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SATO’s Genbaryoku – Why Customers Keep Coming Back 2020 The SATO Group has always changed with the times. From the invention of the hand labeler in 1962 to the development of the world’s first barcode printer in 1981, SATO has continually met the needs of the market with revolutionary new products. In the 1990s SATO shifted the focus of its core business to providing total solutions. We began delivering solutions such as barcode Auto-ID technology to a variety of industries, to improve the accuracy and efficiency of labor processes, generating data on the movement of items and connecting it to IT infrastructures, linking the physical with the virtual. The 2014 onwards driving force for our past success has been SATO’s uncompromising passion for hands-on problem- solving. We personally visit our customers’ sites to better understand their operating environment. With Next-generation total solutions this approach we can fully grasp the core of the issues customers face, and truly begin advising them on Innovation through the combination of new technologies, changes and improvements. Our commitment to finding solutions to our customers’ problems is what 2000s processes and services utilizing our “+ONE” approach will give rise to next-generation AIDC solutions, evolving our core cultivated SATO’s Genbaryoku. Even if the focus of our business changes and evolves, the way in which business to create new customer values with our expertise we serve customers will remain the same as it provides the foundation for our continued growth. With the evolution of information technology, our lives have reached new Technologies levels of convenience, and in the future the need to connect the physical Shift to Auto-ID Solution business with the virtual will be even greater. For example, in the e-commerce field it With the advancement of information AIDC is now possible to harmonize inventories with online store data in real-time. technology, SATO established its Automatic Services Innovations Identification and Data Collection (AIDC) Solutions As the digitization of our world continues at an even more rapid rate, SATO 1990s solution business leveraging bar code and will continue to utilize its hands-on approach to connect the dots, and fill RFID technologies and develops its DCS & Processes in gaps in customers’ operations, focusing on optimization through Auto- Labeling business model ID solutions. Moving forward we will continue our pursuit of being a trusted partner that customers keep coming back to. Development of the world’s first thermal barcode printer Genbaryoku – An uncompromising hands-on 1981 Thermal transfer printer for use approach to problem-solving with Point of Sale systems • Be on customer sites to grasp the real situation with our own eyes and ears R With a strong sense of ownership, develop close relationships with customers R Do not simply rely on theories or second hand information • Go the extra mile to truly understand the root of a problem R While focusing on individual details, even down to a single label, you must also be Invention of the hand labeler able to see the big picture, examining customers’ IT systems and workflows to pinpoint issues 1962 Created to help people efficiently R Going beyond simply meeting operational needs, we seek to fully understand the apply price tags to products customers’ business environment to provide them with real solutions • Commit to delivering a solution, then give it your all R Design best-fit solutions through superior development and deployment of hardware, software, consumables and maintenance services R Connect the dots, filling in the gaps between the customer’s divisions and systems R Proactively involve all necessary parties – SATO management, company-wide teams Founding of SATO and optimal business partners – to guarantee customer success 1940 Manufacturing and sale of • Continue to provide comprehensive support following installation bamboo processing machinery R Value close-knit, long-term partnerships with customers over all else R Always seek to support customers’ stable operations R Look beyond the present to envision the future, and strive for continual improvement Contents Business Model 02 Financial Highlights 04 Message from the President 06 Innovation 20 Caring for the Environment 22 Human Resource Development 24 Special Feature Special Feature Special Feature Introduction 14 Apparel 16 Healthcare 18 Corporate Governance 26 Management Team 28 Stock Information / Corporate Data 30 INTEGRATED REPORT 2014 01 Business Model The SATO Group’s Core Competency Providing Safe, Delicious Foods for You and Your Family Auto-ID technology is utilized by a wide variety of industries to quickly and accurately collect data in multiple usage scenarios. SATO leverages the technology to boost precision and efficiency, save on labor, and deliver solutions that provide peace of mind and protect the environment. An example of this in practice is food traceability. Using Auto-ID technology in conjunction with labeling media, we are able to link goods and data with tracking systems to trace the path of food from ingredient delivery, processing and shipping, all the way to the sales floor. In doing so, we can easily and accurately keep a record of the production process. In the event of a problem, through the visualization of the entire supply chain from production to distribution, it is possible to quickly pinpoint the cause. We want people to be able to enjoy safe and delicious foods, and using Auto- ID technologies SATO is able to provide peace of mind at the dinner table. Harvest Production Distribution Retail R Where was this grown? R Are the ingredients fresh? R What about temperature control? R What is the expiration date? R Were pesticides used? R Are there measures against food contamination? The SATO Group’s Business Model – DCS & Labeling To collect data on the movement of goods and people using Auto-ID solutions, we design systems that optimally integrate printers, readers and software. Additionally, we provide the labels, ribbons and consumables for those systems, and after- Added Value Solutions for a Variety of Industries sales support. This delivery of end-to-end solutions is the core of the SATO Group’s business model – Data Collection Systems and Labeling (DCS & Labeling). Precision AIDC Technology Robust Product Lineup Hardware Consumables Maintenance Labor Savings Resource Savings Genbaryoku Design Services Software System Peripherals Peace of Mind Environmental Protection 02 SATO HOLDINGS CORPORATION INTEGRATED REPORT 2014 03 Financial Highlights Fiscal year ending March 31 (Millions of yen) FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 Business Performance Sales 58,862 61,752 68,964 82,491 87,790 78,163 74,917 78,368 80,536 87,256 96,773 Overseas sales ratio 17.3% 18.4% 22.8% 31.5% 31.6% 26.8% 24.2% 23.7% 23.0% 25.6% 29.3% Gross profit 26,865 28,422 30,593 35,890 37,857 32,399 31,279 33,018 34,217 36,410 41,180 Selling, general and administrative expenses 21,358 23,277 25,371 30,195 32,453 31,669 28,705 28,791 29,564 30,958 34,421 Operating income 5,506 5,144 5,222 5,695 5,404 730 2,574 4,226 4,652 5,452 6,758 EBITDA (Earnings before interest, tax, depreciation and amortization) 6,950 6,843 7,252 8,180 8,208 3,565 5,123 6,417 6,830 8,213 9,871 Net income 2,790 3,012 2,646 2,389 2,062 2,050 781 503 1,953 2,726 4,295 Financial position Total assets 49,676 51,705 61,624 66,923 66,103 61,692 64,203 66,134 74,830 77,521 86,737 Net assets 31,785 34,008 36,119 37,508 36,671 35,918 35,985 34,929 36,172 40,205 46,734 Research and development 1,219 1,458 1,280 1,501 1,728 1,922 1,826 1,902 1,859 2,042 2,225 Capital expenditures 2,329 3,498 2,683 4,278 2,424 2,361 2,387 5,084 1,836 3,059 6,106 Depreciation and amortization of goodwill 1,444 1,698 2,029 2,484 2,804 2,835 2,549 2,190 2,177 2,760 3,112 Cash flow Cash flow from operating activities 4,141 2,873 4,801 2,912 4,108 4,994 5,860 1,595 4,434 3,793 10,589 Cash flow from investing activities (1,649) (3,281) (6,575) (4,066) (2,522) (2,217) (2,093) (4,283) (7,015) (984) (4,776) Free cash flow (Net cash provided by operating activities and 2,492 (408) (1,774) (1,154) 1,585 2,777 3,766 (2,687) (2,581) 2,809 5,812 cash used in investing activities) Cash flow from financing activities (721) (999) 2,069 496 (793) (2,476) (826) (3) 3,273 (2,839) (1,511) Cash and cash equivalents at end of year 11,512 10,234 10,751 10,344 11,035 10,814 13,774 10,813 11,377 11,992 16,763 Per share data (yen) Net income (Earnings per share) 90.73 96.01 84.32 76.30 66.70 67.40 25.95 16.71 64.87 90.56 141.57 Book value per share 1,013.23 1,083.72 1,149.80 1,205.33 1,195.69 1,189.50 1,191.84 1,156.88 1,201.02 1,330.77 1,454.90 Dividends per share 28 30 31 32 33 33 33 34 35 37 40 Financial Indicators Gross profit 45.6% 46.0% 44.4% 43.5% 43.1% 41.5% 41.8% 42.1% 42.5% 41.7% 42.6% Operating profit 9.4% 8.3% 7.6% 6.9% 6.2% 0.9% 3.4% 5.4% 5.8% 6.2% 7.0% EBITDA margin 11.8% 11.1% 10.5% 9.9% 9.4% 4.6% 6.8% 8.2% 8.5% 9.4% 10.2% Return on assets (ROA) 10.9% 10.5% 9.5% 8.5% 7.1% 0.6% 3.6% 5.7% 5.9% 7.1% 8.6% Return on equity (ROE) 9.5% 9.2% 7.5% 6.4% 5.6% 5.7% 2.2% 1.4% 5.5% 7.2% 9.9% Equity ratio 64.0% 65.8% 58.6% 56.0% 55.4% 58.1% 55.9% 52.7% 48.3% 51.7% 53.7% Debt-equity ratio (including lease obligations) 1.7% 1.6% 10.2% 15.6% 18.5% 17.1% 19.6% 24.9% 38.2% 19.4% 18.7% Sales (Millions of yen) Operating income (Millions of yen / %) EBITDA (Millions of yen / %) Earnings per share (yen) ROE (%) ROA (%) 9.9 96,773 Operating income
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