Nikon Annual Report 2006
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Nikon Annual Report 2006 01 Financial Highlights 31 Consolidated Statements of Shareholders’ Equity 02 To Our Shareholders and Investors 32 Consolidated Statements of Cash Flows 05 New Direction: In Pursuit of a Stronger Nikon 33 Notes to Consolidated Financial Statements 08 Review of Operations 47 Independent Auditors’ Report 22 Enhancing CSR Activities 48 Organization of Nikon Group 25 Five-Year Summary 49 Nikon Group Companies 25 Management’s Discussion and Analysis of Operations 50 Directors, Auditors and Offi cers 28 Consolidated Balance Sheets 51 Investor Information 30 Consolidated Statements of Income Profile Nikon has carved out a place as a pioneer of optical reforms aimed at maximizing management effi ciency. technology in Japan and the world since its inception Another mission of Nikon is to always stay one step ahead in 1917. Today, we command a high global standing in of the competition, and we can achieve this by remaining the manufacture and sale of camera-related products, true to our business philosophy of “Trustworthiness and such as digital cameras, as well as binoculars and other Creativity.” This enables us to provide unique products optical products for consumers, such as glasses frames. fi lled with innovation, thereby ensuring that we are a lead- These items complement our diverse array of industrial ing company in the modern era. precision equipment that includes semiconductor-related Going forward, the Nikon Group will leverage its equipment, notably steppers, microscopes and measur- core competencies to meet needs in various industries ing instruments. and to satisfy customers the world over. In order to respond swiftly and fl exibly to the ever- changing business environment, we promote structural Statements contained in this report regarding the plans, projections and strategies of the Nikon Corporation and its subsidiaries and affi liates that comprise the Nikon Group (hereinafter “Nikon”) that are not historical fact constitute forward-looking statements about future fi nancial results. As such, they are based on data that are obtainable at the time of announcement in compliance with Nikon’s management policies and certain premises that are deemed reasonable by Nikon. Hence, actual results may differ, in some cases signifi cantly, from these for- ward-looking statements due to changes in various factors, including—but not limited to—economic conditions in principal markets, product and service demand trends, customer capital investment trends, and currency exchange rate fl uctuations. FINANCIAL HIGHLIGHTS Nikon Corporation and Consolidated Subsidiaries Years ended March 31, 2006 and 2005 NET SALES NET INCOME (LOSS) SHAREHOLDERS’ EQUITY (millions of yen) (millions of yen) (millions of yen) 06 730,944 06 28,945 06 243,122 05 638,468 05 24,141 05 196,030 04 506,378 04 2,410 04 171,194 03 468,959 03 (8,143) 03 162,464 02 482,975 02 (6,004) 02 176,961 Years ended March 31 Years ended March 31 Years ended March 31 Millions of U.S. Millions of Yen Dollars % 2006 2005 2006 Increase FOR THE YEAR Net sales ¥ 730,944 ¥638,468 $ 6,222 14.5% Operating income 66,587 30,545 567 118.0% Net income 28,945 24,141 246 19.9% Per share of common stock (Yen and U.S. Dollars): Basic net income ¥ 78.16 ¥65.19$0.67 19.9% Diluted net income 69.33 57.84 0.59 19.9% Cash dividends applicable to the year 10.00 8.00 0.09 25.0% AT YEAR-END Total assets ¥ 690,920 ¥633,426 $5,882 9.1% Shareholders’ equity 243,122 196,030 2,070 24.0% Notes: 1. Per share of common stock is computed based on the weighted average number of shares outstanding during the year. 2. U.S. Dollar fi gures are translated for reference only at ¥117.47 to U.S. $1.00, the approximate exchange rate at March 31, 2006. 01 TO OUR SHAREHOLDERS AND INVESTORS Translating the advanced technological expertise amassed within Nikon Group into real profits is a primary aim of Nikon management. In the year ended March 2006, we took the first step towards achieving this key objective and presented the blueprint for future growth along the way. Set medium term goals in light of began shipment of the NSR-S609B ArF immersion lithog- record high sales and income raphy scanner, which is the world’s fi rst system to achieve Net sales for the year ended March 31, 2006 advanced a lens having an NA value above 1.0. Following this, we 14.5% year-on-year to ¥730,944 million. Operating plan to launch the NSR-S610C with an NA value of 1.30 income was ¥66,587 million, which represented a in the fourth quarter of 2006 (CY), which will show to 118.0% gain compared with the previous year. As a the world Nikon’s superiority in immersion technology. result, net income grew 19.9% to ¥28,945 million. All of In the fi eld of LCD exposure systems, LCD panels these results marked new record highs for Nikon. continue to get larger at a pace exceeding expecta- These achievements are viewed merely as a stepping tions, providing us with the opportunity to exploit the stone, however, towards even higher performance, as advantages of our unique multi-lens projection optical refl ected in the objectives of our three-year medium system in 7th and 8th generation LCD panel production term management plan. Based on this plan, consolidated equipment. Going forward, we forecast our share in the targets for the year ending March 2009 include net sales market for large LCD exposure systems will continue to of ¥900 billion, operating income of ¥90 billion and a grow along with expansion in the size of LCD panels. debt-equity ratio of less than 30%. Details of the plan In digital SLR cameras, customers have great con- are given later. fi dence in our product line that extends from profes- Nikon has identifi ed two main challenges to over- sional-use to entry-level models. Our compact digital come in order to accomplish these goals: (1) secure a cameras not only incorporate Nikon’s original technolo- leadership position and remain at the vanguard of the gies to enhance user-friendliness such as functions market by leveraging our technical advantages; and (2) that ensure optimized pictures, but also technologies create a highly profi table corporate structure by bolster- accumulated in digital SLR cameras. We will continue to ing manufacturing competitiveness, the quintessence of deliver to market models with the unique Nikon identity. a manufacturer. In the Instruments business, one of the most promis- ing areas for development is in the bioscience fi eld, and Establish market-leading more specifi cally, in the market for microscopes for the technology observation of live cells. Nikon believes that observing Nikon enjoys a strong presence in each of its core mar- live cells will become integral to the development of new kets. In the fi eld of IC steppers and scanners, we are medicines in the coming years. In the year ending March establishing a sound position in the market for cutting 2007, we plan to release the BioStation series of cell cul- edge ArF immersion scanners. During the period, we ture observation systems, which enable the cultivation 02 Ichiro Terato Michio Kariya Executive Vice President, President, Member of the Board, Member of the Board & Chief Financial Offi cer Chief Executive Offi cer & Chief Operating Offi cer NET INCOME (LOSS) RETURN ON EQUITY R&D COSTS PAR SHARE (yen) (%) (millions of yen) 06 78.16 06 13.2 06 37,139 05 65.19 05 13.1 05 33,561 04 6.52 04 1.4 04 30,165 03 (22.03) 03 (4.8) 03 27,506 02 (16.23) 02 (3.3) 02 27,313 Years ended March 31 Years ended March 31 Years ended March 31 03 as well as the observation of live cells. Besides seeking to in Imaging Products, we will work to strengthen com- aggressively develop highly creative new products that petitiveness in the bioscience fi eld in Instruments while match the needs of the market and the times, Nikon aggressively channeling funds into R&D for new busi- will expand business and boost profi tability by further nesses and elemental technologies. strengthening sales and marketing competencies. Nikon is also proactive in its stance towards enter- Bolster corporate governance ing new markets in which we can apply our technical Amid continued globalization of the business environ- advantages. For example, we are presently planning to ment, increasing management effi ciency and transpar- advance into the fi eld of industrial consumption mate- ency, and strengthening the monitoring and supervision rials with our glass materials and component related of business execution are integral to achieving stable businesses. This fi eld is expected to contribute to higher, corporate growth over the medium- to long-term. At more stable profi ts for the Nikon Group. Nikon, corporate governance is viewed as a top manage- ment priority, and as such, we are working hard to create Initiatives to shorten and enhance crucial organizational controls and systems. development lead-time and Initiatives taken to strengthen corporate governance are reduce manufacturing costs outlined on pages 22-23 of this Annual Report. One of the key factors behind greater-than-expected Finally, as members of top management, it is our duty profi tability in Precision Equipment and Imaging to relay the fact that Nikon is now undergoing immense Products was the shortening of development lead-time. change. Another key objective of the medium term man- Promoting simplifi ed design and module standardiza- agement plan is to foster a free and open-minded corpo- tion enabled us to boost profi t-earning capability in rate culture so that motivation levels are optimum and the Precision Equipment, while we were successful in drasti- opinions of all employees, including young engineers, are cally cutting development lead-time for digital cameras more readily heard at the management level.