninvestment in an equity instrument.

Annual Report 2023 STAR MICRONICS CO., LTD.

47

c. Business Combinations
Business combinations are accounted for using the purchase method. Acquisition-related costs, such as advisory
fees or professional fees, are accounted for as expenses in the periods in which the costs are incurred. If the initialaccounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items for which theaccounting is incomplete. During the measurement period, which shall not exceed one year from the acquisition, theacquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and that would have affected themeasurement of the amounts recognized as of that date. Such adjustments shall be recognized as if the accounting
for the business combination had been completed at the acquisition date. The acquirer recognizes any bargain
purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of theassets acquired and all of the liabilities assumed have been identified after a review of the procedures used in thepurchase price allocation. A parent’s ownership interest in a subsidiary might change if the parent purchases or sells
ownership interests in its subsidiary. The carrying amount of noncontrolling interest is adjusted to reflect the change
in the parent’s ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Any
difference between the fair value of the consideration received or paid and the amount by which the noncontrollinginterest is adjusted is accounted for as capital surplus as long as the parent retains control over its subsidiary.

d. Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificates of deposit and investment trusts in bonds that represent
short-term investments, all of which mature or become due within three months of the date of acquisition.

e. Inventories

Inventories are stated at the lower of cost (substantially determined by the average method for the Company and its
consolidated subsidiaries in Japan, and by the first-in, first-out method for the consolidated subsidiaries outside ofJapan) or net selling value.

f. Marketable and Investment Securities
All investment securities are classified as available-for-sale securities.
Marketable available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. The cost of securities sold is determined based on themoving-average method.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For
other-than-temporary declines in fair value, nonmarketable available-for-sale securities are reduced to net realizablevalue by a charge to income.

g. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company andits consolidated subsidiaries in Japan is computed substantially by the declining-balance method based on theestimated useful lives of the assets, while the straight-line method is applied to substantially all of the consolidated
subsidiaries outside of Japan.
The range of useful lives is principally from 15 to 50 years for buildings and structures and from 2 to 15 years formachinery and equipment. The useful lives for lease assets are the terms of the respective leases.

48

Annual Report 2023 STAR MICRONICS CO., LTD.

h. Long-lived Assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate thecarrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if thecarrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected toresult from the continued use and eventual disposition of the asset or asset group. The impairment loss would bemeasured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is thehigher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling
price at disposition.

i. Retirement and Pension Plans
The Company has a noncontributory funded pension plan covering substantially all of its employees. To provide forthe payment of retirement benefits and pension plan payments to employees, the Company recorded a reserve
equivalent to the amounts recognized as necessary at the end of the period under review based on the projected
retirement benefits obligation and the fair value of the pension plan assets at the balance sheet date.
The Company accounts for the liability for retirement benefits based on the projected benefit obligations andplan assets at the balance sheet date. The projected benefit obligations are attributed to periods on a benefit formulabasis. Actuarial gains and losses and prior-service cost that are yet to be recognized in profit or loss are recognizedwithin equity (accumulated other comprehensive income), after adjusting for tax effects and are recognized in profit
or loss over 11 years no longer than the expected average remaining service period of the employees. The discountrate is determined using a single weighted-average discount rate reflecting the estimated timing and amount ofbenefit payment.
Domestic consolidated subsidiaries have lump-sum retirement benefit plans, and certain consolidated foreignsubsidiaries have lump-sum retirement benefit plans or defined contribution pension plans.

j. Asset Retirement Obligations
An asset retirement obligation is recorded for a legal obligation imposed either by law or contract that results from theacquisition, construction, development and normal operation of a tangible fixed asset and is associated with theretirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted
cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if
a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the
period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of theasset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an
asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of theliability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining
useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to
the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to thecarrying amount of the liability and the capitalized amount of the related asset retirement cost.

k. Stock Options

Compensation expense for employee stock options that were granted on and after May 1, 2006 are recognizedbased on the fair value at the date of grant and over the vesting period as consideration for receiving goods orservices in accordance with ASBJ Statement No. 8, “Accounting Standard for Share-based Payment.” Stock options
granted to nonemployees are accounted for based on the fair value of either the stock option or the goods orservices received. In the consolidated balance sheet, the stock option is presented as a stock acquisition right asa separate component of equity until exercised.

l. Bonuses to Directors and Audit and Supervisory Committee Members
Bonuses to directors and Audit and Supervisory Committee Members are accrued at the year-end to which suchbonuses are attributable.

Annual Report 2023 STAR MICRONICS CO., LTD.

49

m. Leases

Finance lease transactions are capitalized by recognizing lease assets and lease obligations in the consolidatedbalance sheet.

		In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” whichrevised the previous accounting standard for lease transactions. Under the previous accounting standard, financeleases that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, otherfinance leases were permitted to be accounted for as operating lease transactions if certain “as if capitalized”
information was disclosed in the notes to the lessee’s financial statements. The revised accounting standard permits
leases that existed at the transition date and that do not transfer ownership of the leased property to the lessee tocontinue to be accounted for as operating lease transactions.
		

All other leases are accounted for as operating leases.

		On January 13, 2016, International Accounting Standards Board issued IFRS No. 16, “Lease,” which requires alessee to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability
representing its obligation to make lease payments for all leases with a term of more than 12 months, unless theunderlying asset is of low value.
		
On February 25, 2016, Financial Accounting Standards Board issued ASU No. 2016-02, “Leases” (Topic 842),
which requires a lessee to recognize lease assets on the balance sheet the assets and liabilities for the rights andobligations created by those leases, unless the underlying asset is of low value.
		Subsidiaries except for those in Japan and the US have applied the standards of “Lease” (IFRS No. 16) andsubsidiaries in the US have applied the standards of “Leases” (ASU No. 2016-02).

n. Revenue Recognition
The Group engages mainly in manufacturing and sales of products in the Special Products Segment and Machine
Tools Segment.
The performance obligation is satisfied at the time it is recognized that a customer has obtained control of the
product based on contractual conditions and recognizes revenues when products are shipped to a customer, at thetime of inspection by a customer or based on trade terms.
As considerations regarding these performance obligations are generally received within one year from the timethey are satisfied, no significant financing component is involved.

o. Research and Development Costs
Research and development costs are charged to income as incurred.

p. Income Taxes

The provision for income taxes is computed based on the pretax income included in the consolidated statement ofincome. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts and the tax bases of assets andliabilities. Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences.

q. Foreign Currency Transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated
into Japanese yen at the exchange rates as of the balance sheet date. The foreign exchange gains and losses fromtranslation are recognized in the consolidated statement of income to the extent that they are not hedged by forward
exchange contracts.

r. Foreign Currency Financial Statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current
exchange rates as of the balance sheet date except for equity, which is translated at the historical rate.
Differences arising from such translation are shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a separate component of equity.
Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the averageexchange rate.

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Annual Report 2023 STAR MICRONICS CO., LTD.

s. Derivatives

The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange rates.
Foreign exchange forward contracts are utilized by the Group to reduce foreign currency exchange risks. The Group
does not enter into derivatives for trading or speculative purposes.

		All derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses onderivative transactions are recognized in the consolidated statement of income.
		
The foreign exchange forward contracts employed to hedge foreign exchange exposures for export sales aremeasured at fair value and the unrealized gains/losses are recognized in the consolidated statement of income.

t. Per Share Information
Basic net income per share is computed by dividing net income attributable to common shareholders by theweighted-average number of common shares outstanding for the period.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised. Diluted
net income per share of common stock assumes full conversion of the outstanding convertible bonds and stockacquisition rights at the beginning of the year (or at the time of issuance) with an applicable adjustment for related
interest expense and net of tax.
Cash dividends per share presented in the accompanying consolidated statement of income are dividends
applicable to the respective fiscal years, including dividends to be paid after the end of the year.

u. Accounting Changes and Error Corrections
In December 2009, the ASBJ issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes andError Corrections,” and ASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes andError Corrections.” Accounting treatments under this standard and guidance are as follows:(1)	Changes in Accounting Policies – When a new accounting policy is applied following revision of an accounting
standard, the new policy is applied retrospectively unless the revised accounting standard includes specifictransitional provisions, in which case the entity shall comply with the specific transitional provisions.
(2)	Changes in Presentation – When the presentation of financial statements is changed, prior-period financial
statements are reclassified in accordance with the new presentation.
(3)	Changes in Accounting Estimates – A change in an accounting estimate is accounted for in the period of thechange if the change affects that period only, and is accounted for prospectively if the change affects both theperiod of the change and future periods.
(4)	Corrections of Prior-Period Errors – When an error in prior-period financial statements is discovered, those statements are restated.

v. New Accounting Pronouncements• “Accounting Standard for Current Income Taxes” (ASBJ Statement No. 27, revised on October 28, 2022)• “Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No. 25, revised on October28, 2022)• “Implementation Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28, revised on
October 28, 2022)(1)	Overview
These accounting standards and guidance establish the accounting classification for corporate taxes resulting
from other comprehensive income that is subject to taxation, as well as the treatment of tax effects related to thesale of shares in subsidiaries, etc., when group taxation regime is applied.
(2)	Scheduled date of application
The Group expects to apply the revised standards and the revised implementation guidance for annual periods
beginning on or after January 1, 2025.
(3)	Effects of the application of the standards and implementation guidance
The Group is currently evaluating the effects of applying the revised standards and the revised implementation
guidance on its consolidated financial statements.

Annual Report 2023 STAR MICRONICS CO., LTD.

51

3. Significant Accounting Estimate
a. Deferred Tax Accounting(1) Carrying amounts
Thousands of
U.S. dollars (Note 1)

Millions of yen
2023

Deferred tax assets

2022

¥498

¥425

2023

$3,507(2) Information on the significant accounting estimate
The Group accounts for a temporary difference as deferred tax assets when it satisfies recoverability based on the
future taxable profit reasonably estimated. The deferred tax asset regarding tax loss carryforwards is disclosed in
Note “14. Income Taxes.”
There is a high degree of uncertainty in a premise for demand and sales trend assuming future taxable profits.
A variety of the factors, which the Group considered in evaluating the recoverability of deferred tax assets, may havean additional impact on taxable profit or the temporary difference, and will consequently affect the profit and loss.

b. Impairment of Long-lived Assets(1) Carrying amounts
Thousands of
U.S. dollars (Note 1)

Millions of yen

Long-lived assets

2023

2022

2023

¥15,903¥15,697$111,993(2) Information on the significant accounting estimate
The Group recognizes the carrying amounts of the relevant asset written down to the recoverable amount, which is
the higher of fair value less cost to sell or the value in use, as an impairment loss when there is any indication that theasset or asset group may be impaired. No impairment of long-lived assets was recognized in 2023.
There is high degree of uncertainty in a premise for a business plan for the calculation of value in use. In theevent of an unforeseen change in the business environment adversely affecting assumptions for the valuation ofassets or asset groups, an impairment may be incurred.

4. Accounting Change(Application of “Implementation Guidance on Accounting Standard for Fair Value Measurement”)
The Group began applying the “Implementation Guidance on Accounting Standard for Fair Value Measurement”(ASBJ Guidance No. 31, revised on June 17, 2021; the “Guidance” in this section) since the beginning of the firstquarter of the fiscal year and prospectively apply new accounting policies prescribed by the Guidance in accordancewith the transitional provision in paragraph 27-2 of the Guidance. Application of this standard has no impact on the
consolidated financial statements.
In the “(5). Financial Instruments Categorized by Fair Value Hierarchy, 17. Financial Instruments and Related
Disclosures,” investment trusts for the previous fiscal year are not stated in accordance with Paragraph 27-3 of the“Implementation Guidance on Accounting Standard for Fair Value Measurement.”

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Annual Report 2023 STAR MICRONICS CO., LTD.

5. Marketable and Investment Securities
Marketable and investment securities at December 31, 2023 and 2022, consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2023

2023

Current:
Trust fund investments and other

¥ 34

Total

¥ 34

Non-current:
Equity securities

¥214

¥288

Corporate and other bonds$2,028562

Trust fund investments and other
Total

73

63

514

¥361

¥839

$2,542The costs and aggregate fair values of securities classified as available-for-sale at December 31, 2023 and 2022,
were as follows:
Millions of yen
2023

Cost

Unrealized gains

Unrealized losses

Fair value

¥104

¥148

¥252

29

44

73

Cost

Unrealized gains

Marketable equity securities

¥104

¥74

Corporate and other bonds

600

Trust fund investments and other

29

34

Cost

Unrealized gains

Marketable equity securities$733$1,042$1,775

Trust fund investments and other

204

310

514

Securities classified as:
Available-for-sale:Marketable equity securities
Trust fund investments and other

Millions of yen
2022

Unrealized losses

Fair value

Securities classified as:
Available-for-sale:
¥178
¥38

562
63

Thousands of U.S. dollars (Note 1)
2023

Unrealized losses

Fair value

Securities classified as:
Available-for-sale:

Proceeds from sales of available-for-sale securities for the years ended December 31, 2023 and 2022, were ¥600
million and nil, respectively. Gross realized gains and losses on these sales, computed on the moving-average costbasis, for the year ended December 31, 2023, were ¥38 million and nil, and for the year ended December 31, 2022,
were both nil.

Annual Report 2023 STAR MICRONICS CO., LTD.

53

6. Short-term Investments
Short-term investments at December 31, 2023 and 2022, consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2023

2023

Deposits over three-month period

¥287

¥505

$2,021

Total

¥287

¥505

$2,021

7. Trade Notes and Accounts Receivable
The Group follows the practice of including installment receivables due after one year (less unearned interest) incurrent assets.
Receivables due after one year (less unearned interest) amounted to ¥2,047 million ($14,415 thousand) and¥1,463 million at December 31, 2023 and 2022, respectively.

8. Inventories
Inventories at December 31, 2023 and 2022, consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
2023

2022

2023

Merchandise¥   932¥   865$  6,563

Finished products

13,611

13,497

95,852Work in process

4,276

6,579

30,113

Raw materials and supplies

2,944

4,146

20,732¥21,763¥25,087$153,260

Total

9. Long-term Debt
Long-term debt at December 31, 2023 and 2022, consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

Lease obligations
Long-term bank loans

2023

2022

2023

¥   67¥   67$  47237

261

Others

1,053

1,151

7,415

Total

1,157

1,218

8,148

387

334

2,726

¥  770¥  884$5,422

Less: current portionLong-term debt, less current portion

Annual maturities of long-term debt at December 31, 2023, were as follows:
Years ending December 31

Thousands of
U.S. dollars (Note 1)

2024¥  387$2,726

2025

287

2,021

2026

217

1,528

2027

76

535

2028

69

486

2029 and thereafter

121

852

¥1,157$8,148Total

54

Millions of yen

Annual Report 2023 STAR MICRONICS CO., LTD.

10. Retirement and Pension Plans
The Company and certain consolidated subsidiaries have severance payment plans for employees. Under thepension plans, employees terminating their employment are entitled to pension payments in most circumstances.
Certain consolidated subsidiaries use a simplified method, which is permitted for small-sized companies inconformity with the Accounting Standard for Retirement Benefits for calculating liability for retirement benefits andretirement benefit expenses for their severance payment plans.
(1) The changes in defined benefit obligation for the years ended December 31, 2023 and 2022, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2023

Balance at beginning of year

2022

2023

¥6,959¥ 9,001$49,007

Current service cost

69

166

486

Interest cost

74

95

521

Actuarial gains and losses

88

157

620

(422)

(532)

(2,972)

Benefits paid
Prior-service cost
Decrease in accordance with shift to a defined contribution
pension system(1,931)(901)

OthersBalance at end of year

(6,345)2

3

14¥5,869¥ 6,959$41,331(2) The changes in plan assets for the years ended December 31, 2023 and 2022, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2023

2022

2023

¥8,158¥8,871$57,451

Expected return on plan assets

204

222

1,437

Actuarial gains and losses

309

(592)

2,176

Contributions from the employer

129

189

908

Benefits paid

(419)

(532)

(2,951)¥8,158$52,169

Balance at beginning of year

Decrease in accordance with shift to a defined contribution
pension system
Balance at end of year(973)

(6,852)¥7,408(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit
obligation and plan assets as of December 31, 2023 and 2022, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2023

2022

Funded defined benefit obligation¥ 5,753¥ 6,858$ 40,514

Plan assets(7,408)(8,158)(52,169)

Total(1,655)(1,300)(11,655)

116

101

817

¥(1,539)¥(1,199)$(10,838)

Unfunded defined benefit obligation
Net liability arising from defined benefit obligation

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liability for retirement benefits

2023

2023

2022

¥   116¥   1012023$    817

Asset for retirement benefits(1,655)(1,300)(11,655)

Net liability arising from defined benefit obligation¥(1,539)¥(1,199)$(10,838)

Annual Report 2023 STAR MICRONICS CO., LTD.

55

(4) The components of net periodic benefit costs for the years ended December 31, 2023 and 2022, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2023

2023

Service cost

¥ 69

¥ 166

Interest cost

74

95

521

(204)

(222)

(1,437)

Recognized net actuarial gains and losses

(46)

250

Amortization of prior-service cost

(153)

Net periodic benefit costs¥(260)

Gains and losses in accordance with shift to a defined
contribution pension system¥(203)

Expected return on plan assets$   486(324)(1,077)¥ 289$(1,831)$(1,430)

Note: The gain was included in other income.

(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement
benefit plans for the years ended December 31, 2023 and 2022, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2023

¥(404)¥1,931$(2,845)

151

(499)

1,063

¥(253)¥1,432$(1,782)2023

Prior-service cost
Actuarial gains and losses
Total(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans as of December 31, 2023 and 2022, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

Unrecognized prior-service cost
Unrecognized actuarial gains and losses
Total

2023

2022

¥(1,528)¥(1,931)$(10,761)

(332)

(181)

(2,338)¥(1,860)¥(2,112)$(13,099)

2023(7) Plan assets

a. Components of plan assets
Plan assets as of December 31, 2023 and 2022, consisted of the following:
2023

2022

Debt investments

60%

34%

Equity investments

26

22

General account

11

Others

14

33

Total

100%

100%

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which are
expected currently and in the future from the various components of the plan assets.
(8) Assumptions used for the years ended December 31, 2023 and 2022, are set forth as follows:
2023

2022

Discount rate

1.1%

1.1%

Expected rate of return on plan assets

2.5%

2.5%

Expected rate of salary increase

9.8%

9.8%

(9) Defined contribution pension plan
The amounts of the required contribution to the defined contribution plans of the consolidated subsidiaries were ¥370
million ($2,606 thousand) and ¥224 million for the years ended December 31, 2023 and 2022, respectively.

56

Annual Report 2023 STAR MICRONICS CO., LTD.

11. Equity
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in
the Companies Act that affect financial and accounting matters are summarized below.

(a) Dividends

Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end
dividend upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain criteria including(1) having a Board of Directors, (2) having independent auditors, (3) having an Audit and Supervisory Board, and (4)the term of service of the directors being prescribed as one year rather than the normal two-year term by its articles
of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the
fiscal year if the company has prescribed so in its articles of incorporation. With respect to the third condition above,
the Board of Directors of companies with (a) board committees (namely, appointment committee, compensationcommittee and audit committee) or (b) an audit and supervisory committee (as implemented under the Companies
Act effective May 1, 2015) may also declare dividends at any time because such companies, by their nature, meetthe criteria under the Companies Act. The Company is organized as a company with an audit and supervisorycommittee, effective May 26, 2016. The Company meets all the above criteria and, accordingly, the Board of
Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year.

		
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders subject
to certain limitations and additional requirements.
		
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts
available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for
distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than
¥3 million.

(b) Increases / Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus), depending on theequity account charged upon the payment of such dividends, until the total of the aggregate amount of legal reserve
and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount ofadditional paid-in capital and legal reserve may be reversed without limitation of such threshold. The Companies Act
also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings
can be transferred among the accounts within equity under certain conditions upon resolution of the shareholders.

(c) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for
distribution to the shareholders which is determined by a specific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of equity.
The Companies Act also provides that companies can purchase both treasury stock acquisition rights andtreasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted
directly from stock acquisition rights.

Annual Report 2023 STAR MICRONICS CO., LTD.

57

12. Stock Options
The stock options outstanding as of December 31, 2023, were as follows:58

Stock Option

Persons Granted

Number of
Options Granted

Date of Grant

Exercise Price2014 I Stock Option

5 directors

23,100 shares

June 9, 2014¥    1

From June 9, 2014
to June 8, 2044

2015 I Stock Option

6 directors

17,100 shares

June 15, 2015¥    1

From June 15, 2015
to June 14, 2045

2016 I Stock Option

3 directors
3 executive officers

36,200 shares

June 13, 2016¥    1

From June 13, 2016
to June 12, 2046

2017 I Stock Option

3 directors
4 executive officers

24,700 shares

June 12, 2017¥    1

From June 12, 2017
to June 11, 2047

2017 II Stock Option

3 directors
6 executive officers
19 employees
8 directors of subsidiaries

148,000 shares

June 12, 2017

¥1,830From July 1, 2019
to June 30, 2023

2018 I Stock Option

3 directors
4 executive officers

24,400 shares

June 11, 2018¥    1

From June 11, 2018
to June 10, 2048

2018 II Stock Option

1 director
6 executive officers
18 employees
8 directors of subsidiaries

175,000 shares

June 11, 2018

¥2,017

From July 1, 2020
to June 30, 2025

2019 I Stock Option

3 directors
4 executive officers

42,700 shares

April 15, 2019¥    1

From April 15, 2019
to April 14, 2049

2019 II Stock Option

7 executive officers
16 employees
8 directors of subsidiaries

161,000 shares

April 15, 2019

¥1,805

From June 1, 2021
to May 31, 2026

2020 I Stock Option

3 directors
5 executive officers

59,900 shares

April 13, 2020¥    1

From April 13, 2020
to April 12, 2050

2020 II Stock Option

5 executive officers
15 employees
8 directors of subsidiaries

138,000 shares

April 13, 2020

¥1,149From June 1, 2022
to May 31, 2027

2021 Stock Option

5 executive officers
16 employees
8 directors of subsidiaries

141,000 shares

April 12, 2021

¥1,720From June 1, 2023
to May 31, 2028

2022 Stock Option

4 executive officers
15 employees
8 directors of subsidiaries

128,000 shares

April 11, 2022

¥1,523

From June 3, 2024
to June 2, 2029

2023 Stock Option

15 employees
9 directors of subsidiaries

100,000 shares

April 10, 2023

¥1,841

From June 2, 2025
to June 1, 2030

Annual Report 2023 STAR MICRONICS CO., LTD.

Exercise Period

The stock option activity was as follows:
Shares
2014 I
Stock Option

2015 I
Stock Option

2016 I
Stock Option

2017 I
Stock Option

2017 II
Stock Option

2018 I
Stock Option

2018 II
Stock Option

15,50010,40022,10019,300136,000

19,400166,000(3,700)(3,000)Year ended
December 31, 2022
Non-vested
		December 31, 2021 –		Outstanding
			Granted
			Canceled
			Vested		December 31, 2022 –		Outstanding
Vested		December 31, 2021 –		Outstanding
			Vested			Exercised			Canceled		December 31, 2022 –		 Outstanding(2,200)(8,000)(10,000)

15,50010,40018,4008,300

126,000

17,200166,000

15,50010,40018,4008,300

126,000

17,200166,000(12,100)(7,900)(13,800)(2,000)(8,600)Year ended
December 31, 2023
Non-vested
		December 31, 2022 –		 Outstanding
			Granted
			Canceled
			Vested		December 31, 2023 –		 Outstanding
Vested		December 31, 2022 –		 Outstanding
			Vested			Exercised			Canceled		December 31, 2023 –		 Outstanding(124,000)
3,400

2,500

4,600

8,300

Exercise price¥    1$    0¥    1$    0¥    1$    0¥    1$    0

Average stock priceat exercise¥1,585$   11¥1,585$   11¥1,585$   11

Fair value priceat grant date

¥1,209$    9¥1,995$   14¥  988$    7¥1,384$   10(6,000)8,600

160,000¥1,830$   13¥    1$    0¥2,017$   14¥1,821$   13¥1,585$   11¥  246$    2¥1,644$   12¥  308$    2

Annual Report 2023 STAR MICRONICS CO., LTD.

59

Shares2019 I
Stock Option

2019 II
Stock Option

2020 I
Stock Option

2020 II
Stock Option

2021
Stock Option

138,000

141,000

2022
Stock Option

2023
Stock Option

Year ended
December 31, 2022
Non-vested
		December 31, 2021 –		Outstanding

128,000

			Granted
			Canceled(138,000)

			Vested		December 31, 2022 –		Outstanding

141,000

128,000

141,000

128,000

Vested		December 31, 2021 –		Outstanding

34,000161,000

59,900138,000

			Vested			Exercised(3,800)(6,600)			Canceled(15,100)(19,200)

		December 31, 2022 –		 Outstanding

15,100161,000

34,100(32,000)

106,000

Year ended
December 31, 2023
Non-vested
		December 31, 2022 –		 Outstanding
			Granted

100,000

			Canceled(3,000)			Vested(141,000)

		December 31, 2023 –		 Outstanding

125,000

100,000¥1,523$   11¥1,841$   13¥  226$    2¥  283$    2

Vested		December 31, 2022 –		 Outstanding

15,100161,000

34,100106,000

			Vested

141,000

			Exercised(5,000)			Canceled(3,000)		December 31, 2023 –		 Outstanding
Exercise price(6,000)(3,000)15,100153,000

34,10044,000132,000¥    1$    0¥1,805$   13¥    1$    0¥1,149$    8¥1,720$   12¥1,828$   13¥1,876$   13¥  157$    1¥  296$    2Average stock priceat exercise
Fair value priceat grant date

(62,000)¥1,882$   13¥1,608$   11¥  352$    2¥  866$    6

The assumptions used to measure fair value of the 2023 Stock Options were as follows:
Estimate method:Black-Scholes option pricing model
Volatility of stock price:
31.363%
Estimated remaining outstanding period: 4.6 years
Estimated dividend:¥60.00 per share
Risk-free interest rate:(0.128)%60

Annual Report 2023 STAR MICRONICS CO., LTD.

13. Restricted Stock Compensation
The restricted stock compensation outstanding as of December 31, 2023, was as follows:
Restricted Stock Compensation

Persons Granted

Number of
Shares Granted

Date of Grant

2021 Restricted Stock Compensation

3 directors
4 executive officers

34,500 shares

April 22, 2021

2022 Restricted Stock Compensation

3 directors
4 executive officers

36,800 shares

April 21, 2022

2023 Restricted Stock Compensation

2 directors
6 executive officers

25,200 shares

April 20, 2023

Notes: 1.	The transfer restriction period is from the grant date to the date immediately after retiring the position of either a director oran executive officer.
2.	The transfer restrictions on all allotted stock shall be lifted upon the expiration of the transfer restriction period provided
that the eligible directors, etc., continuously hold the position of company director or executive officer of the company whodoes not serve as a director from the date of commencement of the execution of duties until immediately before theconclusion of the first general meeting of shareholders thereafter (if the allottee is an executive officer of the company whodoes not serve as a director, from the starting date of the fiscal year that includes the grant date until the end of the current
fiscal year.)

The restricted stock compensation activity was as follows:
2021
Restricted Stock
Compensation

Shares2022
Restricted Stock
Compensation

2023
Restricted Stock
Compensation

Year ended December 31, 2022
		December 31, 2021 – Outstanding

34,50036,800			Granted
			Forfeited(11,700)(12,500)

			Released(2,000)		December 31, 2022 – Outstanding

20,80024,30020,80024,300Year ended December 31, 2023
		December 31, 2022 – Outstanding

25,200			Granted
			Forfeited			Released
		December 31, 2023 – Outstanding
Fair value price at grant date

20,80024,30025,200¥1,622$   11¥1,509$   11¥1,713$   12

Annual Report 2023 STAR MICRONICS CO., LTD.

61

14. Income Taxes
The Company and its consolidated subsidiaries in Japan are subject to Japanese national and local income taxes
which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 29.9% for the years ended
December 31, 2023 and 2022.
Consolidated subsidiaries outside of Japan are subject to income taxes of the countries in which they operate.
The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets
and liabilities at December 31, 2023 and 2022, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2023

2022

2023

Deferred tax assets
Unrealized profit on inventories¥   876¥   953$ 6,169

Depreciation

421

368

2,965

Inventories

345

208

2,430

Accrued bonuses

222

372

1,563

Liability for retirement benefits

123

265

866

741

4,380

Tax loss carryforwards

7

Other – net

622

49

Less valuation allowance

(296)

(258)

(2,084)

Total

2,320

2,649

16,338Deferred tax liabilities
Undistributed earnings of associated companies(1,470)(1,645)(10,352)

Asset for retirement benefits

(555)

(631)

(3,909)Other – net

(412)

(264)

(2,901)

Total(2,437)(2,540)(17,162)

Net deferred tax assets (liabilities)¥ (117)¥   109$   (824)

The expiration of tax loss carryforwards, the related valuation allowances and the resulting net deferred tax assets asof December 31, 2023 and 2022, were as follows:
No material tax loss carryforwards were recognized in 2022.

2023

1 Yearor Less

After 1 Yearthrough
2 Years

After 2 Years
through
3 Years

Millions of yen
After 3 Years After 4 Years
throughthrough
4 Years
5 Years

Deferred tax assets relating to tax
loss carryforwards

After
5 Years

Total

¥7

¥7

¥7

¥7

Less valuation allowances for tax
loss carryforwards
Net deferred tax assets relating to tax
loss carryforwards

2023

Deferred tax assets relating to tax
loss carryforwards

1 Yearor Less

After 1 Yearthrough
2 Years

Thousands of U.S. dollars
After 2 Years After 3 Years After 4 Years
throughthroughthrough
3 Years
4 Years
5 Years

After
5 Years

Total

$49

$49

$49

$49

Less valuation allowances for tax
loss carryforwards
Net deferred tax assets relating to tax
loss carryforwards

Notes: 1.	The amounts of tax loss carryforwards were multiplied by the normal effective statutory tax rates.
2.	The deferred tax assets relating to tax loss carryforwards for the year ended December 31 2023, were ¥7 million. The
Company expects to recover the total amount of the tax loss carryforwards through the estimated future taxable profits.

62

Annual Report 2023 STAR MICRONICS CO., LTD.

A reconciliation between the normal effective statutory tax rate for the years ended December 31, 2023 and 2022,
and the actual effective tax rate reflected in the accompanying consolidated statement of income was as follows:
2023

2022

Normal effective statutory tax rate

29.9%

29.9%

Effect of foreign tax rate differences

(3.7)

(4.0)

Undistributed earnings of associated companies

3.4

2.6

Research and development tax credits

(2.2)

(0.8)

Foreign tax credit

(1.1)

(1.1)

Valuation allowance

(0.1)

(0.2)

Other – net

0.2

0.5

Actual effective tax rate

26.4%

26.9%

15. Research and Development Costs
Research and development costs charged to income were ¥1,849 million ($13,021 thousand) and ¥1,966 million forthe years ended December 31, 2023 and 2022, respectively.

16. Leases
The Company and its consolidated subsidiaries lease certain machinery, computer equipment, office space andother assets.
Obligations under noncancelable operating leases at December 31, 2023 and 2022, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2023

2023

Due within one year¥1

Due after one year

2

14

Total

¥3

$21

$ 7

17. Financial Instruments and Related Disclosures(1) Group Policy for Financial Instruments
The Group invests cash surpluses in low-risk financial instruments and raises funds by bank loans. Derivatives areused mainly to manage foreign exchange risks, not for speculative purposes.

(2) Nature, Extent of Risks Arising from, and Risk Management for Financial Instruments
Trade receivables, such as trade notes and accounts receivable, are exposed to customer credit risk. The Groupmanages its credit risk from receivables on the basis of its internal guidelines, which include monitoring of thepayment term and balance of each customer. The Group also periodically checks the credit status of key customers.
Marketable securities and investment securities, which are mainly debt instruments, are exposed to market risk.
The Group periodically monitors market values of these securities and reports them to the management.
Trade payables, such as trade notes and accounts payable, are mostly due within one year.
The proceeds from the borrowings are used as working capital, and the repayment deadline is up to two years
after the fiscal year-end.
The Group uses forward foreign exchange contracts to manage exchange risks arising from receivables andpayables denominated in foreign currencies. Derivative transactions entered into by the Group have been made inaccordance with internal policies which prescribe the authorization, and the result is reported to management.
The Group also limits the counterparties of these derivatives to major international financial institutions to reduce
credit risk.
With regard to trade payables, the Group is exposed to liquidity risk. The Group manages this risk throughperiodic financial planning by each Group company.

Annual Report 2023 STAR MICRONICS CO., LTD.

63

(3) Fair Values of Financial Instruments
In determining the fair value of financial instruments, various factors are taken into account. Therefore, adopting
different assumptions or conditions could result in fluctuations in these values(a) Fair Value of Financial Instruments
Millions of yen
December 31, 2023

Carrying
amountFair value

Thousands of U.S. dollars (Note 1)
Unrealized
gain/loss

Carrying
amountFair valueMarketable and investment securities

¥325

¥325

$2,289$2,289

Total

¥325

¥325

$2,289$2,289Unrealized
gain/loss

Long-term bank loans

¥ 37

¥ 37

¥0

$  261$  261

$0

Total

¥ 37

¥ 37

¥0

$  261$  261$0

Derivatives

¥ (0)

¥ (0)

$

$

December 31, 2022

Carrying
amountFair valueMarketable and investment securities

¥803

¥803

Total

¥803

¥803

Derivatives

¥229

¥229

(0)

(0)

Millions of yen
Unrealized
gain/loss

Notes: 1.	The note for the cash is omitted. The notes for the short-term investments, trade receivables, and trade payables areomitted because these items are mainly to be settled in a short period of time and fair value is almost equal to book value.
2.	Long-term bank loans scheduled for repayment within one year are included and shown under “Long-term bank loans.”
3.	Unlisted equity securities, etc., are not included in “Marketable and investment securities.” The carrying amount (fair value
cannot be reliably determined) of these financial instruments that do not have a quoted market price in an active market is
as follows.
		
Carrying amountThousands of
U.S. dollars (Note 1)

Millions of yen
2022

2023

2023

Unlisted equity securities

¥ 36

¥ 36

$  253

Investments in unconsolidated subsidiaries and associatedcompanies

301

293

2,120

Investments in limited partnerships
Total

34
¥337

¥363

$2,373

4. As of December 31, 2023
		Other marketable securities include investment trusts to which we have applied the treatment of considering the standard
value as fair value under Paragraph 24-3 of the ‘Practical Guidance on Accounting Standard for Fair Value Measurement’(Practical Issues Task Force No. 31, June 17, 2021).
5.	Derivative receivables and liabilities are on a net basis and items for which the total is a net liability are shown in ( ).

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Annual Report 2023 STAR MICRONICS CO., LTD.

(4) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of yen
December 31, 2023

Due in one
year or less

Cash and cash equivalents¥31,434

Due after one year
through five years

Due after five years
through ten years

Due after
ten years

Marketable and investment securities
Short-term investments

287

Trade receivables

16,548¥2,041¥6

Total¥48,269¥2,041¥6

December 31, 2022

Due in one
year or lessDue after one year
through five years

Cash and cash equivalents¥29,565

Millions of yen

Marketable and investment securities

34

Short-term investments

505

Due after five years
through ten years

Due after
ten years¥  600Trade receivables

21,287

1,463

Total

¥51,391¥2,063

December 31, 2023

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Cash and cash equivalents$221,366

Thousands of U.S. dollars (Note 1)
Due after
ten years

Marketable and investment securities
Short-term investments

2,021

Trade receivables

116,535$14,373

$42

Total

$339,922$14,373$42(5) Financial Instruments Categorized by Fair Value Hierarchy
The fair value of financial instruments is categorized into the following three levels, depending on the observability andsignificance of the inputs used in making fair value measurements.
Level 1: Fair values measured by using quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2: Fair values measured by using inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3: Fair values measured by using unobservable inputs for the assets or liabilities.
If multiple inputs are used that have a significant impact on the measurement of fair value, fair value is classified
at the lowest level in the fair value measurement among the levels to which each of these inputs belongs.

(a) The financial assets and liabilities measured at the fair values in the consolidated balance sheet
Millions of yen
December 31, 2023

Level 1

Level 2

Level 3

Total

Marketable and investment securities
Available-for-sale securities:
Equity securities

¥252

¥252

Investment trusts

73

73

Derivative transactions:
Foreign currency forward contracts
Total assets

¥325

¥(4)

(4)

¥(4)

¥321

¥4

¥  4

¥4

¥  4

Derivative transactions:
Foreign currency forward contracts
Total liabilities

Annual Report 2023 STAR MICRONICS CO., LTD.

65

Millions of yen
December 31, 2022

Level 1

Level 2

Level 3

Total

Marketable and investment securities
Available-for-sale securities:
Equity securities

¥178

Bonds

¥178
¥563

563

220

220

¥783

¥961

¥  9

¥  9

¥  9

¥  9

Derivative transactions:
Foreign currency forward contracts
Total assets¥178

Derivative transactions:
Foreign currency forward contracts
Total liabilities

Thousands of U.S. dollars (Note 1)
December 31, 2023

Level 1

Level 2

Level 3

Total

Marketable and investment securities
Available-for-sale securities:
Equity securities$1,775$1,775Investment trusts

514

514

Derivative transactions:
Foreign currency forward contracts
Total assets$2,289

$(28)

(28)

$(28)

$2,261$ 28$   28$ 28$   28Derivative transactions:
Foreign currency forward contracts
Total liabilities(b) The financial assets and liabilities not measured at the fair values in the consolidated balance sheet
Millions of yen
December 31, 2023

Level 1

Level 2

Level 3Total

Long-term bank loans

¥37

¥37

Total liabilities

¥37

¥37

Thousands of U.S. dollars (Note 1)
December 31, 2023

Level 1

Level 2

Level 3Total

Long-term bank loans

$261

$261

Total liabilities

$261

$261

Not applicable for the year ended December 31, 2022.
The following is a description of valuation methodologies and inputs used for measurement of the fair value of assets
and liabilities:
Marketable and investment securities
The fair values of listed equity securities and investment trusts are evaluated using quoted market price and classified
as Level 1 because listed equity securities are traded in active markets.
Derivatives
The fair values of foreign currency forward contracts are evaluated using the price provided by financial institutions
and classified as Level 2.
Long-term bank loans
The fair values of Long-term bank loans are measured by using discounted present value techniques considering
assumptions including expected future cash flows and discount rates taking into account maturity and credit risk,
and are classified as Level 2.

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Annual Report 2023 STAR MICRONICS CO., LTD.

18. Derivatives
Derivative transactions to which hedge accounting is not applied
Millions of yen

At December 31, 2023

Contracted
amountContracted
amount due
after one year

Fair value

Unrealized
gain/loss¥(4)

Foreign currency forward contracts:
Selling¥  818¥(4)

Buying

341

4

4

Total

¥1,159¥(0)¥(0)

Fair value

Unrealized
gain/loss¥220

Millions of yen

At December 31, 2022

Contracted
amountContracted
amount due
after one year

Foreign currency forward contracts:
Selling¥5,287¥220

Buying

338

9

9

Total

¥5,625¥229¥229

Thousands of U.S. dollars (Note 1)

At December 31, 2023

Contracted
amountContracted
amount due
after one year

Fair value

Unrealized
gain/loss

$(28)

$(28)

Foreign currency forward contracts:
Selling$5,761

Buying

2,401

28

28

Total

$8,162

$ (0)

$ (0)

19. Other Comprehensive Income
The components of other comprehensive income for the years ended December 31, 2023 and 2022, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2023

2022

2023

¥   78¥   21$   549

78

21

549

Unrealized gain (loss) on available-for-sale securities:
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

(19)

3

(134)

¥   59¥   24$   415¥3,690¥3,893$25,986¥3,690¥3,893$25,986

Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Total
Defined retirement benefit plans:
Adjustments arising during the year¥  221¥1,182$ 1,556

Reclassification adjustments to profit or loss

(473)

250

(3,331)

Amount before income tax effect

(252)

1,432

(1,775)

75

(428)

528

¥ (177)¥1,004$ (1,247)

Gains arising during the year¥   11¥   65$    78

Total¥   11¥   65$    78¥3,583¥4,986$25,232

Income tax effect
Total
Share of other comprehensive income in an associate:

Total other comprehensive income

Annual Report 2023 STAR MICRONICS CO., LTD.

67

20. Net Income per Share
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended
December 31, 2023 and 2022, were as follows:
Thousands ofsharesMillions of yen
Net income
attributable toowners of the parent

Weightedaverage shares¥ 8,175

37,350U.S. dollars(Note 1)Yen

EPS

Year ended December 31, 2023
Basic EPS
Net income attributable to common shareholders¥218.89

$1.54

$1.54

Effect of dilutive securities
Convertible bonds
Stock acquisition rights

123

Diluted EPS
Net income for computation¥ 8,175

37,473¥218.17¥10,299

37,983¥271.14

Year ended December 31, 2022
Basic EPS
Net income attributable to common shareholders
Effect of dilutive securities
Convertible bonds
Stock acquisition rights

159

Diluted EPS
Net income for computation¥10,299

38,142¥270.01

21. Revenue Recognition(a) Disaggregated information of revenues from contract with customers
Millions of yen
SpecialProducts

Machine
Tools

Total

Japan

¥ 2,730¥ 5,596¥ 8,326

Europe3,724

26,51530,239USA

8,509

14,60923,118

Asia

1,148

15,365

16,513¥16,111¥62,085¥78,196

December 31, 2023

Revenues from contracts with customers

Millions of yen
SpecialProducts

Machine
Tools

Total

¥ 2,109¥ 6,809¥ 8,918

Europe3,803

20,824

24,627

USA

10,92017,907

28,827

Asia

1,127

23,86924,996¥17,959¥69,409¥87,368

December 31, 2022

Japan

Revenues from contracts with customers

Thousands of U.S. dollars (Note 1)
SpecialProducts

Machine
Tools

Total

Japan

$ 19,225$ 39,409$ 58,634

Europe26,225

186,725

212,950

USA

59,923102,880

162,803

December 31, 2023

Asia
Revenues from contracts with customers

8,085

108,204

116,289$113,458$437,218$550,676

Note: R evenues from contracts with customers are based on the location of each Group Company and are classified by eachcountry or region.

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Annual Report 2023 STAR MICRONICS CO., LTD.

(b) Basic information for understanding revenue from contracts with customers
The basis for understanding revenue is described in Note 2 (n), “Revenue Recognition.”(c) Information based on the relationship between the satisfaction of performance obligations under contracts withcustomers and cash flow arising from the contracts, as well as the amount and timing of revenue expected to berecognized after the next fiscal year from the contracts with customers that existed at the end of the current fiscal year.

(1) Balance of contract liabilities, etc.
Thousands of
U.S. dollars (Note 1)

Millions of yen
2023

2022

2023

Receivables from contracts with customers (beginning balance)¥22,750¥18,553$160,211

Receivables from contracts with customers (ending balance)

18,59522,750130,950

Contract liabilities (beginning balance)

966

801

6,803

Contract liabilities (ending balance)

332

966

2,338

Contract liabilities are mainly related to Advance received.
The amount of revenue recognized in the fiscal year under review included in the balance of contract liabilities atthe beginning of the current fiscal year was ¥966 million ($6,803 thousand).

(2) Transaction prices allocated to remaining performance obligation
As the Group had no significant transaction with an initial expected contract period over one year, the practical
expedients are applied and information on remaining performance obligations is omitted. In the consideration fromcontracts with customers, there is no significant amount without the transaction price.

22. Segment Information
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures,” and ASBJ Guidance
No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to reportfinancial and descriptive information about its reportable segments. Reportable segments are operating segments oraggregations of operating segments that meet specified criteria. Operating segments are components of an entity
about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment
information is required to be reported on the same basis as is used internally for evaluating operating segment
performance and deciding how to allocate resources to operating segments.
1. Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Company’s management is being performed in order to decide how resources are allocated among theGroup. Therefore, the Group has two reportable segments: “Special Products” and “Machine Tools.”“Special Products” produces and sells POS printers and others.
“Machine Tools” produces and sells CNC automatic lathes and others.
2. Methods of measurement for the amounts of sales, profit (loss), assets, liabilities and other items for each reportable segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies.”

Annual Report 2023 STAR MICRONICS CO., LTD.

69

3. Information about sales, profit (loss), assets, liabilities and other items.
Millions of yen

December 31, 2023

Sales to external customers

SpecialProducts¥16,111

Reportable Segment
MachineTools¥62,085

Total

Reconciliations¥78,196

Consolidated¥78,196

Intersegment sales or transfers
Total

16,111

62,08578,196

Segment profit¥ 1,953¥10,350¥12,303¥ (1,952)¥10,351

Segment assets¥14,139¥64,648¥78,787¥14,612¥93,399

Depreciation

496

2,046

2,542

168

2,710

Investments in associates

301

Increase in property, plant andequipment and intangible assets

502

78,196

Other items:
301
2,042

301

2,544

136

2,680

Reconciliations

Consolidated

Millions of yen

December 31, 2022

Sales to external customers

SpecialProducts¥17,959

Reportable Segment
MachineTools¥69,409

Total¥87,368¥87,368

Intersegment sales or transfers
Total

17,95969,40987,368Segment profit¥ 3,754¥12,249¥16,003¥ (2,078)¥13,925

87,368Segment assets¥15,940¥69,479¥85,419¥14,120¥99,539

Depreciation

442

1,791

2,233

181

2,414

Investments in associates

293

Increase in property, plant andequipment and intangible assets

606

Other items:
293
2,598

293

3,204

186

3,390

Thousands of U.S. dollars (Note 1)

December 31, 2023

Sales to external customers

SpecialProducts

Reportable Segment
Machine
Tools

Total

Reconciliations

Consolidated$113,458$437,218$550,676$550,676

Total

113,458

437,218

550,676

550,676

Segment profit$ 13,753$ 72,887$ 86,640$ (13,746)$ 72,894

Segment assets$ 99,570$455,268$554,838$102,901$657,739

Depreciation

3,493

14,40917,902

1,183

19,085Investments in associates

2,120

Increase in property, plant andequipment and intangible assets

3,535Intersegment sales or transfers

Other items:
2,120
14,38017,9152,120
958

18,873

Notes: 1.	Reconciliations recorded for segment profit include corporate expenses that are not allocated to any reportable segment.
Corporate expenses principally consist of general corporate expenses incurred by the Administration Headquarters of theCompany.
2.	Reconciliations recorded for segment assets include corporate assets that are not allocated to any reportable segment.
Corporate assets principally consist of assets maintained by the Administration Headquarters of the Company and consist
principally of excess funds under management (cash and cash equivalents).
3.	Reconciliations recorded for depreciation include depreciation incurred by corporate assets that are not allocated to any
reportable segment.
4.	Reconciliations recorded for increase in property, plant and equipment and intangible assets are capital investments
principally for corporate assets that are not allocated to any reportable segment.
5.	Segment profit agrees with operating profit in the accompanying consolidated statement of income.

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Annual Report 2023 STAR MICRONICS CO., LTD.

Related Information
Related information by geographical area at December 31, 2023 and 2022, consisted of the following:(1) Net Sales
Millions of yen
December 31, 2023

Japan

USA

Germany

China

OthersTotal¥8,402¥21,952¥10,422¥10,333¥27,087¥78,196

Japan

USA

Germany

China

OthersTotal¥9,037¥27,904¥8,743¥17,112¥24,572¥87,368

Japan

USA

Germany

China

OthersTotal$59,169$154,592$73,394$72,768$190,753$550,676

Millions of yen
December 31, 2022

Thousands of U.S. dollars (Note 1)
December 31, 2023

Note: Sales are classified by country or region based on the location of customers.

(2) Property, Plant and Equipment
Millions of yen
December 31, 2023

Japan

China

Thailand

OthersTotal¥7,501¥3,341¥2,710¥2,351¥15,903

Japan

China

Thailand

OthersTotal¥8,001¥3,304¥2,633¥1,759¥15,697

Japan

China

Thailand

OthersTotal$52,824$23,528$19,085$16,556$111,993

Millions of yen
December 31, 2022

Thousands of U.S. dollars (Note 1)
December 31, 2023

23. Related Party Disclosures
Transactions of the Company with related parties for the years ended December 31, 2023 and 2022, were as follows:Year ended December 31, 2023
Not applicableYear ended December 31, 2022
Related party

Category

Description of transaction

Hajime Sato

Chairman of the Board

Exercise of stock options

Millions of yen¥12

Fumio Masuda

Executive Officer

Exercise of stock options¥11

Annual Report 2023 STAR MICRONICS CO., LTD.

71

24. Subsequent Eventa. Appropriation of Retained Earnings
The following appropriation of retained earnings at December 31, 2023, was approved at the Company’s Board of
Directors’ meeting held on February 22, 2024:
Millions of yen

Year-end cash dividends, ¥30 ($0.211) per share¥1,101Thousands of
U.S. dollars (Note 1)$7,754b. The Renovation of Domestic Factories in the Machine Tools Segment
Star Micronics Co., Ltd. (“Star Micronics” or “the Company”) announced that its Board of Directors has resolved torenovate its Kikugawa Factory and construct a new factory as a part of its Machine Tools Segment activities. Brief
details are presented as follows:
1. Purpose(1)	Star Micronics will look to increase its production capacity to meet the growing global demand for Swiss-Type
CNC Automatic Lathes. The Company will also build a new factory in Japan to assemble high-value-added
products and cutting-edge models. In addition to putting in place a monthly production capacity of 100 units,
efforts will be made to strengthen the Company’s ability to respond to geopolitical risks through these means.
(2)	Star Micronics’ current Kikugawa Factory building was constructed more than 35 years ago. The decision torenovate the factory is therefore geared toward improving the Company’s BCP by strengthening its response toearthquakes and other disasters.
(3)	Star Micronics will work to increase operational and production efficiency, improve quality, and reduce costs byautomating operations through measures such as the introduction of robots and the promotion of Digital
Transformation (DX) to create a smart factory.
(4)	Star Micronics will install solar panels and other equipment and promote environment-friendly design and facilities
in a bid to realize sustainable factories. Through these endeavors, the Company aims to obtain ZEB certificationand contribute to the realization of a sustainable society.
2. Overview of the Kikugawa Factory Renovation(1) Name: Kikugawa South Factory (tentative)(2) Location: Misawa, Kikugawa City, Shizuoka Prefecture(3) Activities: Manufacture of core components(4) Structural overview: Steel-framed three-story building(5) Building area: Approx. 10,300m2 (approx. 3,120 tsubo)(6) Total floor area: Approx. 13,700m2 (approx. 4,150 tsubo)(7) Total project expenses: Approx. ¥10,000 million ($70,422,535)(8) Start of construction: July 2024 (planned)(9) Start of operations: November 2025 (planned)
3. Overview of the New Factory(1) Name: Makinohara Factory (tentative)(2) Location: Nunohikihara, Makinohara City, Shizuoka Prefecture(3) Activities: Body assembly of cutting-edge models(4) Structural overview: Steel-framed two-story building(5) Building area: Approx. 6,900m2 (approx. 2,090 tsubo)(6) Total floor area: Approx. 9,100m2 (approx. 2,760 tsubo)(7) Total project expenses: Approx. ¥5,000 million ($35,211,268)(8) Start of construction: May 2025 (planned)(9) Start of operations: July 2026 (planned)

72

Annual Report 2023 STAR MICRONICS CO., LTD.

Deloitte Touche Tohmatsu LLC
AOI TOWER
17-1 Koya-machi, Aoi-ku
Shizuoka-shi, Shizuoka 420-0852
Japan
Tel: +81 (54) 273 8091
Fax: +81 (54) 669 4326
www.deloitte.com/jp/en

INDEPENDENT AUDITOR'S REPORTTo the Board of Directors of Star Micronics Co., Ltd.:<Audit of Consolidated Financial Statements>
OpinionWe have audited the consolidated financial statements of Star Micronics Co., Ltd. and its consolidated
subsidiaries (the "Group"), which comprise the consolidated balance sheet as of December 31, 2023,
and the consolidated statement of income, consolidated statement of comprehensive income,consolidated statement of changes in equity and consolidated statement of cash flows for the year thenended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, all expressed in Japanese yen.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as of December 31, 2023, and its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance withaccounting principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in
our opinion, such translation has been made in accordance with the basis stated in Note 1 to theconsolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience ofreaders outside Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Auditof the Consolidated Financial Statements section of our report. We are independent of the Group inaccordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled ourother ethical responsibilities as auditors. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Key Audit Matter
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of
the consolidated financial statements of the current period. The matter was addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on the matter.

Member of
Deloitte Touche Tohmatsu Limited

Appropriateness of the timing of revenue recognition for sales from the machine tools business
How the Key Audit Matter Was
Addressed in the Audit

Key Audit Matter Description
As stated in Note 22 "Segment Information" to theconsolidated financial statements, sales from themachine tools business were 62,085 million yen,which accounted for 79.4% of consolidated net
sales of 78,196 million yen recorded in the
consolidated statement of income for the current
year. Furthermore, sales from the machine tools
business were primarily from the sales of productsof Star Micronics Co., Ltd. (the "Company"), Star
CNC Machine Tool Corp. and Shanghai Xingang
Machinery Co., Ltd., which are significant
subsidiaries.

Our audit procedures related to theappropriateness of the timing of revenue
recognition for sales from the machine tools
business included the following, among others:(1) Evaluation of internal controls
We evaluated the design and operating
effectiveness of the following internal controls
related to appropriate timing of recording sales
that are recognized based on contractual
conditions with customers, approval of sales
inputted in the sales management system,
which includes assessing the appropriatenessof sales dates by checking with evidence suchas proofs of shipment, bills of lading, andacceptance inspection documents.

As stated in Note n. "Revenue Recognition" of
Note 2 "Summary of Significant Accounting
Policies" to the consolidated financial statements,
the Group deems the performance obligation to besatisfied when a customer has obtained control ofthe product based on contractual conditions and(2) Substantive procedures
recognizes revenues at the time products are
We analyzed the monthly and yearly changes
shipped, products are inspected by a customer, orat a time specified in trade terms.
in sales by customer and by product for themachine tools business and performed the
Revenue related machine tools is recognized onfollowing procedures:
an inspection basis and a certain number of
installation hours are needed for a test run and a• Examined whether the timing in whichrevenue is recognized for transactions is
specification confirmation by a customer before acustomer has the ability to use the machine tools.
appropriate in terms of the contractual
When the installation of machine tools does notconditions established in contracts withproceed as initially planned, the sales may not be
customers or purchase orders.
recorded in the originally planned period.
• Tested significant sales recorded close to
Additionally, the amounts of sales and profits perunit for machine tools are large, and recording
the year end by inspecting purchase orders,such sales in an inappropriate period may
contracts, and evidence which supported
significantly impact the sales and profit for thethe appropriate timing of revenue
year. Furthermore, in the current year, there is arecognition, such as proofs of shipment, bills
potential risk of accelerated posting of sales in anof lading, and acceptance inspection
effort to meet annual performance targets because
documents.
of the decrease in revenue resulting due to• Examined the acceptance inspection
heightened concerns over the economic recessionin Europe and America and the delayed economic
documents for sales recorded on an
recovery in China. Therefore, auditing theinspection basis to determine whether there
appropriateness of the timing of revenue
was a signature for the acceptancerecognition for sales from the machine tools
inspection from the person in charge of thebusiness requires a more careful consideration.
customer, and whether the acceptancedates were consistent with theBased on above, we identified the appropriatenessinstallation/test run dates.
of the timing of revenue recognition for sales from• Examined whether there were large costs
the machine tools business of the Company andincurred after acceptance inspections, which
its two significant subsidiaries as a key audit
matter.
were normally not expected to occur.
• We inspected the sales ledger after the year
end and examined whether there were any
significant negative sales entries that would
cast doubt on the appropriateness of thetiming of revenue recognition.
-2-

Other Information
Management is responsible for the other information. The Audit and Supervisory Committee is
responsible for overseeing the Directors' execution of duties relating to the design and operating
effectiveness of the controls over the other information. The other information comprises the information
included in the ANNUAL REPORT 2023, but does not include the consolidated financial statements andour auditor's report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent withthe consolidated financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
The Audit and Supervisory Committee is responsible for overseeing the Directors' execution of duties
relating to the design and operating effectiveness of the controls over the Group's financial reporting
process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor'sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks. The
procedures selected depend on the auditor's judgment. In addition, we obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

-3-• Obtain, when performing risk assessment procedures, an understanding of internal control relevant tothe audit in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group's ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor's report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However, future events or conditions may cause the Group to cease to continue as agoing concern.
• Evaluate whether the overall presentation and disclosures of the consolidated financial statements arein accordance with accounting principles generally accepted in Japan, as well as the overall
presentation, structure and content of the consolidated financial statements, including the disclosures,and whether the consolidated financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the Audit and Supervisory Committee with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate with it all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Audit and Supervisory Committee, we determine those mattersthat were of most significance in the audit of the consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of such communication.
<Fee-Related Information>
Fees for audit and other services for the year ended December 31, 2023, which were charged by us andour network firms to Star Micronics Co., Ltd. and its subsidiaries were ¥123 million and ¥29 million,
respectively.

-4-Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required
to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

Deloitte Touche Tohmatsu LLC

April 27, 2024-5-

Stock Information
as of December 31, 2023

Total Number of Authorized Shares 158,000,000 shares
Total Number of Issued Shares

41,921,434 shares*

Paid-in Capital

12,721,939,515 yen

Stock Listing

Transfer Agent M
 itsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda,
Tokyo 100-8212, Japan

10,920

Number of Shareholders

 rime Market Section of the TokyoP
Stock Exchange* The decrease in the number of shares issued was due to a retirement of 543,700 shares.

COMPOSITION OF SHAREHOLDERS(%)

Securities Companies

Other Companies

2023

34.0 %

4.0 %Financial Institutions

2022

23.1%
Japanese Individuals
and Others

Foreign Institutions
and Individuals

24.6 %

23.1%

4.0 %

35.4 %

25.4 %

1.1%

12.4 %Star Micronics

1.6 %11.3 %STOCK PRICE RANGE (TOKYO STOCK EXCHANGE)(Yen)(Yen)
2,000

40,0001,500

30,0001,000

20,000500

10,0000

0Closing Price of Star Micronics (Left)

Nikkei Stock Average (Right)

TRADING VOLUME(Thousands of shares)
10,000

5,000

0

2019

2020

2021

2022

2023

Notes: 1. This trading volume shows the monthly volume of trade on the Tokyo Stock Exchange.
2. Stock prices of Star Micronics and the Nikkei Stock Average are based on a simple average of daily closing prices for each day of every month at the Tokyo Stock Exchange.

STOCK PRICE
(Yen)

78

Year
At year-end
High

2019

2020

2021

2022

2023

1,575

1,654

1,549

1,619

1,719

1,893

1,720

1,893

1,858

1,936

Low

1,258

945

1,416

1,318

1,560

Annual Report 2023 STAR MICRONICS CO., LTD.

20-10 Nakayoshida, Suruga-ku,
Shizuoka 422-8654, Japan
Tel +81-54-263-1111
www.star-m.jp

Printed in Japan