One Step Closer toa Better WorldANNUAL REPORT 2022 (PDF Version)
For the year ended December 31, 2022

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
90% and a ratio of overseas production to all production of 84%.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Environment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

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

Society. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

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

Corporate Governance. . . . . . . . . . . . . . . . . . . . . . . . . . 28

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

Consolidated Eleven-Year Summary. . . . . . . . . . . . . . . . . . 32

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

Management’s Discussion and Analysis. . . . . . . . . . . . . . . 34

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

Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . 40

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

Consolidated Statement of Income. . . . . . . . . . . . . . . . . . . 42

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

Consolidated Statement of Comprehensive Income. . . . . . 42

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

Consolidated Statement of Changes in Equity . . . . . . . . . . 43

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

Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . 44

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

Notes to Consolidated Financial Statements. . . . . . . . . . . . 45

Solution Center. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Independent Auditor’s Report. . . . . . . . . . . . . . . . . . . . . . . 69
Stock Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

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.

PURPOSE
Contribute 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 2022 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 sale of 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 sharethroughout 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.

02

Annual Report 2022 STAR MICRONICS CO., LTD.

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.

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 and Thailand 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. Buoyed by 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. Throughactivities in the city 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 suchhigh disaster prevention capabilities as a seismic isolation structure that can handle long-periods of seismic motion and an emergency power supply that cancontinue 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 paperless office 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, theSolution Center can serve as a permanent display of various automatic lathes while accommodating multiple functions. The Center is equipped with a wide range ofshowrooms, 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.

NET SALES(Millions of yen)

¥62,723
million¥52,304
million¥73,884
million¥87,368
million2 /1991

2/20012/2008

12/2022

1990

2000

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

1960
Machine Tools

1970
Components

1980

2010

2022

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 2022 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 2020, 2021 and 2022

Change(%)

Thousands
ofU.S. dollars

2022/2021

2022

Millions of yen
2020

2021

2022

¥45,671¥64,360¥87,36835.7$656,902

Operating income

2,173

7,415

13,925

87.8

104,699

Net income attributable toowners of the parent

1,732

5,740

10,29979.4

77,436Return on sales

3.8%

8.9%

11.8%

Capital expenditures

1,908

1,926

3,390

76.0

25,489Depreciation and amortization

2,255

2,127

2,414

13.5

18,150Total assets

71,62282,361

99,53920.9748,414

Total equity

49,822

61,72873,08818.4

549,534

Equity ratio

68.2%

74.1%

73.0%

For the year :Net sales

At year-end :YenChange (%)

U.S. dollars

Per share :Basic net income¥49.07¥150.83¥271.14

79.8

$2.04

Diluted net income

42.46

142.38270.01

89.6

2.03

Cash dividends
applicable to the year

58.00

58.00

70.00

20.7

0.53

Common shares issued

45,091,334

44,091,334

42,465,134

Number of shareholders

9,103

10,727

11,776

Stock information :Note : The rate of ¥133 to US$1, prevailing on December 31, 2022, has been used for translation into U.S. dollar amounts.

NET SALESOPERATING INCOME(Millions of yen)

(Millions of yen)

64,36060,652

CASH DIVIDENDS APPLICABLE
TO THE YEAR(Millions of yen)

(Yen)

13,92587,36865,940NET INCOME ATTRIBUTABLETO OWNERS OF THE PARENT

9,712

45,671

6,795

7,415

5,817

10,299

04

’19

’20

’21

’22

Annual Report 2022 STAR MICRONICS CO., LTD.

’18

’19

54

58

58

’18

’19

’20

’21

5,740
4,054
1,732

2,173

’18

70
56

’20

’21

’22

’18

’19

’20

’21

’22

’22

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 2020, 2021 and 2022

Net Sales by Geographical Region
Change(%)

Thousands
ofU.S. dollars

2022/2021

2022

Millions of yen
2020

2021

2022

Japan

¥5,754¥8,072¥9,037

12.0$67,947

USA

13,70817,31527,90461.2

209,804

China

10,437

14,543

17,112

17.7

128,662

Germany

2,827

6,076

8,743

43.9

65,737

Others12,945

18,354

24,572

33.9

184,752

Total

45,67164,36087,36835.7

656,902

Note :The rate of ¥133 to US$1, prevailing on December 31, 2022, has been used for translation into U.S. dollar amounts.

Japan

10.3%

Others

Japan

28.2%

(Millions of yen)

Net Salesby Region

2022

USA

31.9%

5,754

8,072

9,037

2021

2022

Germany

10.0%

2020

China

19.6%

USA

China

(Millions of yen)

(Millions of yen)

27,904
13,7082020

14,543

17,3152021

17,112

10,437

2022

Germany

2020

2021

2022

Others(Millions of yen)

(Millions of yen)

8,743
6,076

12,945

2,827
2020

2021

2022

2020

18,3542021

24,572

2022

Annual Report 2022 STAR MICRONICS CO., LTD.

05

TO OUR SHAREHOLDERS
Mamoru Sato

Representative Direc tor,
President and CEO

Confronting materiality to realize our purpose
Despite the ongoing uncertainty surrounding factors such as the prolonged impact of COVID-19 and global inflation, both
the Machine Tools and Special Products segments performed well in 2022, achieving record highs in net sales as well as
net income attributable to owners of the parent.
2023 is the second 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 of theCompany and employees growing together and contributing to society.

01 Operating Results in 2022
Looking at 2022, global economic conditions remained uncertain. In addition to the effects of COVID-19, this uncertainty
was due to a variety of factors including the accelerated pace of global inflation, soaring resource prices triggered by the
prolonged Ukraine crisis, tight supply of components and parts such as semiconductors, and sharp fluctuations inforeign currency exchange rates. By geographic region, the U.S. economy exhibited a recovery trend on the back ofsteady consumer spending. In contrast, economic conditions throughout Europe were generally weak. In Asia, China’s
economy remained firm despite significant restrictions on
economic activities owing to the government’s decision to adopt azero-corona policy. On the domestic front, Japan witnessed amodest economic recovery.

NET SALES(Millions of yen, %)87,368In each of the major markets in which the Star Micronics Group
operates, demand for POS printers was strong especially in the
U.S. At the same time, overseas demand for the Group’s mainstay
machine tools remained generally high with firm demand also inJapan.
Under these circumstances, the Star Micronics Group reported net
sales of ¥87,368 million for 2022, up 35.7% compared with theprevious year. This was largely due to the substantial increase insales of machine tools. From a profit perspective, operating
income climbed 87.8%, to ¥13,925 million owing mainly to thesubstantial jump in sales. Net income attributable to owners of the64,36018,712
17,717
15,138
12,791+43.4%

21,713+37.1%

17,540’21
1Q

Annual Report 2022 STAR MICRONICS CO., LTD.

22,405+26.5%

parent amounted to ¥10,299 million, up 79.4% year on year.

06

25,710+37.4%

’22
2Q

3Q

4Q

02 Business Overview
In the Machine Tools Segment, sales of CNC automatic lathes jumped significantly amid brisk global demand for capital
investment. By geographic region, sales were strong across a wide range of industries centered on the medical-related
sector in the U.S. market. In the European market, sales were robust mainly in automotive-related industries.
Accordingly, sales rose significantly in each market. Despite signs of a cautious approach toward capital investment in
China over the latter half of the year, sales in the Asian market increased. This was mainly due to the ongoing high levelof sales mainly in automotive-related industries. With signs of a recovery across a wide range of industries, sales in thedomestic market increased substantially. This was despite the delay in the automotive-related recovery in Japan.
As a result of each of the aforementioned factors, both sales and profits increased substantially. In specific terms, sales
grew 42.3% compared with the previous year to ¥69,409 million. Operating income jumped 78.6% year on year to¥12,249 million.
Turning to the Special Products Segment, despite the impact of factors such as delays in the supply of products
attributable to shortages in the procurement of components and parts as well as disruptions to logistics, sales of POS
printers increased. In addition to the ongoing period of favorable market conditions, which reflected continued brisk
mPOS demand in each market, this increase in sales was largely due to the impact of the yen’s depreciation. Looking at
trends by geographic region, sales in the U.S. market increased substantially. While delays in the supply of products had
a negative effect, this was largely attributable to the impact of the yen’s depreciation. In the European and domestic
markets, conditions were favorable; however, European and domestic sales decreased due to delays in the supply of
products.
As a result, both sales and profits grew. In specific terms, sales increased 15.3% compared with the previous year, to¥17,959 million. Operating income grew substantially climbing 64.5% year on year, to ¥3,754 million.

03 Outlook for the Following Year
Looking ahead, conditions throughout the global economy are expected to remain uncertain. In addition to ongoing
concerns surrounding geopolitical risks where no end is in sight, including the crisis in Ukraine, there are anxieties
toward the economic slowdown caused by inflation and trends in energy prices which continue to over at a high level. In
Japan, the impact of volatile foreign currency exchange rates also continues to be a major cause for concern.
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 an upswing in sales
as order backlogs clear in Europe and the U.S., this forecast decline is due to concerns surrounding a downturn in capital
investment demand triggered by the slowdown in economic conditions. In the Special Products Segment, sales areprojected to stall in the U.S., but remain firm in the European
market. Taking into account these and other factors including the

NET SALES AND OPERATING INCOME

impact of foreign currency exchange rates, sales in this segment(Millions of yen)

are forecast to remain at the same level as the year under review.
projecting a downturn in consolidated results in the coming year.
64,360operating income is forecast to decline 24.6%, to ¥10,500 million

’19

’20

be ¥130.

NET SALES

’21

’22

10,500exchange rate will be ¥125 and the yen/Euro exchange rate will

7,415

Forecasts are based on the assumptions that the yen/U.S. dollar

2,173

21.3%, to ¥8,100 million.

5,817

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

13,92545,671compared with 2022, to ¥79,500 million. On a year-on-year basis,

60,652In specific terms, we expect a decrease in net sales of 9.0%

79,50087,368Taking into account the aforementioned factors, we are’23(target)OPERATING INCOME

Annual Report 2022 STAR MICRONICS CO., LTD.

07

04 About the Medium-Term Management Plan
The Star Micronics Group formulated its Medium-Term
Management Plan as part of a review of its Corporate
Philosophy, Purpose, Management Policy, and Action
Guidelines to empower employees to make decisions andact autonomously as we seek to become a company thatgrows sustainably together with society. At the same time,
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.
Positioning the mPOS and food delivery markets as aprincipal area of operations, the Star Micronics Group will
work to further 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 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.
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.
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.
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 first year, 2022, operating cash flow, consolidated annual operating income per employee, ROE, the ratioof R&D expenses to net sales, and non-consolidated annual education and training outlays per employee came in at ¥7.5
billion, ¥8.37 million, 15.4%, 2.3%, and ¥89,084, 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.

08

Annual Report 2022 STAR MICRONICS CO., LTD.

05 Corporate Governance and Shareholder Returns
The Board of Directors of the Company consists of two internal directors and four outside directors, and thus the outside
directors already account for the majority. Star Micronics has also put in place the non-mandatory Nomination andCompensation Committee as an advisory body to the Board of Directors to enhance the transparency and objectivity ofprocedures 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.
Under its shareholder return policy, the Company has decided to target a consolidated total payout ratio of at least 50%,
including the repurchase of its own shares, with the aim of paying a stable annual dividend of at least ¥60 per share.
Taking into consideration its consolidated business performance for the year under review and the Company’s record
high net sales and net income attributable to owners of the parent, Star Micronics recognizes the critical need to further
upgrade and expand the return and distribution of profits to shareholders including dividends. As far as its year-end
dividend is concerned, the Company has therefore decided to pay a period-end dividend of ¥40 per share, comprising an
ordinary dividend of ¥30 per share and a special dividend of ¥10 per

CASH DIVIDENDS PER SHARE

share. Together with the interim dividend of ¥30 per share, the Company(Yen)

has decided to pay a record-high annual dividend of ¥70 per share.

70
52

54

56

58

58

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.
Looking ahead, Star Micronics plans to page an interim and period-end
dividend of ¥30 per share for an annual dividend of ¥60 per share for2023.
In working toward achieving its established goals, the Star Micronics

2/’18 12/’18 12/’19 12/’20 12/’21 12/’22

CASH DIVIDENDS PER SHAREGroup kindly requests the continued support and understanding of all
stakeholders.
March 2023

Mamoru Sato

Representative Director, President and CEO

Annual Report 2022 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 thedriving force behindcommercialization of theservice business

Generate continuous
cash as a core business

Evolve as a promising
mainstay third pillarof business

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

10

Annual Report 2022 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 2022 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 2022, the first year of theMedium-Term Management Plan, and plans for 2023 are presented as follows:First Medium-Term Management
Plan 2022-2024

Building a foundation
for change

2022

2023

Progress

Plans

SpecialProducts
Segment• Make deeper inroads into the mPOS/ fooddelivery market• Uncover peripheral areas• Strengthen software technologies throughvarious measures including M&As

• Formulated plans for peripheral areas• Commenced search activities• Commence new product sales andfurther promote planning• Expand production items by new EMS
partners

MachineTools
Segment• Strengthen the production system• Delve into hardware technologies• Promote the adoption of software
technology• Completed work to expand production
capacity at the Company’s Dalian factory• Promoted the development of hardware
technology• Promoted the development of processing
estimation support software• Complete work to expand production capacity
at the Company’s factory in Thailand• Promote the development of hardware
technology• Promote the development of processing
estimation support software

New
Business• Uncover and commercialize new segments
mainly through M&As

• Explored new segments by utilizing theCompany’s own resources and throughcollaboration with other companies• Explored new segments by utilizing theCompany’s own resources and throughcollaboration with other companies

SystemMaintenance• Strengthen the management platform• Strengthen R&D structures and systems• Reform human resource systems• Strengthen business management
systems• Formulated Development Headquartersplans• Put in place a new human resource
structure and systems• Strengthen business management systems• Establish the Development Headquarters• Put in place a new human resource
structure and systems

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

KPI

Target(Next three-year
cumulative/average)

2022 Actual

2023 Forecast

Operating cash flow

¥20.0 billion– ¥25.0 billion(cumulative)¥ 7.5 billion

Operating income per employee(consolidated)¥6.00 million(average)¥8.37 million¥6.36 million

ROE

10.0% or more
(average)

15.4%

11.1%

Ratio of R&D expenses to
net sales

5.0%(average)

2.3%

2.5%

Education and training outlays
per employee (non-consolidated)¥100,000*(average)¥89,084¥86,782¥6.6 billion(cumulative ¥14.1 billion)* In order to further invest in human resources and enhance corporate value, the target of education and training outlays per employee has changed.

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Annual Report 2022 STAR MICRONICS CO., LTD.

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

2022 Actual

2023 Forecast

ROA

20.0%

26.4%

20.0%

Operating income ratio

18.0%

20.9%

16.9%

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

2022 Progress
1. Took preparatory steps to commence sales of peripheral equipment and began (initiated) further search activities
2. Undertook a renewal of the Star Micronics Cloud Service (SMCS) and bolstered development capabilities
3. Promoted the optimization of production and logistics through reorganization of EMS partners

2023 Plans
1. Commence sales of peripheral equipment and put in place additional plans for new products
2. Promote stable SMCS operations and bolster development capabilities
3. Expand production items by new EMS partners[ Machine Tools Segment ]First Medium-Term Management Plan 2022-2024 KPIs
Target(Next three-year average)

2022 Actual

2023 Forecast

ROA

15.0%

19.6%

15.0%

Operating income ratio

15.0%

17.6%

15.7%

Principal Initiatives
1. Globally expand the Company’s Solution Center
Establish solution centers in Europe and Asia, building a user support system in collaboration with Japan
2. Enhance 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

2022 Progress
1. Took preparatory steps to commence operations at the Asia Solution Center
Formulated Europe Solution Center plans
2. Promoted the development of mechanical technology and processing estimation support software; took preparatory steps toprovide digital content
3. Expand production capacity through three manufacturing bases(1) Undertook a large-scale renovation of domestic factories (commenced the formulation of new factory plans; essentially in linewith plans)(2) Increased floor area at the Company’s Dalian factory (completed in line with plans)(3) Upgraded and expanded facilities and equipment at the Company’s factory in Thailand (essentially in line with plans)

Annual Report 2022 STAR MICRONICS CO., LTD.

13

2023 Plans
1. Commence operations at the Asia Solution Center
Commence construction of Europe Solution Center
2. Promote the development of mechanical technology and processing estimation support software; commence to provide digitalcontent
3. Expand production capacity through three manufacturing bases(1) Undertake a large-scale renovation of domestic factories (commenced demolition work at certain existing factories)(2) Upgrade and expand facilities and equipment at the Company’s factory in Thailand (scheduled to be completed)[ New Business ]Create new business value that contributes to improve business efficiency of customers
Principal Initiatives Develop and commercialize new business proposals mainly through the use of M&A’s
Target 2024: Net sales of ¥3.0 billion, operating income of ¥0.3 billion

New Business Domains
Business Domain

Value Provided/Business Process2022 Progress

Provide systems to streamline theprocesses of small and medium-sized
warehousing and distribution operations

Considered and put forward new businessproposals, and approached potential
business partners

Store DX

Provide hardware and software (systems)
that streamline store operations

Promoted activities aimed at including
Smart Solution Technology, Inc. (SST) in
the Company’s scope of consolidation

Production DX

Provide new services related to the
Machine Tools Segment

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

Logistics DX

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 ¥21 billion to growth investments as a part of efforts to carry out the aforementioned principal
initiatives and ¥9 billion or more to address certain concerns including the return of profits to shareholders.
Fund Allocation Plan (2022–2024)

Growthinvestment

Operating cash flow

¥20.0–25.0 billion

Cash on hand

¥5.0–10.0 billion

Cash allocation
resources
About ¥30.0
billionShareholder
returns, etc.

New businessdevelopment costs¥5.0 billion

Capital investment(organic)¥6.0 billion

Investment inlarge-scalerenovation ofdomestic factories¥10.0 billion

Total returns andoptimized capitalefficiency¥9.0 billion
or more(dividends + share buybacks)

In putting in place and carrying out its shareholder return policy, Star Micronics is targeting a total payout ratio of 50% ormore including the purchase of own shares based on a stable dividend of ¥60 or more per share.

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Annual Report 2022 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 withtablet terminals, smartphones, and other devices has been expanding.
mPOS products are available under the mCollectionTM brand, which
not only includes printers but also such peripheral devices as cash
drawers. Through the Special Products Segment, the Company alsooffers Star Micronics Cloud Services (SMCS), a cloud-based service
for printers.

SPECIAL PRODUCTSSALES BY SEGMENT

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

(Millions of yen, %)20.9%

17,95917.9%15,57012,652

20.6%

12,542

12.9% 13.2%

11,721
2,266

’18*

’19

’20

’21

3,754

2,283

1,614

1,546

’19

’20

’18*

’22

14.7%

’21

’22

OPERATING INCOMEOPERATING INCOME RATIOBusiness Environment and Results in 2022
As far as POS printers in 2022 are concerned, despite the impactof factors such as delays in the supply of products attributable toshortages in the procurement of components and parts as well as
disruptions to logistics, sales increased. In addition to the ongoing
period of favorable market conditions, which reflected continued
brisk mPOS demand in each market, this increase in sales waslargely due to the impact of the yen’s depreciation. Looking at

SPECIAL PRODUCTS SEGMENT SALESBY GEOGRAPHICAL REGION(Billions of yen)

18.0

trends by geographic region, sales in the U.S. market increased

15.6

substantially. While delays in the supply of products had anegative effect, this was largely attributable to the impact of the
yen’s depreciation. In the European and domestic markets,
conditions were favorable. Sales, however, decreased owing todelays in the supply of products.
Accounting for each of the aforementioned, net sales in theSpecial Products Segment increased 15.3% compared with theprevious year, to ¥17,959 million (US$135,030 thousand). From a
profit perspective, operating income grew 64.5% year on year, to

12.7

12.5

6.2

5.6

3.9
0.9
1.6
’18*

3.2
1.0
2.8
’19

THE AMERICAS

11.7

8.5

10.9

6.4
2.7
0.9
1.8
’20
EUROPE

3.9
0.9
2.2

3.8
1.1
2.1

’21

’22
ASIA

JAPAN

¥3,754 million (US$28,225 thousand).
* The consolidated fiscal period for the fiscal period ended December 31, 2018 isbased on and presented for a 10-month period for the Company and consolidated
subsidiaries in Japan and a 12-month period for overseas consolidated subsidiaries.

Annual Report 2022 STAR MICRONICS CO., LTD.

15

Outlook for 2023 and Business Strategies
In the Special Products Segment, sales are projected to stall in the U.S., but remain firm in the European market in 2023.
Taking into account these and other factors including the impact of foreign currency exchange rates, sales in this segment
are forecast to remain at the same level as current fiscal year.
In its mainstay mPOS lineup, Star Micronics will launch sales of a new label printer targeting the food delivery sector in
mid-2023. As a printer that can accommodate linerless label paper, this new product is environmentally friendly. Unlike
conventional printers, this new product also supports strong adhesive linerless labels. With this initiative, Star Micronics
aims to increase further its market share in the growing label printer market.
From a business results perspective, net sales are projected to come in at ¥17,740 million, down 1.2% compared with thecurrent fiscal year. On the earnings front, operating income is forecast to decline 20.1% year on year, to ¥3,000 million.

Sales Volume of POS Printers by Region
2021

POS printer mC-Print3

360

341

-5.3%

Europe164135-17.7%

Asia

48

50

4.2%

Japan

61

56

-8.2%

Total

634

583

-8.0%

Food delivery

Small andmedium-sized stores

Restaurant

Cloud server
Order

Receipt
mobile POS(mPOS)
Electronicmoney

Order slip

Cash

Delivery service

Label Printer mC-Label3 released!
Added to the mCollection of peripheral equipment for stores, Star
Micronics will commence sales of the thermal 3-inch label printer,
mC-Label3, in Japan and overseas from mid-2023. Label solutions linked
to store systems are indispensable in the food delivery, takeout, andrelated scenes. While Star Micronics has to date sold printers that arecompatible with weak-adhesive linerless label paper, the Company hasreceived comments that stronger adhesives are required depending on theusage scene. The mC-Label3 supports strong adhesive linerless labels,
which have been difficult to handle with small printers, while realizing
high-speed printing. By supporting various types of paper, the mC-Label3
can be used for a wide range of applications, such as price tags andshipping labels, not to mention product labels. The mC-Label3 will be soldin the Americas, Europe, and Asia, including Japan, with the aim of further
increasing market share in the growing label printer market.

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Annual Report 2022 STAR MICRONICS CO., LTD.

Change2022

The Americas

mobile POS (mPOS)

Card(Thousands of units)

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.

MACHINE TOOLS

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

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

(Millions of yen, %)19.0%

69,40979.4%

49,338

17.6%
14.1%

48,79044,921

9,390

33,95014.1%

12,249

7.9%
6,858

6,333
2,697
’18*1

’19

’20*2

’21*2

’22

’18*1

’19

’20*2

’21*2

’22

OPERATING INCOMEOPERATING INCOME RATIOBusiness Environment and Results in 2022
In the Machine Tools Segment, sales of CNC automatic lathes jumped significantly amid brisk global demand for capital
investment in 2022. By geographic region, sales were strong across a wide range of industries centered on the
medical-related sector in the U.S. market. In the European market, sales were robust mainly in automotive-relatedindustries. Accordingly, sales rose significantly in each market. Despite signs of a cautious approach toward capital
investment in China over the latter half of the year, sales in the Asian market increased. This was mainly due to the ongoinghigh level of sales mainly in automotive-related industries. With signs of a recovery across a wide range of industries, sales
in the domestic market increased substantially. This was despite the delay in an automotive-related recovery in Japan.
Accounting for these factors, net sales in the Machine Tools
Segment climbed 42.3% compared with the previous year, to¥69,409 million (US$521,872 thousand) while operating income
jumped 78.6% year on year, to ¥12,249 million (US$92,098

MACHINE TOOLS SEGMENT SALESBY GEOGRAPHICAL REGION(Billions of yen)

thousand).
*1 The consolidated fiscal period for the fiscal period ended December 31, 2018 isbased on and presented for a 10-month period for the Company and consolidated
subsidiaries in Japan and a 12-month period for overseas consolidated subsidiaries.
*2 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.

69.4
49.3
10.7

44.9
11.4

18.4

13.1

33.9
7.6
7.8

14.3
6.0

14.5
6.0

14.7

’18*1

’19

’20*2

THE AMERICAS

17.9

48.8
9.2

20.8

13.6
20.2

23.9

3.8 5.7
’21*2

6.8
’22

EUROPE

ASIA

JAPAN

Annual Report 2022 STAR MICRONICS CO., LTD.

17

Outlook for 2023 and Business Strategies
Sales in the mainstay Machine Tools Segment are forecast to decline in 2023. Despite expectations of an upswing in sales
as order backlogs clear in Europe and the U.S., this forecast decline is due to concerns surrounding a downturn in capital
investment demand triggered by the slowdown in economic conditions.
Looking ahead, Star Micronics will undertake the necessary preparations to commence operations at solution centers inShanghai and Switzerland while working to expand production capacity by bolstering its three production bases. The
Company will also strengthen its sales structure by enhancing before- and after-sales services in Japan, Europe, and Asia.
As far as business results are concerned, net sales in the Machine Tools Segment are forecast to decline 11.0% comparedwith the year under review, to ¥61,760 million. Operating income is anticipated to decrease 20.8% year on year, to ¥9,700
million.

CNC Swiss-Type
Automatic Lathe SL-10

A New Product, the SD-26, Draws Attention
at the Japan International Machine Tool Fair JIMTOF2022
Star Micronics announced details of the SD-26, a new modeland operability during setup and other operations, including

Swiss type automatic lathe capable of up to 26-diameterreconfigured tool post layouts as well as various software

machining in September 2022. The SD-26 is available in 4

options to support operator operations.

types allowing the user to select the most suitable tool post
specification according to the workpiece. The type S has a

Exhibited for the first time in Japan at JIMTOF2022, the

2nd B-axis mechanism that can provide swivel control for theSD-26 type E attracted considerable praise. Customers werededicated tool unit and can be fitted with various types ofable to experience not only the machining capabilities of thistool units, including the industry’s first twin-thread whirling

new product, but also its workability and operability.

unit. All types offer various features to enhance workability

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Annual Report 2022 STAR MICRONICS CO., LTD.

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, a dedicated NC school room for machine operation training, evaluation
testing and measurement rooms, reception rooms equipped with a web conference system, a conference room that canaccommodate approximately 100 people, and a sales office for the Machine Tools Segment.
In September 2022, the Company held a new product press conference for the media for the first time in three years, aswell as a new product preview for distributors in Japan. While work on the Center was completed in 2020, Star Micronics
refrained from holding public events due to the pandemic. Accordingly, this was the first time to invite a large audiencesince the Center’s completion.
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

Annual Report 2022 STAR MICRONICS CO., LTD.

19

In order to expand its solution capabilities globally, Star Micronics will open solution centers equipped with similar featuresat Star Micronics AG (SMAG) in Zurich, Switzerland and Shanghai Xingang Machinery Co., Ltd. (Shanghai Xingang) in
Shanghai, China to service the European and Asian markets, respectively. Plans are in place to employ each center as acore base for sales activities in each market.

Shanghai Xingang Machinery Co., Ltd.
In relocating and expanding Shanghai Xingang, a wholly-owned sales subsidiary in China, Star Micronics has
decided to establish the Asian Solution Center.
Established in the Free Trade Zone in Shanghai, China in December 2002, Shanghai Xingang engages insales activities in the Chinese domestic market. In response to the recent strong demand in the Asianmarket, Star Micronics will establish the Solution Center in conjunction with the relocation of its sales
subsidiary to further strengthen the sales capability of machine tool products throughout Asia, and will
utilize the Center as a base for providing a full range of services and solutions. The Solution Center isscheduled to open in 2023.

Image of the showroom

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 aworkshop area to hold sessions for sales representatives. In this manner, this new facility will serve as asolution center to help showcase the Group’s operations in Europe. By providing before-sales services andfurther reinforcing its ability to propose various applications, Star Micronics is looking to expand its market
share in Europe. Completion of the new building is scheduled for 2024.

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Annual Report 2022 STAR MICRONICS CO., LTD.

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.

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

2022 Progress• Set a goal reducing greenhouse gas emissions• Commenced disclosure from 2023 based on the recommendations of the TCFD
• Established the Sustainability Committee

Star Micronics established the Sustainability Committee in 2022, the first year of the Medium-Term Management Plan. In
addition to overseeing the Group’s promotion structure and systems, the Committee works to strengthen initiatives aimed
at resolving issues that impede society’s medium- and long-term sustainable growth from each of the ESG perspectives.
From 2023, Star Micronics also initiated steps to disclose information based on the recommendations of the Task Forceon Climate-related Financial Disclosures (TCFD).

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.

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%

2018

2019

13,684

14,480

2020
9,571

2021

2022

11,62912,20540%2050 Target
Carbon Neutral

20%

0%

2013

2030

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

2050

Annual Report 2022 STAR MICRONICS CO., LTD.

21

Environmentally Friendly ProductsStar Micronics believes that reducing both space and energy consumption is one way to consider the environment. The
Company is actively promoting energy- and resource- saving designs while extending service life by leveraging
technologies that are core to compact precision machining and assembly to ensure that its products are smaller, thinner,and help reduce environmental impact during the usage phase. Furthermore, Star Micronics is actively promoting thedevelopment of an environmentally friendly lineup including lead-free products and those that comply with the WEEE &RoHS directives.
In the Special Products Segment, Star Micronics has set up its own eco-profile and publishes details for each model. In the
Machine Tools Segment, the Company has established its own environmental standards. Models that meet the criteria are
identified with an ECO mark as a Star Environmental Standard compliant model.

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.

[ Governance ]The Group established the Sustainability Committee as a body to make decisions on important matters related to climatechange. Chaired by the representative director, president and CEO, and comprised of full-time directors and executive
officers, the Committee identifies material sustainability issues, including climate change, sets targets for the resolutionof these issues, and promotes Groupwide initiatives. Details of decisions made by the Sustainability Committee as well as
counter and related measures are disseminated to each division and Group company through the subordinate
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.

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Annual Report 2022 STAR MICRONICS CO., LTD.

Environmental Management Framework
Board of Directors
Reporting

Reporting

Sustainability Committee
Policy and plan
presentation

Risk
coordination

Reporting

Environmental Sub-committee
Promotion

Risk Management Committee

Promotion

Reporting

Reporting

Divisions and Group Companies

Environmental Management Framework Meeting Structure
Meeting structure

Main role

Composition

Frequency

2022 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)

4 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)

5 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

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23

[ 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

Transition Risk
Physical risks
Opportunities

24

Item

Financial Impact
1.5 ˚C

4 ˚C

Countermeasures

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 2022 STAR MICRONICS CO., LTD.

[ 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)
16.0

15.3

– 20%

(Actual)
12.2

12.0

2030 Target
Reduce by 46%(compared with 2013)
8.3

8.0

2050 Target
Carbon Neutral

4.0

0.0

2013

2022
(Actual)

2030

2050

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

Annual Report 2022 STAR MICRONICS CO., LTD.

25

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

2022 Progress• Increased the percentage of women in management (increased from 1.8% to 5.9%)• Strengthened education and training programs• Pushed forward with steps to establish a new human resource structure and systems

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 2022, the Company
pushed 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• Putting in place a framework for a new human resource
structure and systems• 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

26

Strategy

Progress and Plans• Enhancing women’s empowerment (KPI: 10% or more
women in managerial positions by 2030)• Fostering a corporate climate and changing awareness(manager training, developing flexible and diverse working
styles, etc.)• Increasing the percentage of women in management(increased from 1.8% to 5.9% (as of the end of Dec 2022))• Appointing female directors• Introducing training during maternity leave (strengthening
career support during maternity leave)

Annual Report 2022 STAR MICRONICS CO., LTD.

Ratio of Female Workers (Non-consolidated)
2018

(%)

2019

2020

2021

2022

Employees

19.6

19.9

19.5

19.8

20.3

Managers

1.1

1.1

1.1

1.8

5.9

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• Upgrading and expanding self-development support
systems (encouraging the acquisition of technicalqualifications, providing online study assistance, etc.)• Introducing DX-related training (reskilling)• Introducing cross-border learning (joint training with othercompanies); (developing next generation leaders)• Strengthening health-related training (mindfulness, healthseminars for women, dental oral care seminars, etc.)

Expenses Allocated for Education and Training (Non-consolidated)
2018

2019

2020

2021

2022

Education and training
outlays per employee (Yen)¥18,726¥27,179¥37,462¥52,731¥89,084

Total training expenses(Thousands of yen)

¥9,560¥13,209¥16,858¥22,780¥40,266

Annual Report 2022 STAR MICRONICS CO., LTD.

27

SUSTAINABILITYCORPORATE GOVERNANCE
Material issues

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

2022 Progress• Disclosed details of a skills matrix for directors• Strengthened the diversity of the Board of Directors (appointed female directors)• Enhanced 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 three 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.
On February 9, 2021, the Company established the Nomination and Compensation Committee as an arbitrary advisory body to theBoard 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.

28

Annual Report 2022 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)Selection/
Dismissal/
Monitoring

Cooperate

ReportAudit OfficeInstruct

ReportPresident andCEOManagement
Council

AdviseReportReportReportRisk Management Committee

Nomination andCompensation
Committee

Supervision/
Consultation

Sustainability Committee

ReportReportAudit

Directors
who do not serve concurrentlyas Audit and Supervisory Committee Members

Audit and Supervisory
Committee Members

Internal Audit

Instruct

Department incharge ofcompliance

Executive
Officers
ReportEducation/
Awareness
Training

Instruct

ReportInstruct

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 23, 2023.
Turning to the matter of stock compensation, an amount is allocated in line with the status and position of each Director

Annual Report 2022 STAR MICRONICS CO., LTD.

29

(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)

221

123

54

—

44

44

3

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

—

—

—

—

—

—

—

Outside Directors andAudit and Supervisory
Committee Members

25

25

—

—

—

—

5

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.
3. Star Micronics has paid ¥55 million in total to one Director of the Board upon their retirement. These payments are for severance of a retirement benefit
allowance for Directors that was discontinued pursuant to a resolution of the Ordinary General Meeting of Shareholders for the 82nd Period held on
May 24, 2007.

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, the Company is working to ensure thoroughgoingcompliance through various measures. This includes putting in place rules and organizations. In addition, a department
dedicated to corporate social responsibility (CSR) spearheads our compliance activities. This department plays a central
role in providing reminders and education on compliance to the Group’s Directors, Executives and Employees, and ischarged 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 forensuring the reliability of its financial reporting, as stipulated in the Financial Instruments and Exchange Law of Japan.

30

Annual Report 2022 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
Directors who do not serve
concurrently as Audit andSupervisory Committee
members

Audit/Supervise

Audit and Supervisory
Committee

Opinion

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 2022 STAR MICRONICS CO., LTD.

31

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

Dec. 2022

Dec. 2021

Dec. 2020

Net sales¥87,368¥64,360¥45,671

Cost of sales

53,526

41,75630,349Selling, general and administrative expenses

19,917

15,18913,149Operating income

For the year:

13,925

7,415

2,173

Other income (expenses) – net

287

549

715

Income before income taxes

14,212

7,964

2,888

Income taxes

3,823

2,174

1,131

Net income (loss) attributable to noncontrolling interests

90

50

25

Net income attributable to owners of the parent

10,299

5,740

1,732

Net cash provided by operating activities

7,523

9,601

6,843

Net cash (used in) provided by investing activities(2,633)741(1,253)

4,890

10,342

5,590(4,624)(7,559)(2,136)

Basic net income¥271.14¥150.83¥ 49.07

Diluted net income

270.01142.38

42.46

Cash dividends applicable to the year

70.00

58.00

58.00

Current assets¥80,073¥65,707¥54,893

Net property, plant and equipment

15,697

14,30914,272

Total assets

99,53982,361

71,622Long-term liabilities

1,347

1,128

1,266

Total equity

73,08861,72849,822Highest¥1,858¥1,893¥1,720

Lowest

1,318

1,416

945

Equity ratio (%)

73.0

74.1

68.2

Return on equity (%)

15.4

10.4

3.5

Dividend payout ratio (%)

25.8

38.5

118.2

Dividend on equity (%)

4.0

3.9

4.1

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.

32

Annual Report 2022 STAR MICRONICS CO., LTD.

Millions of yen (Except for per share data)

Dec. 2019

Dec. 2018

Feb. 2018

Feb. 2017

Feb. 2016

Feb. 2015

Feb. 2014

Feb. 2013¥60,652¥65,940¥60,773¥48,937¥54,458¥50,958¥43,482¥37,858

38,33040,47838,51130,82533,55831,35528,047

24,683

16,50515,75016,052

14,505

15,165

14,126

12,82911,595

5,817

9,712

6,210

3,607

5,735

5,477

2,606

1,580

(485)

(1,029)

149

224

(383)

605

40

2,140

5,332

8,683

6,359

3,831

5,352

6,082

2,646

3,720

1,486

1,764

487

572

1,530

1,285

1,400

1,330

(208)

124

91

78

101

101

103

90

4,054

6,795

5,781

3,181

3,721

4,696

1,143

2,300

5,124

6,089

8,923

5,338

3,107

4,326

2,597

483

(3,150)(2,950)(5,013)813(1,074)(2,501)(2,455)(1,908)

1,974

3,139

3,910

6,151

2,033

1,825

142

(1,425)(3,015)(3,766)(2,926)139(2,180)(1,568)(1,394)(1,202)¥113.72¥186.04¥155.68¥ 81.77¥ 87.98¥111.36¥ 27.17¥ 54.66

99.34

163.42136.90

74.69

87.69

111.05

27.14

56.00

54.00

52.00

48.00

46.00

44.00

34.00

30.00

¥56,830¥59,914¥59,635¥53,172¥50,367¥50,533¥41,233¥35,827

15,542

15,521

14,076

12,926

14,36015,30914,327

13,47676,39479,93577,36368,351

67,82870,26159,30352,564

9,675

10,046

9,697

9,935

2,021

617

524

303

50,79049,31247,44743,75550,20051,90345,69840,710Yen¥1,893¥2,270¥2,480¥1,770¥2,238¥1,885¥1,422

¥988

1,258

1,332

1,588

1,023

1,125

1,115

857

647

65.2

60.3

60.1

62.8

72.7

72.4

75.5

76.1

8.3

14.3

12.9

6.9

7.4

9.8

2.7

6.0

49.2

29.0

33.4

58.7

52.3

39.5

125.1

54.9

4.1

4.1

4.3

4.1

3.9

3.9

3.4

3.3

Annual Report 2022 STAR MICRONICS CO., LTD.

33

Management’s Discussion and Analysis

OVERVIEW (Years ended December 31, 2022 and 2021)
Business Environment

Cash Dividends per Share(Yen)

Looking at 2022, global economic conditions remained
uncertain. In addition to the effects of COVID-19, thisuncertainty was due to a variety of factors including theaccelerated pace of global inflation, soaring resource
prices triggered by the prolonged Ukraine crisis, tightsupply of such components and parts as semiconductors,
and sharp fluctuations in foreign currency exchange rates.
By geographic region, the U.S. economy exhibited arecovery trend on the back of steady consumer spending.
In contrast, economic conditions throughout Europe weregenerally weak. In Asia, China’s economy remained firm
despite significant restrictions on economic activities
owing to the government’s decision to adopt azero-corona policy. On the domestic front, Japan
witnessed a modest economic recovery.

Net
Sales


(Millions of yen)

2021

2022

Change (%)¥64,360¥87,368

35.7

In each of the major markets in which the Star Micronics
Group operates, demand for POS printers was strong
especially in the U.S. At the same time, overseas demand
for the Group’s mainstay machine tools remained generallyhigh with firm demand also in Japan.

Operating
Income(Millions of yen)

2021

2022

Change (%)¥7,415¥13,925

87.8

Operating income came in at ¥13,925 million owing mainly
to the increase in sales of machine tools.

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

2021

2022

Change (%)¥5,740¥10,299

79.4

Net income attributable to owners of the parent
amounted to ¥10,299 million largely reflecting the increasein net sales.

34

Annual Report 2022 STAR MICRONICS CO., LTD.

2021

2022

Change (yen)

¥ 58

¥70

¥12

The annual cash dividend for the year under review was¥70 per share, up ¥12 yen per share compared with theprevious year. As far as the period-end dividend isconcerned, Star Micronics also paid a special dividend of¥10 per share.

Total Assets
(Millions of yen)

2021

2022

Change (%)¥82,361¥99,539

20.9

Amid foreign currency exchange rates affecting theconsolidated balance sheet as a whole as of the end ofyear under review, total assets increased compared withthe end of the previous year owing mainly to the upswing
in such accounting line items as inventories and tradenotes and accounts receivable.

Free
Cash Flows(Millions of yen)

2021

2022

Change (%)¥10,342¥4,890(52.7)

Despite the increase in income before income taxes, free
cash flows came in at ¥4,890 million largely reflecting theincrease in inventories.
Free cash flows = Operating cash flows + Investing cash flows

CapitalExpenditures(Millions of yen)

2021

2022

Change (%)¥1,926¥3,39076.0

Capital expenditures amounted to ¥3,390 million. Thislargely included expenditure on equipment to expand
capacity in the Machine Tools Segment.

Net Sales by Region(Millions of yen)

2021

2022

Change (%)

Japan
USA
China
Germany¥ 8,072
17,315
14,543
6,076¥ 9,037
27,904
17,112
8,743

12.0
61.2
17.7
43.9

Others

18,354

24,572

33.9

INCOME ANALYSIS

thousand), an upswing of ¥11,770 million, or 28.2%,
compared with the previous year. On this basis, grossprofit climbed ¥11,238 million, or 49.7%, year on year,to ¥33,842 million (US$254,451 thousand).
Selling, general and administrative (SG&A) expenses
were ¥19,917 million (US$149,752 thousand), up ¥4,728
million, or 31.1%, compared with the previous year.
Taking into account the aforementioned factors,
operating income surged ¥6,510 million, or 87.8%,
year on year, to ¥13,925 million (US$104,699 thousand).

Achieved record high net sales and substantial
increases in both revenue and earnings
Star Micronics reported record high consolidated net
sales of ¥87,368 million (US$656,902 thousand) in 2022,
up ¥23,008 million, or 35.7%, compared with theprevious year. Looking at 2022, global economic
conditions remained uncertain. In addition to the effects
of COVID-19, this uncertainty was due to a variety offactors including the accelerated pace of global inflation,soaring resource prices triggered by the prolonged
Ukraine crisis, tight supply of such components andparts as semiconductors, and sharp fluctuations inforeign currency exchange rates. By geographic region,
the U.S. economy exhibited a recovery trend on the backof steady consumer spending. In contrast, economic
conditions throughout Europe were generally weak.
In Asia, China’s economy remained firm despite
significant restrictions on economic activities owing to
the government’s decision to adopt a zero-corona policy.
On the domestic front, Japan witnessed a modest
economic recovery. Under these circumstances, demandfor POS printers was strong especially in the U.S. in eachof the major markets in which the Star Micronics Group
operates. At the same time, overseas demand for theGroup’s mainstay machine tools remained generally highwith firm demand also in Japan.
The cost of sales came to ¥53,526 million (US$402,451

Achieved record high net income attributable toowners of the parent
In 2022, other income – net came to ¥287 million(US$2,158 thousand), down from ¥549 million in theprevious year. In the year under review, Star Micronics
incurred a foreign exchange loss – net of ¥76 million(US$571 thousand).
As a result, income before income taxes amounted to¥14,212 million (US$106,857 thousand), an increase of¥6,248 million, or 78.5%, compared with the previous
year. Net income attributable to owners of the parent after
deducting income taxes and net income attributable tononcontrolling interests came to ¥10,299 million(US$77,436 thousand), an upswing of ¥4,559 million,
or 79.4%, year on year.
Basic net income per share was ¥271.14 (US$2.04)
and diluted net income per share was ¥270.01 (US$2.03).

Operating Income andOperating Income Ratio

Net Income per Share

Cash Dividends per Share

(Billions of yen, %)

(Yen)

(Yen)

15.9%

70

11.5%

2.2

’18*

’19

’20

’21

Operating Income
Operating Income Ratio

’22

’18*

142.38150.83

7.4

42.46
49.07

4.8%
5.8

99.34
113.729.7

163.42186.04

13.9

9.6%

’19

’20

’21

270.01
271.14

14.7%

54

56

58

’22

’18*

’19

’20

58

’21

’22

Basic Net Income
Diluted Net Income* The consolidated fiscal period for the fiscal period ended December 31, 2018 is based on and presented for a 10-month period for the Company and consolidated
subsidiaries in Japan and a 12-month period for overseas consolidated subsidiaries.

Annual Report 2022 STAR MICRONICS CO., LTD.

35

Accounting for the payment of a special dividend,
record high annual cash dividend of ¥70 per share
Star Micronics set its annual cash dividend at ¥70(US$0.53) per share, up ¥12 per share compared withthe previous year. Taking into consideration its
consolidated business performance for the year underreview and its record high net sales and net income
attributable to owners of the parent, the Company
decided to pay a special dividend of ¥10 per share asof the end of the year for a record high annual cash
dividend in a bid to further upgrade and expand thereturn and distribution of profits to shareholders
through cash dividends. Based on the aforementioned,
Star Micronics’ consolidated total payout ratio came in at
44.6% for the year under review. Looking ahead, theCompany plans to pay an interim and year-end cash
dividend of ¥30 per share each for an annual cash
dividend of ¥60 per share for 2023.
Star Micronics has decided to target a consolidated
total payout ratio of at least 50%, including the repurchaseof its own shares, with the aim of paying a stable annual
cash dividend of at least ¥60 per share as part of its
shareholder return policy. As far as the Company’s internal
reserves are concerned, Star Micronics is committed toenhancing 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 to ensure its
sustainable growth.

FINANCIAL POSITION & LIQUIDITY
Increase in total assets on the back of robust
orders and substantial revenue growth
Total current assets stood at ¥80,073 million (US$602,053
thousand) as pf December 31, 2022, up ¥14,366 million,or 21.9%, compared with the end of the previous year.
The upswing in total current assets largely reflected
year-on-year increases of ¥2,366 million, or 8.7%, to¥29,565 million (US$222,293 thousand) in cash and cash
equivalents, ¥4,203 million, or 22.7%, to ¥22,698 million(US$170,662 thousand) in trade notes and accounts
receivable, and ¥7,264 million, or 40.8%, to ¥25,087
million (US$188,624 thousand) in inventories.
The balance of net property, plant and equipment
climbed ¥1,388 million, or 9.7%, compared with the endof the previous year, to ¥15,697 million (US$118,023

36

Annual Report 2022 STAR MICRONICS CO., LTD.

thousand) owing mainly to a year-on-year increase inmachinery and equipment of ¥1,094 million, or 5.2%,
to ¥21,979 million (US$165,255 thousand).
The balance of investments and other assets grew
¥1,424 million, or 60.7%, compared with the previous
year-end, to ¥3,769 million (US$28,338 thousand).
Accounting for each of these factors, the balance of
total assets as of the end of year under review increase¥17,178 million, or 20.9%, compared with the end of theprevious year, to ¥99,539 million (US$748,414).

Increase in liabilities owing to upswings in suchaccounting line items as payables and income
taxes payable
Total current liabilities stood at ¥25,104 million(US$188,752 thousand) as of December 31, 2022,
an increase of ¥5,599 million, or 28.7%, compared withthe end of the previous year. This increase was mainly due
to year-on-year upswings of ¥2,650 million, or 17.5%,
to ¥17,810 million (US$133,910 thousand) in payables,of ¥1,606 million, or 198.0%, to ¥2,417 million(US$18,173 thousand) in income taxes payable.
Total long-term liabilities climbed ¥219 million,
or 19.4%, compared with the end of the previous year,to ¥1,347 million (US$10,128 thousand) as of December
31, 2022. This largely reflected the year-on-year increasein the balance of long-term debt of ¥95 million, or 12.0%,
to ¥884 million (US$6,647 thousand).

Increase in equity owing to the accumulation ofretained earnings
Total equity increased ¥11,360 million, or 18.4%,
compared with the end of the previous year, to ¥73,088
million (US$549,534 thousand). Despite the impact ofsuch initiatives as the payment of cash dividends as wellas the purchase and disposal of treasury stock,
the increase in total equity was largely attributable to theyear-on-year upswing in retained earnings of ¥8,035
million, or 19.2%, to ¥49,849 million (US$374,804
thousand) and positive turnaround in foreign currencytranslation adjustments to ¥3,366 million (US25,308
thousand) from a negative balance of ¥830 million as ofthe end of the previous year.
Accounting for the increase in total assets, the equity
ratio came in at 73.0%, down 1.1 percentage points year
on year. Equity per share as of December 31, 2022
climbed ¥352.13 compared with the previous year-end,to ¥1,928.77 (US$14.50).

Total Assets

Equity and Return on Equity

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

99.5
79.9

76.4

71.6

82.4

’22

’18*

3.5%

’19

EquityROE

CASH FLOWSContinued capital expenditure and returns toshareholders on the back of ample operating
cash flow
Net cash provided by operating activities came to ¥7,523
million (US$56,564 thousand). The principal cash inflows
came from income before income taxes of ¥14,212 million(US$106,857 thousand) and depreciation andamortization of ¥2,414 million (US$18,150 thousand),
which exceeded the major cash outflows that emanatedfrom the increase in inventories of ¥5,880 million(US$44,210 thousand), income taxes – paid of ¥2,465
million (US$18,534 thousand), and increase in tradereceivables of ¥1,728 million (US$12,992 thousand).
Net cash used in investing activities came to ¥2,633
million (US$19,797 thousand). This largely reflected theprincipal cash outflow for purchases of property, plant andequipment of ¥2,170 million (US$16,316 thousand).
Net cash used in financing activities amounted to¥4,624 million (US$34,767 thousand). This was mainly
due to dividends paid to shareholders of ¥2,251 million(US$16,925 thousand) and payments for purchase oftreasury stock of ¥1,960 million (US$14,737 thousand).
Taking into account the aforementioned activities aswell as foreign currency translation adjustments on cash
and cash equivalents of ¥2,100 million (US$15,789
thousand) and the net increase in cash and cash
equivalents of ¥2,366 million (US$17,789 thousand),cash and cash equivalents stood at ¥29,565 million(US$222,293 thousand) as of December 31, 2022.

’20

’21

5.1

7.5

6.8

73.1

’21

61.7

’20

50.8

’19

49.8

8.3%

9.6
6.1

10.4%

49.3

’18*

15.4%

14.3%

’22

(1.3)

(3.0)

(3.2)

’18*

’19

’20

0.7

(2.6)
’21

’22

Operating Cash Flows
Investing Cash Flows

CAPITAL EXPENDITURES AND
R&D EXPENSES
Investment in equipment to boost capacity in the
Machine Tools Segment in 2022
In 2022, capital expenditures, which totaled ¥3,390 million(US$25,489 thousand), were largely directed toward thepurchase of facilities and equipment aimed at boosting
capacity in the Machine Tools Segment. In 2023, Star
Micronics plans to undertake capital expenditures of¥2,862 million focusing mainly on a large-scale renewal of
the Company’s the Kikugawa Factory in the Machine Tools
Segment and construction of a new building at an
overseas subsidiary.
Special Products—Capital expenditures in the Special
Products Segment increased ¥424 million compared withthe previous year, to ¥606 million (US$4,556 thousand) in
2022. In 2023, the Company is budgeting expenditures of¥283 million in this segment mostly for molds used in the
manufacture of new products.
Machine Tools—Capital expenditures in the Machine
Tools Segment climbed ¥931 million compared with theprevious year, to ¥2,598 million (US$19,534 thousand),in 2022. In 2023, the Company plans to undertake capital
expenditures of ¥2,474 million. This includes thelarge-scale renewal of the Company’s Kikugawa Factory,
the construction of a new building at an overseas
subsidiary, and facilities and equipment to help boost
production capacity.

Annual Report 2022 STAR MICRONICS CO., LTD.

37

New product development in each segment
Underpinned by its precision processing and assembly
technologies nurtured over a long period, the Star
Micronics Group undertakes research and development
activities to further create added value. In addition todeveloping products and technologies that are directly
related to its current operations, the Group actively works
to set up 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 ¥1,965 million.
Special Products Segment—In the current fiscal year,
Star Micronics developed the thermal 3-inch label printermC-Label3 as well as the Star Quick Setup Utility
Customizer and Star Document Markup Designer services
that further enhance the added-value of its printers.
Recognizing the need to meet the label printing
requirements of the food delivery market, which has
greatly expanded due to the COVID-19 pandemic,mC-Label3 handles various types of paper, including
strong adhesive linerless labels, and can be used for awide range of applications, such as backyard inventory
management labels and shipping labels, not to mention
product labels. In addition, mC-Label3 allows users to
replace parts that have worn out on their own, and comeswith a video manual on how to replace and clean parts
further enhancing the ease of maintenance.
As the name suggests, Star Quick Setup Utility
Customizer is a service that provides additional utility
value at the time of initial printer setup. As a service that
customizes the initial printer setup for each POS system,
Star Quick Setup Utility Customizer enables the burden
incurred at the time of system installation to besignificantly reduced. Star Document Markup Designer isan intuitive service that facilitates the easy creation of
print data by employing proprietary text-based print datathat boasts excellent readability. In eliminating the needto understand the print instructions of the Company’s
printers, Star Document Markup Designer has made iteasy to create print data. At the same time, Star
Micronics has upgraded the features of TSP100IV, thelatest model in the flagship TSP100 series, as well as themC-Print series to facilitate the link between printers andthe Star Micronics Cloud Service to enable the use of
these services.
Research and development expenses for the Special
Products Segment totaled ¥802 million.

38

Annual Report 2022 STAR MICRONICS CO., LTD.

Machine Tools Segment—Star Micronics developed the
new SD-26, a mid-range model sliding head-type
automatic lathe, in the year under review.
Drawing on the concept of a single unit that canmachine parts between the volume zone 8 to 26 diameter,
the SD-26 is a Swiss type automatic lathe that mainly
targets complex-shaped parts for automotive, hydraulicand pneumatic equipment, and medical-related use. The
SD-26, which employs a gate-shaped tool post arranged
on a gang-type tool post for front-end machining, isavailable in four types. This in turn allows users to selectthe most suitable tool post specification that meets their
specific machining application need. In addition to thestandard 4-spindle facing-type milling unit with a tool
swivel control axis (B-axis), the top-of-the-line type S,
which boasts an industry-first cartridge-type tool unit
equipped with a 2nd B-axis mechanism that can provide
swivel control, is capable of handling all types ofcomplex-shaped parts. The gang-type tool post forback-end machining is equipped with a two turning tool
holder in addition to an 8-spindle unit with Y-axis control
for enhanced turning capability on the back side. To
reduce environmental impact, the SD-16 is equipped with
the newly developed ECO mode, which reduces standby
power consumption when the machine is idle.
From a software perspective, Star Micronics promoted
the development of multiple Step Cycle Pro models which
provide chip-breaking operations thereby improving
productivity. In addition to advancing the rollout of multiple
Step Cycle Pro models, the Company has developed
various functions that help improve user convenience andworkability. These functions include Eccentric Turning formachining eccentric shapes with cutting tools, Easy Editthat is capable of creating simple on-machine programs,
and a B-connect function that can be connected to an
automatic material supply device to an Ethernet IP which
in turn facilitates integrated control with the machine unit.
Research and development expenses for the Machine
Tools Segment amounted to ¥1,062 million.
New Business—Star Micronics tool steps to consider
the creation of new business based on the three logistics
DX, store DX, and production DX themes in the year
under review.
Under the logistics DX theme, the Company has
cultivated market needs while developing and proposing
service models that help increase user productivity. Froma store DX perspective, Star Micronics collaborated with acompany that possesses data communication technology

that employs sound wave and initiated steps to consider
digital services for retail stores and restaurants. In
advancing production DX, a digital service project was
launched with the Machine Tools Segment. The Company
also developed and exhibited a prototype version of its

machining estimation support software at the Japan
International Machine Tool Fair JUMTOF2022.
Research and development expenses in this segment
came to ¥100 million.

SALES FRAMEWORK AND NET SALESBY REGIONNet Sales by Region

Japan
10.3%

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
28.2%
USA
31.9%
Germany
10.0%
China
19.6%

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

Substantial increase in net sales acrossall regions
In the year under review, the ratio of overseas sales as
a proportion of total sales came to 89.7%, up 2.2
percentage points compared with the previous year.
By region, net sales in the U.S. amounted to ¥27,904
million (US$209,804 thousand), an increase of ¥10,589
million, or 61.2%, year on year.
Net sales in China came to ¥17,112 million(US$128,662 thousand), a year-on-year upswing of¥2,569 million, or 17.7%.
Net sales in Germany totaled ¥8,743 million(US$65,737 thousand), an increase of ¥2,667 million,or 43.9%, compared with the previous year.
In Japan, net sales came to ¥9,037 million (US$67,947
thousand), an upswing of ¥965 million, or 12.0%, year
on year.

Switzerland

Star Micronics
AG

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, %)85.8% 82.5% 87.4% 87.5% 89.7%

78.3
56.6

’18*

50.0

’19

56.3
39.9

’20

’21

’22

Overseas Sales
Proportion of Total Sales

Annual Report 2022 STAR MICRONICS CO., LTD.

39

Consolidated Balance SheetStar Micronics Co., Ltd. and Consolidated Subsidiaries
December 31, 2022

Thousands of
U.S. dollars (Note 1)

Millions of yen

Assets

2022

2021

2022

¥ 27,199$ 222,293

Current assets:
Cash and cash equivalents (Note 17)¥ 29,565

Marketable securities (Notes 5 and 17)

34

Short-term investments (Notes 6 and 17)

505

377

3,797

22,69818,495

170,662

52

58

391

Other

1,293

1,044

9,722

Allowance for doubtful receivables

(133)

(137)

(1,000)256

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

25,087

17,823

188,624

Prepaid expenses and other

Inventories (Note 8)

972

848

7,308

Total current assets

80,07365,707602,053

2,008

1,893

15,098Property, plant and equipment:
Land
Buildings and structures

16,081

15,328120,910

Machinery and equipment

21,97920,885

165,255

Lease assets (Note 16)

121

153

910

Construction in progress

216

175

1,624

Other

1,902

1,507

14,30142,30739,941

318,098(26,610)(25,632)(200,075)

15,697

14,309118,023

Investment securities (Notes 5 and 17)

839

717

6,308

Investments in unconsolidated subsidiaries and associated companies

395

332

2,970

425

599

3,196

Total
Accumulated depreciation
Net property, plant and equipment

Investments and other assets:

Deferred tax assets (Note 14)
Asset for retirement benefits (Note 10)
Other assets
Total investments and other assets
Total
See notes to consolidated financial statements.

40

Annual Report 2022 STAR MICRONICS CO., LTD.

1,300

9,774

810

697

6,090

3,769

2,345

28,338¥ 99,539¥ 82,361$ 748,414

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and equity

2022

2021

2022

¥12,988¥11,967$ 97,654

Current liabilities:
Payables (Note 17):
Trade notes and accounts payable
Unconsolidated subsidiaries and associated companies
Other
Current portion of long-term debt (Note 9)
Income taxes payable (Note 14)

1

1

8

4,821

3,192

36,248

334

261

2,511

2,417

811

18,173

1,100

11,654Contract liabilities

966

Accrued expenses

1,550

Other

7,263

2,027

2,173

15,241

25,104

19,505

188,752

Long-term debt (Note 9)

884

789

6,647

Liability for retirement benefits (Note 10)

101

130

759

Deferred tax liabilities (Note 14)

316

125

2,376

Total current liabilities
Long-term liabilities:

Other

46

84

346

1,347

1,128

10,128		 and 44,091,334 shares in 2021

12,722

12,722

95,654

Capital surplus

11,711

13,85488,053

352

421

2,647

49,84941,814

374,804(6,608)(7,067)(49,684)

108

84

812

3,366

(830)

25,308

Total long-term liabilities
Commitments and contingent liabilities (Note 16)
Equity (Notes 11, 12 and 24):
Common stock – authorized, 158,000,000 shares;		 issued, 42,465,134 shares in 2022

Stock acquisition rights (Note 12)
Retained earnings
Treasury stock – at cost,		 4,809,548 shares in 2022
		 and 5,367,223 shares in 2021
Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Total

1,481

477

11,13572,981

61,475548,729

Noncontrolling interests

107

253

805

Total equity

73,08861,728549,534¥99,539¥82,361$748,414

Total
See notes to consolidated financial statements.

Annual Report 2022 STAR MICRONICS CO., LTD.

41

Consolidated Statement of Income
Star Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2022

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 loss – net
Gain on sale of property, plant and equipment
Loss on disposal of property, plant and equipment
Gain on liquidation of subsidiaries and associates
Other – net
Other income (expenses) – net
Income before income taxes
Income taxes (Note 14):
Current
Deferred
Total income taxes
Net income
Net income attributable to noncontrolling interests
Net income attributable to owners of the parent

2022

2021

2022

¥87,368
53,52633,842
19,917
13,925¥64,360
41,756
22,604
15,1897,415$656,902
402,451
254,451
149,752
104,699

180
(32)
(76)
33
(20)

1,353
(241)
(571)
248
(150)

202
287
14,212

173
(19)
(2)
20
(16)
165
228
549
7,964

1,519
2,158
106,857

3,893
(70)
3,823
10,38990¥10,299

2,062
112
2,174
5,790
50
¥ 5,740

29,270(526)
28,744
78,113677$ 77,436

Yen

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

¥271.14270.01
70.00

U.S. dollars (Note 1)¥150.83
142.38
58.00

$2.04
2.03
0.53

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
Star Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2022

Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

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.

42

Annual Report 2022 STAR MICRONICS CO., LTD.

2021

2022

¥10,389¥5,790$ 78,113

24
3,893
1,004
65
4,986
¥15,375

57
2,663
313
12
3,045
¥8,835

180
29,271
7,549
489
37,489$115,602¥15,251
124¥8,757
78$114,669
933

Consolidated Statement of Changes in Equity
Star Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2022

Thousands
Outstanding
number ofshares ofcommonstock

Balance, December 31, 2020

35,304

Millions of yen

Commonstock

Capitalsurplus¥12,722 ¥13,058

StockacquisitionrightsRetainedearnings

Treasurystock–
at cost¥429 ¥38,298 ¥(12,077)

Net income attributable toowners of the parent
Cash dividends,¥58.0 per share

Accumulated othercomprehensive income (loss)
Unrealized
ForeignDefinedgain oncurrency retirement
available-fortranslation
benefitsale securities adjustments
plans

¥ 27

¥(3,352) ¥  164

Noncontrolling
Total interests

Total
equity¥49,269¥ 553 ¥49,822

5,740

5,740

(2,266)(2,224)(2,266)(2,224)(2,266)

5,740(2,224)Purchase of treasury stock(1,431)

Disposal of treasury stock

46

16

56

72

72

Conversion of convertible
bonds

4,805

2,071
(1,291)

5,929
1,291

8,000

8,000

Retirement of treasury stock
Net change in the year
Balance, December 31, 2021

(8)
38,724¥12,722 ¥13,854¥421 ¥41,814 ¥ (7,067)¥ 84

38,724

12,722421(11)41,80384

Cumulative effect ofaccounting change
Restated balance

13,854

Net income attributable toowners of the parent
Cash dividends,¥70.0 per share(7,067)

2,522

313

2,884

¥  (830) ¥  477

¥61,475¥ 253 ¥61,728(11)
61,464

253

(830)

477

10,299(1,221)

Disposal of treasury stock

153

Retirement of treasury stock
Purchase of shares of
consolidated subsidiaries
Sales of shares of
consolidated subsidiaries

2,584

(11)
61,717
10,299(1,958)(2,253)(1,958)(2,253)(1,958)

9

206

215

215

(2,211)

2,211
60

60

60
(1)

Net change in the year(69)
37,656(300)

10,299(2,253)Purchase of treasury stock

Balance, December 31, 2022

57

¥12,722 ¥11,711

24¥352 ¥49,849 ¥ (6,608)

¥108

1,004

(1)
5,155

¥ 3,366 ¥1,481¥72,981

4,196

(146)

(1)
5,009

¥ 107 ¥73,088

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

Commonstock

Balance, December 31, 2021

CapitalsurplusStockacquisitionrights$3,166 $314,391 $(53,135)

95,654 104,165

3,166 314,308

Unrealized
gain onavailable-forsale securities

Foreigncurrencytranslation
adjustments

Definedretirement
benefit
plans

(83)

(83)
1,902 464,037

77,436(16,940)

77,436(16,940)(14,722)(14,722)(14,722)

68

1,549

1,617

1,617

(16,624)

16,624451

451(53,135)

632(6,241)

3,586

77,436(16,940)

Purchase of treasury stock
Disposal of treasury stock
Purchase of shares of consolidated
subsidiaries
Sales of shares of
consolidated subsidiaries

Total
equity462,135

Cash dividends, $0.53 per share

Retirement of treasury stock

Noncontrolling
Total interests$632 $ (6,241) $ 3,586 $462,218 $ 1,902 $464,120(83)

Net income attributable to owners of
the parent

451
(7)

Net change in the year
Balance, December 31, 2022

Treasurystock–
at cost$95,654 $104,165

Cumulative effect of accounting change
Restated balance

Retainedearnings(519)$95,654 $ 88,053$2,647 $374,804 $(49,684)

7,549

(7)
38,759 (1,097)(7)
37,662

180

31,549$812$25,308 $11,135 $548,729 $   805 $549,534

See notes to consolidated financial statements.
Annual Report 2022 STAR MICRONICS CO., LTD.

43

Consolidated Statement of Cash FlowsStar Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2022

Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

2021

2022

¥14,212¥ 7,964$106,857

Income taxes – paid

(2,465)(1,811)(18,534)

Depreciation and amortization

2,414

2,127

18,150Operating activities:
Income before income taxes
Adjustments for:

Gain on liquidation of subsidiaries and associates
Reversal of allowance for (provision for) doubtful receivables
Gain on sale and disposal of property, plant and equipment

(165)
(23)

18

(173)

(12)

(4)

(90)

Increase in trade receivables(1,728)(2,475)(12,992)

Increase in inventories(5,880)(3,045)(44,210)(Decrease) increase in trade payables

(57)

6,009

(429)

Increase (decrease) in liability for retirement benefits

100

(130)

752

Other – net

962

1,113

7,233

Total adjustments(6,689)1,637(50,293)

Net cash provided by operating activities

7,523

9,601

56,564(2,170)(1,052)(16,316)

24

1,113

Investing activities:
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment

148

Decrease in short-term investments
Purchases of marketable and investment securities

1,100
(200)

Proceeds from sale of marketable and investment securities
Other – net
Net cash (used in) provided by investing activities(600)(1,504)

1,410
(411)

(141)

(3,090)(2,633)741(19,797)

Financing activities:
Decrease in short-term bank loans
Dividends paid to shareholders
Dividends paid to noncontrolling shareholders of consolidated subsidiaries(2,500)(2,251)(2,223)(16,925)

(10)

(232)

(75)

(1,960)(2,269)

Repayments to noncontrolling shareholders
Payments for purchase of treasury stock(147)

Disposal of treasury stock

119

14

895

Other – net

(522)

(202)

(3,925)

Net cash used in financing activities(4,624)(7,559)(34,767)

Foreign currency translation adjustments on cash and cash equivalents

2,100

1,387

15,789Net increase in cash and cash equivalents

2,366

4,170

17,789Cash and cash equivalents at beginning of year

27,19923,029204,504

Cash and cash equivalents at end of year

¥29,565¥27,199$222,293

Noncash investing and financing activities:
Increase in capital surplus due to conversion of convertible bonds¥ 2,071

Decrease in treasury stock due to conversion of convertible bonds

5,929

Decrease in convertible bonds due to conversion of convertible bonds
See notes to consolidated financial statements.

44(14,737)

Annual Report 2022 STAR MICRONICS CO., LTD.

¥ 8,000

Notes to Consolidated Financial Statements
Star Micronics Co., Ltd. and Consolidated Subsidiaries
Year Ended December 31, 2022

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, 2021 to conform to the classifications used in the year ended December 31, 2022.
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¥133 to $1, the approximate rate of exchange at December 31, 2022.
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, 2022, include the accounts of the Company and its 17 (17in 2021) 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 2021) 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,” theaccounting 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 that net
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 through othercomprehensive income; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value modelof accounting for property, plant and equipment and investment properties and incorporation of the cost model ofaccounting; 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 through profit orloss for other-than-temporary declines in the fair value of an investment in an equity instrument, where a foreignsubsidiary elects to present in other comprehensive income subsequent changes in the fair value of an investment in
an equity instrument.

c. 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.

Annual Report 2022 STAR MICRONICS CO., LTD.

45

d. Inventories

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

e. 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.
Investments in limited partnerships, which are considered securities under Article 2, Clause 2 of the Japanese
Financial Instruments and Exchange Act, are recorded under the equity method and based on the latest consolidated
financial statements available on the reportable date ruled by the partnership contracts.

f. 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.

g. 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.

h. 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.
(Additional information)
The Company has transferred a part of its defined benefit pension plan to a defined contribution pension plan
applying “Accounting for Transfer between Retirement Benefit Plans” (ASBJ Guidance No. 1 of January 31, 2002,
revision issued on December 16, 2016) and “Practical Solution on Accounting for Transfer between Retirement
Benefit Plans” (ASBJ, PITF No. 2 of March 29, 2002, revision issued on February 7, 2007) and the retirement pension
plan corresponding to the transferred portion to the defined contribution pension plan is to be terminated partially.
As a result, ¥203,002 thousand is to be recorded as other income for the fiscal year ended December 31, 2023.

46

Annual Report 2022 STAR MICRONICS CO., LTD.

i. 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
the asset 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
the liability. 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.

j. 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.

k. 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.

l. 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 Japan and US have applied the standards of “Lease” (IFRS No. 16) and subsidiaries in
US have applied the standards of “Leases” (ASU No. 2016-02).

m. 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.

Annual Report 2022 STAR MICRONICS CO., LTD.

47

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

o. 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.

p. 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.

q. 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.

r. 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.

s. 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.

t. 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.

48

Annual Report 2022 STAR MICRONICS CO., LTD.

u. New Accounting Pronouncements
On June 17, 2021, the ASBJ revised ASBJ Guidance No. 31, “Implementation Guidance on Accounting Standard for
Fair Value Measurement” published on June 17, 2021.
When the guidance was published, it indicated that because a certain period of time may be required to discuss
the fair value measurement of an investment trust with the people involved and in order to consider the notes
regarding the fair value of investments in unions or other organizations reported by the net amount of equity on thebalance sheet, around one year was required for discussion and consideration after publication of “AccountingStandard for Fair Value Measurement.” As a result, the guidance was revised and published on June 17, 2021.
The Company expects to apply the guidance for annual periods beginning on or after January 1, 2023, and is in
the process of measuring the effects of applying the accounting standard and guidance in future applicable periods.

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

Millions of yen
2022

Deferred tax assets

2021

¥599

¥425

2022

$3,196(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 have anadditional 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

2022

2021

2022

¥15,697¥14,309$118,023(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 2022.
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.

Annual Report 2022 STAR MICRONICS CO., LTD.

49

4. Accounting Change(Application of “Accounting Standard for Revenue Recognition”)
The Group has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020;
hereinafter referred to as the “Revenue Recognition Accounting Standard”), etc., since the beginning of the firstquarter of the fiscal year under review and recognizes revenue from goods or services to be provided at an amount
expected to be received in exchange for those goods or services at the time when control over the promised goods
or services is transferred to a customer. As a result, the Company now recognizes revenue at the time of acceptanceinspection for certain sales, whereas it previously recognized revenue at the time of shipment, mainly in the Machine
Tools Segment. In addition, consideration payable to a customer, such as sales commissions, had been previously
accounted for as selling, general and administrative expenses, but is now accounted for as a net amount deductedfrom sales.
The Company applies the Revenue Recognition Accounting Standard in accordance with the transitional
handling stipulated in the proviso of Paragraph 84 of the Accounting Standard for Revenue Recognition. The
Company adds or subtracts the amount of the cumulative effect on retained earnings from the beginning of the firstquarter or from retained earnings in cases where the new accounting policies are applied retroactively to periods
before the beginning of the first quarter. However, the Company applied the procedure provided for in Paragraph 86of the Revenue Recognition Accounting Standards and did not retroactively apply the new accounting policy tocontracts under which almost all revenue had been recognized before the beginning of the first quarter in accordancewith the procedure before the application of the new accounting policy.
As a result, net sales decreased ¥85 million ($639 thousand), cost of sales increased ¥320 million ($2,406
thousand), and selling, general and administrative expenses decreased ¥148 million ($1,113 thousand). Operating
income, ordinary income, and income before income taxes decreased ¥257 million ($1,932 thousand) each in thefiscal year under review. The impact on per share information is minimal.
The balance of retained earnings at the beginning of the fiscal year under review decreased by ¥11 million($83 thousand).
Due to the application of the Accounting Standard for Revenue Recognition, “advances received,” which had
been included in “Other” under “Current liabilities” is included in “Contract liabilities” from the first quarter of fiscal
2022. In accordance with the transitional handling stipulated in Paragraph 89-2 of the Accounting Standard for
Revenue Recognition, no reclassification via new indication methods will be carried out for the previous fiscal year
using the new presentation. Moreover, in accordance with the transitional handling stipulated in Paragraph 89-3of the Accounting Standard for Revenue Recognition, the note to “Revenue Recognition” for the previous year is
not stated.
(Application of “Accounting Standard for Fair Value Measurement”)
The Company began applying the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30
issued on July 4, 2019, hereinafter the “Fair Value Measurement Accounting Standard”) and related measures atthe beginning of the first quarter of the fiscal year under review. Accordingly, the Company will apply the new
accounting policies stipulated in the Fair Value Measurement Accounting Standard and related measures in the futurein accordance with the transitional handling stipulated in Section 19 of the same standard and Section 44-2 of the“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10 issued on July 4, 2019).
Application of this standard has no impact on consolidated financial statements.
(Application of ASC 842, “Leases”)
Effective from the first quarter of the fiscal year under review, the Company has adopted ASC 842, “Leases” withregard to overseas consolidated subsidiaries. Regarding the application of the applicable accounting standard, thecumulative effect of adopting the standard, which is permitted as a transitional measure, is recognized as of the dateof adoption.
The adoption of the applicable accounting standard has an insignificant impact on the consolidated financial
statements.

50

Annual Report 2022 STAR MICRONICS CO., LTD.

5. Marketable and Investment Securities
Marketable and investment securities at December 31, 2022 and 2021, consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
2021

2022

2022

Current:
Trust fund investments and other¥ 34$  256

Total

¥ 34

$  256

Non-current:
Equity securities

¥214

¥218

$1,609Corporate and other bonds

562

377

4,225

Trust fund investments and other
Total

63

122

474

¥839

¥717

$6,308The costs and aggregate fair values of securities classified as available-for-sale at December 31, 2022 and 2021,
were as follows:
Millions of yen
2022

Cost

Unrealized gains¥74

Unrealized losses

Fair value

Securities classified as:
Available-for-sale:Marketable equity securities¥104

Corporate and other bonds

600

Trust fund investments and other

29

34

Cost

Unrealized gains

¥45

¥178
¥38

562
63

Millions of yen
2021

Unrealized losses

Fair value

Securities classified as:
Available-for-sale:Marketable equity securities¥104

Corporate and other bonds

400

Trust fund investments and other

29

38

Cost

Unrealized gains

Marketable equity securities$  782$556

Corporate and other bonds

4,511

¥149
¥23

377
67

Thousands of U.S. dollars (Note 1)
2022

Unrealized losses

Fair value

Securities classified as:
Available-for-sale:

Trust fund investments and other218$1,338
$285

256

4,226
474

Proceeds from sales of available-for-sale securities for the years ended December 31, 2022 and 2021, were niland ¥3,009 million, respectively. Gross realized gains and losses on these sales, computed on the moving-average
cost basis, for the year ended December 31, 2022, were both nil, and for the year ended December 31, 2021, were
¥14 million and ¥4 million, respectively.

Annual Report 2022 STAR MICRONICS CO., LTD.

51

6. Short-term Investments
Short-term investments at December 31, 2022 and 2021, consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
2021

2022

2022

Deposits over three-month period

¥505

¥377

$3,797

Total

¥505

¥377

$3,797

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 ¥1,463 million ($11,000 thousand) and ¥999
million at December 31, 2022 and 2021, respectively.

8. Inventories
Inventories at December 31, 2022 and 2021, consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2021

2022

Merchandise¥   865¥   754$  6,504

Finished products

13,497

8,804

101,481Work in process

6,579

4,620

49,466

Raw materials and supplies

4,146

3,645

31,173¥25,087¥17,823$188,624

Total

9. Long-term Debt
Long-term debt at December 31, 2022 and 2021, consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2021

2022

Lease obligations¥   67¥   82$  504

Others

1,151

968

8,654

Total

1,218

1,050

9,158

Less: current portionLong-term debt, less current portion

334

261

2,511

¥  884¥  789$6,647

Annual maturities of long-term debt at December 31, 2022, were as follows:
Years ending December 31

Thousands of
U.S. dollars (Note 1)

2023¥  334$2,511

2024

295

2,218

2025

217

1,632

2026

169

1,271

2027

67

504

2028 and thereafter

136

1,022

¥1,218$9,158Total

52

Millions of yen

Annual Report 2022 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, 2022 and 2021, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

Balance at beginning of year

2022

2021

2022

¥ 9,001¥9,245$ 67,677

Current service cost

166

169

1,248

Interest cost

95

98

714

Actuarial gains and losses

157

(89)

1,180

Benefits paid

(532)

(422)

(4,000)Prior-service cost

(1,931)OthersBalance at end of year

(14,519)

3

(0)

23

¥ 6,959¥9,001$ 52,323(2) The changes in plan assets for the years ended December 31, 2022 and 2021, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2021

2022

¥8,871¥8,538$66,699

Expected return on plan assets

222

214

1,669

Actuarial gains and losses

(592)

350

(4,451)

Contributions from the employer

189

191

1,421

Balance at beginning of year

Benefits paid
Balance at end of year

(532)

(422)

(4,000)¥8,158¥8,871$61,338(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, 2022 and 2021, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2021

Funded defined benefit obligation¥ 6,858¥ 8,911$ 51,564

Plan assets(8,158)(8,871)(61,338)

Total(1,300)40(9,774)

101

90

759

¥(1,199)¥   130$ (9,015)

Unfunded defined benefit obligation
Net liability arising from defined benefit obligation

2022

Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

Liability for retirement benefits¥   101

Asset for retirement benefits(1,300)Net liability arising from defined benefit obligation¥(1,199)

2021

2022

¥130

$   759¥130$(9,015)(9,774)

Annual Report 2022 STAR MICRONICS CO., LTD.

53

(4) The components of net periodic benefit costs for the years ended December 31, 2022 and 2021, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2021

2022

2022

Service cost

¥ 166

¥ 169

Interest cost

95

98

714

(222)

(214)

(1,669)

Expected return on plan assets
Recognized net actuarial gains and losses
Net periodic benefit costs$ 1,248

250

7

1,880

¥ 289

¥ 60

$ 2,173(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement
benefit plans for the years ended December 31, 2022 and 2021, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2021

2022

Prior-service cost
Actuarial gains and losses
Total

2022

¥1,931$14,519

(499)

¥446

(3,752)¥1,432¥446$10,767(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans as of December 31, 2022 and 2021, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

Unrecognized prior-service cost
Unrecognized actuarial gains and losses
Total

2021

2022

¥(1,931)$(14,519)(181)¥(680)(1,361)¥(2,112)¥(680)$(15,880)(7) Plan assets

a. Components of plan assets
Plan assets as of December 31, 2022 and 2021, consisted of the following:
2022

2021

Debt investments

34%

24%

Equity investments

22

26

General account

11

31

Others

33

19

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, 2022 and 2021, are set forth as follows:
2022

2021

Discount rate

1.1%

1.1%

Expected rate of return on plan assets

2.5%

2.5%

Expected rate of salary increase

9.8%

4.1%

(9) Defined contribution pension plan
The amounts of the required contribution to the defined contribution plans of the consolidated subsidiaries were ¥224
million ($1,684 thousand) and ¥177 million for the years ended December 31, 2022 and 2021, respectively.

54

Annual Report 2022 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(a component 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 2022 STAR MICRONICS CO., LTD.

55

12. Stock Options
The stock options outstanding as of December 31, 2022, were as follows:56

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

2016 II Stock Option

3 directors
6 executive officers
18 employees
9 directors of subsidiaries

168,000 shares

June 13, 2016

¥1,289From June 29, 2018
to June 28, 2022

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

Annual Report 2022 STAR MICRONICS CO., LTD.

Exercise Period

The stock option activity were as follows:2014 I
Stock Option

2015 I
Stock Option

2016 I
Stock Option

Shares2016 II
Stock Option

2017 I
Stock Option

2017 II
Stock Option

2018 I
Stock Option

15,50010,40022,100104,700

19,300136,000

19,400Year ended
December 31, 2021
Non-vested
		December 31, 2020 –		Outstanding
			Granted
			Canceled
			Vested		December 31, 2021 –		Outstanding
Vested		December 31, 2020 –		Outstanding
			Vested			Exercised			Canceled		December 31, 2021 –		 Outstanding(11,000)

15,50010,40022,10093,70019,300136,000

19,40015,50010,40022,10093,70019,300136,000

19,400(3,700)(64,300)(29,400)(3,000)(8,000)(10,000)

8,300

126,000

17,200¥    1$    0¥1,577$   12¥1,384$   10¥1,830$   14¥    1$    0¥1,577$   12¥1,644$   12

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
Exercise price
Average stock priceat exercise
Fair value priceat grant date

15,50010,40018,400¥    1$    0¥    1$    0¥1,209$    9¥1,995$   15¥    1$    0¥1,573$   12¥  988$    7¥1,289$   10¥1,674$   13¥  165$    1(2,200)¥  246$    2

Annual Report 2022 STAR MICRONICS CO., LTD.

57

2018 II
Stock Option

2019 I
Stock Option

2019 II
Stock Option

Shares2020 I
Stock Option

2020 II
Stock Option

2021
Stock Option

2022
Stock Option

Year ended
December 31, 2021
Non-vested
		December 31, 2020 –		Outstanding
			Granted
			Canceled
			Vested		December 31, 2021 –		Outstanding
Vested		December 31, 2020 –		Outstanding
			Vested			Exercised			Canceled		December 31, 2021 –		 Outstanding

161,000

138,000
141,000(161,000)

166,000

34,000138,000

141,000

138,000

141,000

59,900161,000

166,000

34,000161,000

59,900Year 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
Exercise price
Average stock priceat exercise
Fair value priceat grant date

128,000(138,000)

166,000

34,000161,000(3,800)(15,100)(6,600)(19,200)
161,000

34,100106,000¥2,017$   15¥    1$    0¥1,577$   12¥1,608$   12¥1,805$   14¥    1$    0¥1,577$   12¥  866$    7¥1,149$    9¥1,742$   13¥  157$    1

The assumptions used to measure fair value of the 2022 Stock Options were as follows:Black-Scholes option pricing model
Estimate method:
Volatility of stock price:32.900%Estimated remaining outstanding period: 4.6 years
Estimated dividend:¥58.00 per share
Risk free interest rate:(0.006)%

58

Annual Report 2022 STAR MICRONICS CO., LTD.

¥1,720$   13¥1,523$   11¥  296$    2¥  226$    2138,000(32,000)

15,100¥  352$    3

128,000

59,900166,000¥  308$    2141,000

13. Restricted Stock Compensation
The restricted stock compensation outstanding as of December 31, 2022, was as follows:
Restricted Stock Compensation

2021 Restricted Stock Compensation
2022 Restricted Stock Compensation

Persons Granted

3 directors
4 executive officers
3 directors
4 executive officers

Number of
Shares Granted

Date of Grant

34,500 shares

April 22, 2021

36,800 shares

April 21, 2022

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:
Shares2021
Restricted Stock
Compensation

2022
Restricted Stock
Compensation

Year ended December 31, 2021
		December 31, 2020 – Outstanding
			Granted

34,500			Forfeited			Released
		December 31, 2021 – Outstanding

34,500Year ended December 31, 2022
		December 31, 2021 – Outstanding

34,500			Granted

36,800			Forfeited(11,700)

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

20,80024,300¥1,622$   12¥1,509$   11

Fair value price at grant date

(12,500)

Annual Report 2022 STAR MICRONICS CO., LTD.

59

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, 2022 and 2021.
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, 2022 and 2021, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2021

2022

Deferred tax assets
Unrealized profit on inventories¥   953¥   376$ 7,165

Accrued bonuses

372

275

2,797

Depreciation

368

339

2,767

Liability for retirement benefits

265

33

1,993

Inventories

208

166

1,564

Tax loss carryforwards

360

Impairment loss

26

Other – net

741

515

5,571

Less valuation allowance

(258)

(290)

(1,940)

Total

2,649

1,800

19,917(1,645)(1,136)(12,368)

Deferred tax liabilities
Undistributed earnings of associated companies
Asset for retirement benefits(631)

Other – net(264)(4,744)(190)(1,985)

Total(2,540)(1,326)(19,097)

Net deferred tax assets (liabilities)¥   109¥   474$    820

The expiration of tax loss carryforwards, the related valuation allowances and the resulting net deferred tax assets asof December 31, 2022 and 2021, were as follows:

2021

1 Yearor Less

After 1 Yearthrough
2 Years

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

After 2 Years
through
3 Years

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

After
5 Years

Total

¥8

¥352

¥360

¥8

¥352

¥360

No material tax loss carryforwards were recognized in 2022.
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 2021, were ¥360 million. The
Company expects to recover the total amount of the tax loss carryforwards through the estimated future taxable profits.

60

Annual Report 2022 STAR MICRONICS CO., LTD.

A reconciliation between the normal effective statutory tax rate for the years ended December 31, 2022 and 2021,
and the actual effective tax rate reflected in the accompanying consolidated statement of income was as follows:
2022

2021

Normal effective statutory tax rate

29.9%

29.9%

Effect of foreign tax rate differences

(4.0)

(4.6)

Undistributed earnings of associated companies

2.6

5.9

Unrealized profit on inventories

(1.3)

(2.0)

Research and development tax credits

(0.8)

(0.9)

Valuation allowance

(0.2)

0.0

Other – net

0.7

(1.0)

Actual effective tax rate

26.9%

27.3%

15. Research and Development Costs
Research and development costs charged to income were ¥1,966 million ($14,782 thousand) and ¥1,650 million forthe years ended December 31, 2022 and 2021, 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, 2022 and 2021, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

Due within one year

2021

2022

¥ 50

Due after one year

299

Total

¥349

17. Financial Instruments and Related Disclosures(1) Group Policy for Financial Instruments
The Group invests cash surpluses in low-risk financial instruments. Derivatives are used mainly to manage foreignexchange 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 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 2022 STAR MICRONICS CO., LTD.

61

(3) Fair Values of Financial Instruments
Fair values of financial instruments are based on their quoted market price, if available. If a quoted price is not available, other rational valuation techniques are used instead.

(a) Fair Value of Financial Instruments
Millions of yen
December 31, 2022

Carrying
amountFair value

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

Carrying
amountFair valueMarketable and investment securities

¥803

¥803

$6,038$6,038

Total

¥803

¥803

$6,038$6,038Derivatives

¥229

¥229

$1,722$1,722

December 31, 2021

Carrying
amountFair valueMarketable and investment securities

¥593

¥593

Total

¥593

¥593

Derivatives¥ (55)¥ (55)

Unrealized
gain/loss

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.	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
2021

2022

2022

Unlisted equity securities

¥ 36

¥ 69

$  271

Investments in unconsolidated subsidiaries and associatedcompanies

293

229

2,203

Investments in limited partnerships

34

55

255

¥363

¥353

$2,729Total

3.	Derivative receivables and liabilities are on a net basis and items for which the total is a net liability are shown in ( ).

(4) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of yen
December 31, 2022

Due in one
year or less

Cash and cash equivalents¥29,565

Marketable and investment securities

34

Short-term investments

505

Due after one year
through five years

Due after five years
through ten years

Due after
ten years¥  600Trade receivables

21,287

1,463

Total

¥51,391¥2,063

December 31, 2021

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

Cash and cash equivalents¥27,199

Millions of yen

Marketable and investment securities
Short-term investments

Due after five years
through ten years

Due after
ten years¥  455377

Trade receivables

17,554

999

Total¥45,130¥1,454

December 31, 2022

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

Cash and cash equivalents$222,293

Thousands of U.S. dollars (Note 1)

Marketable and investment securities
Short-term investments

62

255

$ 4,5113,797

Trade receivables

160,053

11,000Total$386,398$15,511

Annual Report 2022 STAR MICRONICS CO., LTD.

Due after five years
through ten years

Due after
ten years

(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, 2022

Level 1

Level 2

Level 3

Total

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

¥178

Bonds

¥178
¥563

563

Derivative transactions:
Foreign currency forward contracts
Total assets

¥178

220

220

¥783

¥961

¥  9

¥  9

¥  9

¥  9

Derivative transactions:
Foreign currency forward contracts
Total liabilities

Thousands of U.S. dollars (Note 1)
December 31, 2022

Level 1

Level 2

Level 3

Total

Marketable and investment securities
Available-for-sale securities:
Equity securities$1,339Bonds$1,339$4,233

4,233

1,654

1,654

$5,887$7,226$   68$   68$   68$   68Derivative transactions:
Foreign currency forward contracts
Total assets$1,339Derivative transactions:
Foreign currency forward contracts
Total liabilities(b) The financial assets and liabilities not measured at the fair values in the consolidated balance sheet
Not applicable
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 are evaluated using quoted market price and classified as Level 1 because
listed equity securities are traded in active markets. The fair values of bonds are evaluated using the price provided
by financial institutions and classified as Level 2.
Derivatives
The fair values of foreign currency forward contracts are evaluated using the price provided by financial institutions
and classified as Level 2.

Annual Report 2022 STAR MICRONICS CO., LTD.

63

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

At December 31, 2022

Contracted
amountContracted
amount due
after one year

Fair value

Unrealized
gain/loss¥220

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

Buying

338

9

9

Total

¥5,625¥229¥229

Fair value

Unrealized
gain/loss¥(51)

Millions of yen

At December 31, 2021

Contracted
amountContracted
amount due
after one year

Foreign currency forward contracts:
Selling¥4,677¥(51)

Buying

178

(4)

(4)

Total

¥4,855

¥(55)

¥(55)

Thousands of U.S. dollars (Note 1)

At December 31, 2022

Contracted
amountContracted
amount due
after one year

Fair value

Unrealized
gain/loss$1,654$1,654Foreign currency forward contracts:
Selling$39,752

Buying

2,541

68

68

Total

$42,293$1,722$1,722

19. Other Comprehensive Income
The components of other comprehensive income for the years ended December 31, 2022 and 2021, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
2022

2021

¥   21¥   642022

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 effectTotal$   158

(8)
21

56

158

3

1

22

¥   24¥   57$   180¥3,893¥2,842$29,271

Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Total

(179)
¥3,893¥2,663$29,271¥1,182¥  439$ 8,887

250

7

1,880
10,767

Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect

1,432

446

Income tax effect

(428)

(133)

(3,218)¥1,004¥  313$ 7,549

Gains arising during the year¥   65¥   12$   489

Total¥   65¥   12$   489¥4,986¥3,045$37,489

Total
Share of other comprehensive income in an associate:

Total other comprehensive income

64

Annual Report 2022 STAR MICRONICS CO., LTD.

20. Net Income Per Share
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended
December 31, 2022 and 2021, were as follows:
Thousands ofsharesMillions of yen
Net income
attributable toowners of the parent

Weightedaverage shares¥10,299

37,983

U.S. dollars(Note 1)Yen

EPS

Year ended December 31, 2022
Basic EPS
Net income attributable to common shareholders¥271.14

$2.04

$2.03

Effect of dilutive securities
Convertible bonds
Stock acquisition rights

159

Diluted EPS
Net income for computation¥10,299

38,142¥270.01¥ 5,740

38,056¥150.83

(7)

1,975

Year ended December 31, 2021
Basic EPS
Net income attributable to common shareholders
Effect of dilutive securities
Convertible bonds
Stock acquisition rights

237

Diluted EPS
Net income for computation¥ 5,733

40,268¥142.38

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

Machine
Tools

Total

Japan

¥ 2,109¥ 6,809¥ 8,918

USA

10,92017,907

28,827

Asia

1,127

23,86924,996

Europe3,803

20,824

24,627¥17,959¥69,409¥87,368

December 31, 2022

Revenues from contracts with customers

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

Machine
Tools

Total

Japan

$ 15,857$ 51,196$ 67,053

USA

82,105

134,639

216,744

Asia

8,474

179,466

187,940

Europe28,594

156,571

185,165$135,030$521,872$656,902

December 31, 2022

Revenues from contracts with customers

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

(b) Basic information for understanding revenue from contracts with customers
The basis for understanding revenue is described in Note 3 (n), “Standards of significant revenues and expenses.”(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.

Annual Report 2022 STAR MICRONICS CO., LTD.

65

(1) Balance of contract liabilities, etc.
Millions of yen

Thousands of
U.S. dollars (Note 1)

2022

2022

Receivables from contracts with customers (beginning balance)¥18,553$139,496

Receivables from contracts with customers (ending balance)

22,750171,053

Contract liabilities (beginning balance)

801

6,023

Contract liabilities (ending balance)

966

7,263

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 ¥801 million ($6,023 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 report financial
and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations 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 informationis required to be reported on the same basis as is used internally for evaluating operating segment performance anddeciding 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.”

66

Annual Report 2022 STAR MICRONICS CO., LTD.

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

December 31, 2022

Sales to external customers

SpecialProducts¥17,959

Reportable Segment
MachineTools¥69,409

Total

Reconciliations¥87,368

Consolidated¥87,368

Intersegment sales or transfers
Total

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

Segment 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

87,368Other items:
293
2,598

293

3,204

186

3,390

Reconciliations

Consolidated

Millions of yen

December 31, 2021

Sales to external customers

SpecialProducts¥15,570

Reportable Segment
MachineTools¥48,790

Total¥64,360¥64,360

Intersegment sales or transfers
Total

15,57048,79064,360

Segment profit¥ 2,283¥ 6,858¥ 9,141¥ (1,726)¥ 7,41564,360

Segment assets¥12,537¥55,791¥68,328¥14,033¥82,361

Depreciation

338

1,550

1,888

239

2,127

Investments in associates

229

Increase in property, plant andequipment and intangible assets

182

Other items:
229
1,667

229

1,849

77

1,926

Thousands of U.S. dollars (Note 1)

December 31, 2022

Sales to external customers

SpecialProducts

Reportable Segment
Machine
Tools

Total

Reconciliations

Consolidated$135,030$521,872$656,902$656,902

Total

135,030

521,872

656,902656,902

Segment profit$ 28,225$ 92,098$120,323$ (15,624)$104,699

Segment assets$119,850$522,399$642,249$106,165$748,414

Depreciation

3,323

13,466

16,7891,361

18,150Investments in associates

2,203

Increase in property, plant andequipment and intangible assets

4,556Intersegment sales or transfers

Other items:
2,203
19,53424,090

2,203
1,399

25,489Notes: 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
the Company.
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.
6.	As described in Note 4, “Accounting Change,” the Company has applied the Accounting Standard for Revenue
Recognition, etc. from the beginning of the fiscal year under review and changed the accounting method with which it
recognized revenue. As a result, the method for calculating segment profit and loss was changed in the same manner.
			
As a result of this change, segment profit in Special Products Segment decreased ¥47 million ($353 thousand) while
net sales and segment profit in the Machine Tools Segment decreased ¥85 million ($639 thousand) and ¥210 million($1,579 thousand) in the fiscal year under review, compared with results calculated using the previous method.

Annual Report 2022 STAR MICRONICS CO., LTD.

67

Related Information
Related information by geographical area at December 31, 2022 and 2021, consisted of the following:(1) Net Sales
Millions of yen
December 31, 2022

Japan

USA

China

Germany

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

Japan

USA

China

Germany

OthersTotal¥8,072¥17,315¥14,543¥6,076¥18,354¥64,360

Japan

USA

China

Germany

OthersTotal$67,947$209,804$128,662$65,737$184,752$656,902

Millions of yen
December 31, 2021

Thousands of U.S. dollars (Note 1)
December 31, 2022

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

(2) Property, Plant and Equipment
Millions of yen
December 31, 2022

Japan

China

Thailand

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

Japan

China

Thailand

OthersTotal¥8,459¥2,607¥1,913¥1,330¥14,309

Japan

China

Thailand

OthersTotal$60,158$24,842$19,797$13,226$118,023

Millions of yen
December 31, 2021

Thousands of U.S. dollars (Note 1)
December 31, 2022

23. Related Party Disclosures
Transactions of the Company with related parties for the years ended December 31, 2022 and 2021, were as follows:Year ended December 31, 2022
Millions of yen

Thousands of
U.S. dollars (Note 1)

Related party

Category

Description of transaction

Hajime Sato

Chairman of the Board

Exercise of stock options

¥12

$90

Fumio Masuda

Executive Officer

Exercise of stock options

¥11

$83

Year ended December 31, 2021
Not applicable

24. Subsequent Event
The following appropriation of retained earnings at December 31, 2022, was approved at the Company’s Board of
Directors’ meeting held on February 22, 2023:
Millions of yen

Year-end cash dividends, ¥40 ($0.301) per share

68

Annual Report 2022 STAR MICRONICS CO., LTD.

¥1,507

Thousands of
U.S. dollars (Note 1)$11,331Independent Auditor’s Report

Annual Report 2022 STAR MICRONICS CO., LTD.

69

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Annual Report 2022 STAR MICRONICS CO., LTD.

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71

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Annual Report 2022 STAR MICRONICS CO., LTD.

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Stock Information
as of December 31, 2022

Authorized 158,000,000 shares
Issued42,465,134* shares
Paid-in Capital
12,721,939,515 yen
Number of Shareholders
11,776
Common Stock rime Market Section of the TokyoP
Stock Exchange
Transfer Agent Mitsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda,
Tokyo 100-8212, Japan
Stock Listing* The decrease in the number of shares issued was due to a retirement of 1,626,200 shares.

COMPOSITION OF SHAREHOLDERS(%)

Securities Companies

Other Companies

2022

Financial Institutions

2021

24.6 %

23.1%

Japanese Individuals
and Others

Foreign Institutions
and Individuals

4.0 %

35.4 %

23.9 %

3.8 %

34.4 %

22.7%

1.6 %

11.3 %Star Micronics
3.0 %12.2 %STOCK PRICE RANGE (TOKYO STOCK EXCHANGE)(Yen)(Yen)
3,000

30,0002,000

20,0001,000

10,0000

0Closing Price of Star Micronics (Left)

Nikkei Stock Average (Right)

TRADING VOLUME(Thousands of shares)
15,00010,000

5,000

0

2018

2019

2020

2021

2022.

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)

74

Year
At year-end
High
Low

2018

2019

2020

2021

2022

1,491

1,575

1,654

1,549

1,619

2,270

1,893

1,720

1,893

1,858

1,332

1,258

945

1,416

1,318

Annual Report 2022 STAR MICRONICS CO., LTD.

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

One Step Closer toa Better WorldANNUAL REPORT 2022 (PDF Version)
For the year ended December 31, 2022

Printed in Japan