A N N U A L R E P O R T2 0 1 5( Y e a r e n d e d M a r c h 3 1 , 2 0 1 5 )
H y d r a u l i c C o n t r o l s
H e a t C o n t r o l P r o d u c t s
A e r o s p a c e P r o d u c t s
Env i ronmenta l S y s t e m s
M i c r o E l e c t r o n i c s T e c h n o l o g y
M i c r o T e c h n o l o g y
S e n s o r s
F u e l C e l l
Various technical resourcesfunneled into new
operations on fuel cells
Commercial hydraulic equipmentoperations started by applying
hydraulic technology for propellers
First industrial heat exchangersproduced by leveraging aircraft
heat exchanger technology
The development departmentinvestigates and developsnew business operations C o n t e n t s
3
6
7
10
13
15
17
19
37
38
M e s s a g e f r o m t h e P r e s i d e n t
C o n s o l i d a t e d F i n a n c i a l H i g h l i g h t s
S e g m e n t O v e r v i e w
A e r o s p a c e a n d R e l a t e d P r o d u c t s
I n d u s t r i a l P r o d u c t s
C o r p o r a t e G o v e r n a n c e
C S R A c t i v i t i e s
E n v i r o n m e n t a l P r e s e r v a t i o n
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
D o m e s t i c a n d O v e r s e a s B a s e s
C o m p a n y P r o f i l e / S t o c k I n f o r m a t i o n
Notes on forward-looking statements Information provided in this annual report contains certain forward-looking statements concerning performance forecasts and projections made by SPP using information available at present (performance forecasts for fiscal 2015 are the figures announced on April 30) and is subject to various risks and uncertainties. Due to various changes, actual results may vary from those projected in the forward-looking statements.
G r o w t h H i s t o r y▶ Starting with high-precision technology for engineering aircraft equipment, SPP has
extended its business into a broad range of creative areas.
▶ SPP is particularly strong in the precision machining of high-strength metal materials, thermal management, and joining of metal materials.
▶ SPP has some 15% of the world market for landing gear systems used in regional jets.
▶ We boast world-class shares of the markets for plate-fin heat exchangers and LNG vaporizers.
293(62%)
Aerospace and Related Products
178(38%)
IndustrialProducts
Landing Gearsand
Landing GearControl Systems
Heat ControlProducts
Other Products:Micro Technology,
Environmental Systems, etc.
Heat Exchangersfor Aircraft
HydraulicControls
Business Mix (results for f iscal 2014)
Group net sa les ¥47.1 bi l l ion
Aerospace and Re la ted Products
I n d u s t r i a l P r o d u c t s
Fu tu re1900 1950 20001961Foundation of SPP
Start of integratedproduction of propellers
Business expanded intolanding gear and heatexchangers for aircraft
Research intoduralumin
Entry into the environmental systemsmarket with the commercialization
of ozone generators
Introduction of vacuumpump technology
Control taken of aplasma etching
specialist
MEMS manufacturingequipment technology
employed to start sensor business
Start of semiconductor/MEMS manufacturingequipment business
Start of liquid crystalmanufacturing equipment
operations
▶
21
Sustained growth in both revenue and earnings
In global growth markets, we wi l l persistently fol low our
“Two-wheeled Growth Model with an Equal Focus on Qual i ty
and Quantity” to achieve our “Aspirat ion” long-term vision.
Pres ident
Other Industrial Products
Heat Control Products
Aerospace and Related Products
Enhancing the Management and Business
Foundation to Achieve the “Aspiration”
Long-Term Vision for 2020
In the spring of 2014, SPP formulated the “Aspiration 2020”
long-term vision as well as the “Mid-Term Management Plan
for Fiscal 2014-2016,” the latter being the first three-year
action plan aimed at achieving the long-term goal.
The long-term vision upholds SPP’s aspiration to be a
group that “works with its customers to create value in global
growth markets.” Focusing on “attractive technologies from a
customer perspective” “in SPP’s existing business fields,” it
aims to ensure “growth in terms of both quality and
quantity.” As targets for 2020, therefore, the “Aspiration”
vision eyes consolidated net sales in the range of ¥100 billion
and operating margin of 8%.
The “Mid-Term Management Plan for Fiscal 2014-2016” is
defined as an action plan to strengthen both foundations of
SPP. First, management will be enhanced with a focus on
four pillars: upgrading of corporate governance, best use of
business resources, enhancement of global management
and group management, and optimization of the business
and product portfolio. Secondly, business operations will be
further improved toward four goals: higher productivity,
improved QCD (quality, cost, and delivery), strengthened
supply chain, and enhanced after-sale services.
Challenges Still Remain Despite
Growth in Both Revenue and
Earnings in FY 2014
In fiscal 2014, the first year of the mid-term plan, all members
of the SPP group worked together to secure incoming
orders and increase sales, while at the same time developing
new products and their applications. As a result, the group’s
consolidated net sales rose by 4.7% from the previous fiscal
year to ¥47.13 billion. Due to efforts in promoting sales and
optimizing costs as well as the effects of the weaker yen,
SPP posted a consolidated operating income of ¥1.59
billion, an increase of ¥0.63 billion. An exchange gain,
2008200720062005 2009 2010 2011 2012 2013 2014 2015Forecast
2020
Net Sales(billion ¥)
OperatingIncome(billion ¥)
Growth in existing business fields with a focus on new products
“Aspiration 2020”Consolidated net sales in the range of ¥100 billionOperating margin of at least 8%
OperatingIncome
0
20
40
60
80
100
-1
0
1
3
5
7
9
Increasingoverseas
sales ratioto 50%
Mid-Term Management Plan
Net Sales
Operating Income
2014
520
19
recognized as a non-operating income, helped push up
consolidated ordinary income to ¥2.02 billion.
Consolidated net income, which includes a ¥0.5 billion gain
on the sale of investment securities related to Micro
Technology, was ¥1.45 billion. For fiscal 2014, SPP paid an
annual dividend of ¥7 per share.
Despite achieving growth in both revenue and earnings,
we had mixed results in the first year of the mid-term
plan.
The current mid-term plan has both aspects of “sowing”
and “harvesting.” In the latter, we are to successfully develop
the operations and products we have prepared so far and
thereby help strengthen our direct earning power. On the
“sowing” side, we will foster new “seeds” of growth to
achieve the “Aspiration 2020” vision. In other words, the plan
is aimed at both investment in sustainable growth and the
improvement of financial strength.
Looking back on fiscal 2014 from these perspectives, the
SPP group made good progress on the “sowing” side for
future growth. The Aerospace Products segment developed
global MRO (maintenance, repairs, and overhaul) operations
under partnership with the Lufthansa group. The Heat
Control Products segment won the first major order in
relation to a shale gas project in North America.
We were not as successful on the “harvest” side of
strengthening our earning power from the existing
operations, however. Despite making progress in optimizing
purchase costs, we are left with challenges in improving the
productivity of aircraft landing gear systems and in marketing
of and receiving orders for new products.
Overcoming Short-term Challenges in FY 2015 for FY 2016 and After to Achieve the Long-term Vision
In fiscal 2015, we expect to achieve net sales of ¥55.0 billion
and an operating income of ¥2.0 billion. These figures
represent year-on-year growth in both revenue and
earnings, but fall short of the levels indicated for the current
fiscal year in the Mid-Term Management Plan.
The reason is that it has been taking time to “harvest” the
fruit grown from previously sown “seeds.” For example,
Aerospace and Related Products suffers from a delay in the
planned improvement of productivity to ensure stable supply
of new products. Industrial Products faces a problem with
catalytic reactors for CompactGTL as C-GTL users have
been slow in making decisions on commercialization.
However, our scenario for achieving the “Aspiration” long-term
2015
600
39
2016
680
54
M e s s a g e f r o m t h e P r e s i d e n t
Note: The SPTS business was divested in August 2011 (the graph does not include the results for the transferred business).
3 4
vision remains entirely unchanged. We aim to achieve mid-
to long-term growth with a focus on developing overseas
operations primarily in three fields. SPP’s commercial aircraft
business is expected to grow steadily; our high-value added
heat exchangers and LNG vaporizers boast a strong
competitive edge in international markets; and our Micro
Technology has a distinctive technology to differentiate itself.
Specifically, SPP has already completed two merger and
acquisition projects in fiscal 2015. One is the purchase of a
Canadian surface finishing service provider with the aim of
improving group capacity to supply aircraft landing gear on a
global basis. The other is the acquisition (by our subsidiary
SPP Technologies) of a U.S.-based Thermal Products business
to ensure that Micro Technology can develop operations
overseas and develop new products by leveraging synergy
with existing operations.
We will develop these operations and products to reach the
“harvest” phase as soon as possible and thereby get closer
to achieving our long-term vision. In fiscal 2015, all members
of the group will work together to that end with a focus on
the five areas described below:
(1) Strengthening corporate governance and fast improvement of ROE
Corporate governance is an aspect of management that
investors are particularly concerned with. As part of an
initiative for its enhancement, SPP will have two External
Directors for the first time to make the board of directors more
active and enable it to make swift decisions to strengthen
both our growth strategies and financial foundation.
ROE is another aspect or parameter of management that
investors take keen interest in. SPP will also strive to improve
this parameter fast by speeding up the implementation of
measures to increase earnings.
(2) Improving group productivity with a focus on Aerospace Products
SPP will need to respond to diverse changes in its business
structure, such as increases in the group’s overall overseas
sales ratio and the growing share of private-sector
demand in Aerospace products, as well as a rise in the
consolidated/non-consolidated ratio within the group. To
this end, we will implement fundamental improvement
measures to achieve the initially planned productivity level,
thereby reducing costs and improving profitability further.
To achieve these targets, we have set up a cross-organizational
task force to accelerate the process of resolving fundamental
issues. In addition, we have started an initiative to increase
the value of our human resources even further by helping
employees broaden their perspective to encompass all aspects
of business including production, sales, and technology.
(3) Solid implementation and completion of commercial- production projects and further development
Aerospace Products will steadily work on the commercial-
production of the MRJ1 and HondaJet2, the development
of the orders from Dornier3, and the development of a
heat exchanger for the Rolls-Royce engine to power the
A330 neo aircraft now being developed by Airbus.
Industrial Products will make solid progress in delivering
large orders related to shale gas.
(4) Developing specialty technologies further
SPP’s core competence lies in the precision machining of
high-strength metal materials, thermal management, and
joining of metal materials. Leveraging these strengths, the
company will accelerate the development of EHA aircraft
landing gear systems, ultra-high performance cooling for
aircraft engines, and heat exchangers for the hydrogen
society of tomorrow.
(5) Improving asset efficiency and free cashflow
Improving free cashflow is indispensable for making timely
investments that are necessary to achieve our “Aspiration”
vision for 2020. To this end we will strive to improve our asset
efficiency. Beginning in fiscal 2015, SPP has introduced ROIC
as a new performance management indicator. As the first
step, we have been giving top priority to reducing inventories.
While there are certainly some delays compared with the
initial targets stated in initial Mid-Term Plan, we will strive to
properly achieve our business vision in order to ensure the
sustainable growth of our corporate value.
1: Japan’s first commercial jet being developed by Mitsubishi Aircraft Corporation. SPP is responsible for MRJ’s landing gear system.2: The private jetplane being developed by Honda. Its landing gear system is supplied by SPP.3: A German aircraft manufacturer. Dornier has selected SPP as the supplier of the landing gear system for an amphibious flying boat.
C o n s o l i d a t e d F i n a n c i a l H i g h l i g h t sF o r t h e y e a r s e n d e d M a r c h 3 1 , 2 0 1 5
¥47.13 billion (+ 4.7%) (+ ¥0.63 billion) (+ ¥0.32 billion)
¥1.59 billion ¥1.45 billion
Net sales
Operating income
Operating margin (not including the SPTS business)
Net income
Total assets
Equity ratio
Per share
Net income
Cash dividends
(million ¥)
(million ¥)
(%)
(million ¥)
(million ¥)
(%)
(¥)
(¥)
56,237
5,026
2.0
4,811
80,095
35.0
90.80
8.00
2010
52,296
4,193
1.2
6,695
72,603
45.6
126.37
8.00
2011
40,171
430
1.1
263
75,585
44.1
4.96
7.00
2012
45,032
963
2.1
585
79,948
41.0
11.05
7.00
2013
47,135
1,598
3.4
1,450
81,899
42.4
27.39
7.00
2014
55,000
2,000
3.6
1,000
87,100
41.3
18.89
7.00
2015Forecast
56,237
52,296
40,171
45,03247,135
2010
42,767
2009
48,805
2008
49,903
2007
50,151
2006
40,346
2005 2011 2012 2013 2014
55,000
2015Forecast
▶ Net Sa les・Operat ing Marg in (not including the SPTS business)
80,095
72,60375,585
79,948
2010
81,283
2009
77,674
2008
72,363
2007
67,293
2006
65,166
2005 2011 2012 2013 2014
81,899
87,100
2015Forecast
▶ Tota l Asse ts・Equ i t y Ra t io
Contribution from SPTS*
Net Sales
Operating Margin (not including the SPTS business)
Total AssetsEquity Ratio
Resul ts for F iscal 2014
(million ¥) (%) (%)(million ¥)
4.1
6.3 6.1
-1.7
0.6
2.0
1.21.1
2.1
3.4
43.844.1
39.8
34.2
29.4
35.0
45.644.1
41.042.4
41.3
3.6
N e ts a l e s
Operatingincome
N e ti n c o m e
0
-10,000
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0
-2.5
5
10
15
100
90
80
70
60
50
40
30
20
10
00
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
*SPP Process Technology Systems (SPTS) has been excluded from consolidation since the third quarter of fiscal 2011, following the transfer of the SPTS shares in the first half of that fiscal year.
5 6
Bus iness Pro f i l e
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(Forecast)
2020
95
117
85
120
90
128
90
176
84
209
100
240Products for public sector
Delivery of components for private-sector applications (Tier 2)
Aiming to be a global Tier 1 supplier
Full-fledged development for the private sector Growing into a landing gear system integrator
Diversifying heat control systems
Starting full-fledged development programs to become a global Tier 1 supplier
Establishing a cycle from the development to commercial-production of heat control systems
12/2014: Wins Dornier Seastar landing gear contract
07/2006: Wins HJ landing gear development contract
Starting commercial-production
Aspiration
Start of commercial-production04/2012: Starts building
Canadian operations
01/2008: Wins MRJ landing gear development contract
Early phase of commercial-production
S e g m e n t O v e r v i e w A e r o s p a c e a n d R e l a t e d P r o d u c t s
Major product lines and SPP’s strengths
QT PumpsHS Pump
Trent 1000®Engine FOHETrent 1000®Engine(Photograph : Courtesy of Rolls-Royce plc.)
Trent 1000®Engine SACOC
Landing Gear Systems
CRJ700/900/1000 Dressed Main Landing Gear AssyImpact absorption during landing
CRJ700/900/1000 Dressed Nose Landing Gear AssySteering of surface movement
CRJ1000 (from Bombardier Web Page)
Heat Management Systems
CX Pump
Hydraulic Control Products
Thermal management and the joining of metal materials are SPP’s specialties here.
High efficiency, compact size, and low weight as well as shapes that help reduce air drag contribute to reducing the fuel consumption and noise of aircraft engines.
Since the 1980s, SPP has supplied heat exchangers for almost all engine series from Rolls-Royce, the famous UK manufacturer of aircraft engines.
Technologies developed for aircraft hydraulic equipment are leveraged to offer hydraulic pumps featuring low consumption, low pulsation, and low noise for various applications such as transport equipment and general industrial equipment.
Under strong partnership with the Haitian group, the world’s largest manufacturer of injection molding equipment, a joint venture has been established to develop business in China.
In 1957, SPP delivered the landing gear system for the T-33 training aircraft to
the former Japanese Defense Agency. Since then, aircraft for the Agency (now
upgraded to a ministry) have almost exclusively been equipped with landing
gear systems from SPP. Today, SPP products account for some 80% of the
landing gear systems installed in the Defense Ministry’s air fleet.
SPP has also been successful in the area of commercial aircraft. In 1997, the
company worked with U.S.-based Menasco to win a landing gear system project
for the CRJ 700 from Bombardier in Canada. SPP landing gear systems currently
have approximately 15% of the world market for regional jets. In addition, the
company has received an order from Mitsubishi Aircraft Corporation for the MRJ
90 landing gear system. With the start of flight services using the Mitsubishi
aircraft, SPP is expected to increase its share of the regional jet market solidly.
Unique Combination of the Precision Machining of High-strength Metal Materials
with Specialized Surface Finishing Ensures Clear DifferentiationDeveloped since the start of propeller production in 1933,
SPP technology for the precision machining of high-strength
metal materials has been highly regarded by our customers. In
J u n e 2 0 1 5 , w e a d d e d f u r t h e r o p e r a t i o n s b y p u r c h a s i n g
a Canadian company engaged in special ized surface finishing
for aircraft components. This purchase has substantial ly
raised SPP’s corporate value, since it makes SPP one of the
few suppliers in the world that are capable of comprehensive
production featuring the unique combination of precision
machining with special ized surface finishing.
SPP Aims to Become a Global Tier 1 Supplier of Landing Gear Systems
for Business-Regional Aircraft
Since our early days, SPP has had the desire to enter the commercial
aircraft market as a global Tier 1 supplier by taking advantage of the
technology it has long developed in public-sector business. To this
end, we have faced the three requirements to be met by a landing
gear system integrator: technological ability, overseas operations,
and MRO. These efforts have ensured continued success. The
orders received in relation to the domestically developed HondaJet
and MRJ aircraft were followed in 2014 by the signing of a landing
gear system contract with Dornier in Germany.Note: A T ier 1 suppl ier concludes d i rect contracts wi th a i rcraf t manufacturers and is
involved in the development and commercia l-product ion of landing gear systems r ight f rom the in i t ia l phase of a i rcraf t pro jects.
Note: MRO stands for maintenance, repai rs, and overhaul .
0
-1,000
-2,000
-3,000
1,000
2,000
3,000
4,000
5,000
Technological development ability as a
Tier 1 supplier
RequirementPrevious Mid-Term Plan
(2011~13)Current Mid-Term Plan(2014~16)
Aspiration 2020(2017~)
Overseas operations
MRO
Purchase of domesticMRO specialist (SPPNECO)Partnership with Lufthansa
for overseas MRO
Foundation ofNorth American subsidiary (SPPCA)
Purchase of CFN
MRJ/HondaJet (HJ)development
Promotion of overseas operations (from Tier 2 to Tier 1)
Start of MRJ/HJ commercial-productionMRJ Roll-Out
HJ’s first flight in Japan Development of new-generation (next-generation and derived) technologies
Wins Dornier contract on Seastar CD 2 landing gear
Expansion of MRO operations
To be utilized also for products for the public sector
To become a Global
Tier 1 Supplier of landing gear
for business-regional aircraft
Net Sales(billion ¥)
0
10
20
30
40
50
Private demandPublic demand
Number of aircraftin service
2013 20332014~33
3,435
Retirements
-2,615
New deliveriesNew deliveries3,508
Number of aircraftin service
4,328
Current SPP share:approx. 15%
SPP’s target as a Tier 1 supplier:CRJ+MRJ+new Tier 1 contracts
Number of aircraft
Projected Demand for Regional Jets wi th 20 to 99 seats (Source: Japan Ai rcraf t Development Corporat ion)
Many years of experience in the design, development, and production technology for landing gear, with a focus on the outstanding precision machining of high-strength metal materials
Involvement in the development projects on the MRJ and HondaJet, both promising products for Japan’s future aviation industry provide opportunities to make technical achievements as a landing gear system integrator.
Purchase of a Canadian specialized surface finishing service provider leads to establishing a production system combining precision machining and specialized surface finishing.
In Japan, SPP took over ANA MRO operations to found a subsidiary in Nagasaki. SPP also works with Lufthansa to strengthen overseas MRO.
7 8
Bus iness Pro f i l e
Note: Some of the share figures indicated above are estimated by SPP.
LNG Vaporizer Heat Exchanger for Air Separation Plant
Silicon Deep Etching System SiO2 Sacrificial Layer Etching System
AOP water treatment systemOzone generator
● Dornier Names SPP Tier 1 Landing Gear Supplier
”Heat/energy sources,” “environment,” and “information-communication
technology” are the keywords that characterize SPP’s Industrial Products. In the
area of heat control, the SPP segment is highly regarded for its LNG vaporizers
and plate-fin heat exchangers.
・SPP open-rack LNG vaporizers have 60% of the world market.
・Our low-temperature industrial heat exchangers dominate the domestic market almost completely and have a 20 to 30% market share worldwide.
・SPP’s element coolers for Shinkansen bullet trains boast the monopoly of the Japanese market.
In the area of information-communication technology, SPP delivers MEMS and
semiconductor manufacturing equipment. Our SiO2 sacrificial layer etching
systems maintain a domestic market share of more than 90%.
S e g m e n t O v e r v i e w I n d u s t r i a l P r o d u c t s
Major product lines and SPP’s strengths
Heat Control Products
Micro Technology
The segment’s original technology for silicon deep etching systems, which are used for processing MEMS and other electronic devices, makes them the segment’s core product category. SPP and its partner SPTS Technologies accommodate 90% of worldwide demand for these systems. (SPP focuses on the Japanese market.)
Environmental Systems
New Operations | Fuel Cells (SOFCs), Wireless Sensor Networks, High Precision Gyro / MEMS Devices
Ozone generating technology is used as a basis to deliver advanced water treatment systems that are ideal for decomposing persistent substances.
Technology developed for aircraft heat exchangers is applied to industrial equipment
With their high reliability and quality, SPP’s high-performance, compact, and lightweight plate-fin heat exchangers are acclaimed as world-class products.
SPP open-rack LNG vaporizers (ORVs) have a higher share of the world market than any other competitor.
SPP serves Japanese heavy electrical equipment manufacturers as their main supplier of inverter-controlled element coolers for fast trains.
In the fiscal year under review (fiscal 2014), Aerospace and Related
Products achieved net sales of ¥29.32 billion, an increase of 10.1% from
the previous year. Operating income rose by 68.4% to ¥1.35 billion. The
segment posted year-on-year growth in both revenue and earnings,
primarily due to favorable developments in the sale of heat exchangers
for aircraft engines and hydraulic equipment for China. Further positive
contributions came from the purchase of MRO operations for aircraft
landing gear as well as the weaker yen.
In fiscal 2015, the segment anticipates a further increase in net sales to
¥34.0 billion due to expected growth in sales, particularly those of
landing gear systems. The segment’s operating income is expected to
be at a prior-year level of ¥1.35 billion, primarily due to an increase in
fixed costs.
▶ Overview of Business Performance in Fiscal 2014
In November 2014, SPP Canada Aircraft, Inc. (SPPCA), a Canadian
subsidiary of SPP, was selected by Dornier Seawings GmbH in
Germany as a landing gear supplier to equip its new Seastar CD2
amphibious flying boat. For the first time, SPPCA received an order
for landing gear systems as a Tier 1 supplier.
SPP is striving to establish itself as a Tier 1 supplier that takes on
direct delivery of landing gear to global aircraft manufacturers. The
new milestone was a tribute to the various measures SPP had taken
to that end.
In April 2015, SPP and Rolls-Royce in the UK concluded an
agreement that SPP take part in the Rolls-Royce project on the Trent
7000 engine. Under this agreement SPP is to design, develop, and
produce heat exchangers for the engine and provide aftermarket
product support. The Trent 7000 is slated for exclusive use in the
A330 neo, the facelifted variant of the A330 aircraft being developed
by Airbus. The A330 neo is to be put into commercial operation in
2017.
● Involvement in the Development of the Rolls-Royce Trent 7000 Engine
In June 2015, SPP Canada Aircraft, Inc. (SPPCA), a Canadian
subsidiary of SPP, completed the acquisition of Tecnickrome
Aeronautique Inc. (Tecnickrome), a Canadian provider of specialized
surface finishing services for aerospace equipment. Following the
2013 purchase of CFN Precision Ltd., a Canadian manufacturer of
landing gear components, the recent acquisition of Tecnickrome will
significantly enhance the SPP group’s overall capability to provide a
stable supply of products.
● SPP Purchases Tecnickrome
¥29.32 billion
¥1.35 billion
21,80520,493 21,181
26,638
2013
29,329
2014
34,000
2015(Forecast)
201220112010
Net Sales(million ¥)
OperatingIncome
(million ¥)
10,000
0
20,000
30,000
40,000
594
11125
805
2013
1,356
2014
1,350
2015(Forecast)
201220112010
500
1,000
1,500
0
T O P I C S
N e ts a l e s
Operatingincome
9 10
2010 2011 2012 2013 2014 2015(Forecast)
¥18.4billion
¥17.8billion
¥21.0billion
2020
¥50.0billion
0
10
20
30
40
50
-1.0
0.0
1.0
2.0
3.0
4.0
Net sales(billion ¥)
Operating margin(%)
¥17.8 billion
¥0.24 billion
Net Sales(million ¥)
OperatingIncome
(million ¥)
N e ts a l e s
Operatingincome
In the fiscal year under review (fiscal 2014), Industrial Products
achieved net sales of ¥17.8 billion, a drop of 3.2% from the previous
fiscal year. Operating income increased by 53.5% to ¥0.24 billion.
The year-on-year decline in net sales was caused by the
postponement of sales in Micro Technology to the next fiscal year
and a delay in launching operations such as those for environmental
systems in China. Operating income was slightly higher than for the
previous fiscal year due to the positive effects of streamlining and
cost reductions.
In fiscal 2015, the segment expects to post growth in both revenue
and earnings. Its net sales will reach ¥21.0 billion due to an increase
in sales from Micro Technology and other operations. Streamlining
effects will raise the segment’s operating income to ¥0.65 billion.
▶ Overview of Business Performance in Fiscal 2014
S e g m e n t O v e r v i e w I n d u s t r i a l P r o d u c t s
Operating with a focus on vaporizers at LNG receiving terminals,
SPP’s heat exchanger business has made numerous achievements.
SPP has aptly responded to the shale gas revolution currently going
on in North America, and worked to expand its business to cover
liquefiers used at LNG export bases. In February 2014, the company
won a major project for large-sized low-temperature industrial heat
exchangers used in liquefiers at the Cove Point Base in Maryland,
shipping the order in March 2015.
For the mass-production of LNG, most export bases employ heat
exchangers of a type (spiral tube) different from the plate-fin type
adopted by SPP. Depending on the liquefying method, however,
spiral tube products are combined with large-size low-temperature
industrial heat exchangers, which are plate-fin products. SPP will
continue to promote its products in this area to contribute to
ensuring stable energy supply.
● SPP Wins a Heat Exchanger Project for a North American LNG Export Base
In June 2015, SPP Technologies Co., Ltd (SPT), a SPP subsidiary,
purchased the Thermal Products business from SPTS Technologies
UK Ltd. in the UK. Based in Silicon Valley, the business is related to
the heat treat furnaces used in semiconductor manufacturing
processes. To take over the business, SPT established a
wholly-owned new U.S. company named SPT Microtechnologies
USA, Inc.
This purchase allows SPP to expand the Micro Technology
operations conducted mainly by SPT and have an overseas site for
the business. At the same time, the company strives to create
maximum synergy with existing products and technologies to
establish itself as a world-class producer of MEMS and semiconductor
manufacturing equipment and thereby ensure further continued
growth.
● Purchase of a Thermal Products Business
18,365
31,80235,054
18,393
-164
4,181
4,901
157
2013
17,806
2014
21,000
2015(Forecast)
201220112010 2013
241
2014
650
2015(Forecast)
201220112010
*SPP Process Technology Systems (SPTS) has been excluded from consolidation since the third quarter of fiscal 2011, following the transfer of the SPTS shares in the first half of that fiscal year.
Contribution from SPTS(※)
Contribution from SPTS(※)
All Existing Departments Strive for Steady Growth
by Introducing New Products and Opening up New MarketsGlobalization is the keyword for our growth in Industrial Products, too.
In connection with LNG vaporizers, many LNG receiving terminals
are expected to be built in Southeast Asian countries in a few
years. Low-temperature industrial heat exchangers will benefit
from numerous projects being planned on natural gas
liquefaction and downstream petrochemical products worldwide.
Particularly promising are exciting developments triggered by the
shale gas revolution in North America. The European railroad car
market is another promising market that promises solid growth.
To take advantage of these opportunities, SPP will aggressively
capitalize on its sales collaboration and partnerships with local
companies. Specific measures will include the strengthening of
marketing activities in individual regions and the local
implementation of final assembly processes.
In the area of Micro Technology, in June 2015 SPP purchased the
Thermal Products operations of the UK’s SPTS and founded a
new group company in the USA. The new affiliate will allow us to
aggressively develop overseas operations and new products in
the area of Micro Technology.
Issue Initiatives/achievements
Sales promotion to shale gas projects in North America
Prioritized strengthening of marketing activities in North America
Wins several large projects (heat exchangers for an LNG manufacturing base and for an ethylene plant)
Catalytic reactors for CompactGTL
Completion of a new enhanced plant for stainless steel heat exchangers for the high-temperature industry
Purchase of a Thermal Products business by SPP Technologies Co., Ltd.Expansion of Micro Technology business
113
3.5%
2.4%
-0.9%
0.9% 1.3%
3.1%
109 123 124 120
250
Heat Control Products
250
Other Industrial Products
34
20
21
43
16
22
33
189
30
18
27
189
35
35
20
Aspiration 2020
Growth drivers
Commercialization of products from new businesses
Environmental business in China
Market launch of new MT equipment
Heat exchangers ・Commercial products
for C-GTL・Expansion of
overseas operations
SPTS (transferred business)
Environmental Systems
Heat Control Products
New Operations
Micro Technology
Operating margin (not including the transferred business)
SPTS business transfer
13
123
Volume ef fectCost reduct ionClearer differentiation
T O P I C S
10,000
20,000
30,000
0
40,000
1,000
0
2,000
-1,000
3,000
4,000
5,000
11 12
Affiliated Companies
Individual business segmentsand indirect department
Business Study Meetings
Responsible Director
Internal AuditingDepartment
ManagementConference
CSRCommittee
AccountingAuditor
Audit & SupervisoryBoard
Audit & SupervisoryBoard Members’ Office
ComplianceCommittee and otherspecial committees
Internal audit
Decision-making Supervision
Appointment/dismissal
Externalaudit
Appointment/dismissal
Cooperation
Audit
Monitoringcontrol
President andRepresentative Director
General Meeting of Shareholders
Board of Directors(including two external directors)
Appointment/dismissal
Legal AdvisorAdvice
Directors and Audit & Supervisory Board Members (As of June 26, 2015)
■ A u d i t & S u p e r v i s o r y B o a r d M e m b e r s
■ D i r e c t o r s
In charge of Heat Exchangers
In charge of Aerospace, Research
In charge of Industrial Hydraulic, Environmental Systems, Microelectronics Technology, Corporate Environmental Control & Facilities Engineering
In charge of Corporate Planning, Controlling & Treasury, Information Systems
In charge of Project Management・Engineering & Development・Quality Assurance・Thermal Control Systems -Aerospace, Purchasing & Transportation
In charge of Sensor, Wireless Sensor Network & Systems, MEMS & Sensor Systems, Fuel Cell Systems
In charge of Business Strategy Planning・Production・Strategic Procurement -Aerospace
In charge of General Administration, Factory Innovation Center
In charge of TSV System Development, Micro Technology
In charge of Sales & Marketing-Aerospace
Attorney at Law
In charge of Business Strategy Planning・Production・Procurement・Engineering・Quality Assurance -Heat Exchangers
Shinichi MIKIPresident
Yoshihisa NAKAMURAExecutive Vice President
Former Mayor of Amagasaki CityExternal Director, GUNZE LIMITEDExternal Director, PEGASUS SEWING MACHINE MFG. CO., LTD.
Member of the Board, Senior Executive Officer, Daikin Industries, Ltd.
Guntaro KAWAMURAExternal Director
Aya SHIRAIExternal Director
Yoshio TAOKASenior Managing Director
Kiyotaka NOGISenior Managing Director
Kazuo SADASenior Managing Director
Katsuhiko HAMADAManaging Director
Natsuo HASHIMOTOManaging Director
Jun SHIRAISHIDirector
Yoshifumi KAWAKAMISenior Audit & Supervisory Board Member
Shigeki IWASHITASenior Audit & Supervisory Board Member
Ei ichi MORIExternal Audit & Supervisory Board Member
General Manager, Group Companies Planning Division, Nippon Steel & Sumitomo Metal Corporation
Susumu MAEKAWAExternal Audit & Supervisory Board Member
Attorney at Law
Yasumasa NAKANISHIExternal Audit & Supervisory Board Member
Ayumu TAKAHASHIManaging Director
Toshihiro HAYAMIDirector
Akihiko MATSUYUKIDirector
Takayuki KASHIWADirector
C o r p o r a t e G o v e r n a n c e
Corporate Governance
■ O v e r v i e w o f C o r p o r a t e G o v e r n a n c e a t S P PSPP has good corporate governance with the Board of Directors and
the Audit & Supervisory Board. The Board of Directors meet at least
once every month to make decisions on important matters and
supervise the implementation of specific tasks. Management
Conference meetings of the senior management and Business Study
Meetings at individual departments are also held as appropriate to
ensure exhaustive discussion. If necessary, our legal advisor provides
relevant advice. These procedures allow the company to carry out its
operations in a fast and appropriate fashion.
Audit & Supervisory Board members attend meetings of the Board of
Directors and other significant meetings to correctly understand and
supervise the way the company is actually managed. They also utilize
the Audit and Supervisory Board Members' Office to help audit the
internal control system and the risk management structure. Under an
agreement with an accounting auditor, the company conducts
regular audits and, as the need arises, receives professional advice.
■ C o m p l i a n c eTo promote compliance activities, SPP has set up a Compliance
Committee, which is responsible for establishing and maintaining
the company's compliance structure.
In carrying out operations at individual departments, regulations on
organizations, division of duties, and decision-making criteria to
clarify the authorities and responsibilities are defined. Furthermore,
internal audit regulations and regulations on the audit of internal
control of financial reporting are in place. According to these
regulations, the Internal Auditing Department works as an
independent organization directly reporting to the President. It
conducts audits on compliance to legal regulations, operational
efficiency, and the establishment and management of the structure
that is stipulated in the Financial Instruments and Exchange Act for
the internal control of financial reporting. It then reports the results
to the President and Audit & Supervisory Board to ensure the validity
of operations as a whole and the reliability of financial reports.
In addition, a whistle-blowing system is established to upgrade the
compliance structure.
■ R i s k M a n a g e m e n tSPP commits itself to understanding and reducing individual risks
existing in the performance of operations. Starting by identifying
such risks, the company sets up special committees on individual
items and establishes regulations on the examination and activities
conducted by each of the committees. The CSR Committee is
responsible for overall risk management by controlling individual
special committees and having them report their activities.
13 14
Safety and Health Committee
Product Liability Committee
Quality Assurance Committee
Human Rights Committee
Environmental Management Committee
Information Security Committee
Risk Management Committee
Compliance Committee
CSRCommittee
SPP cares about the communities in which it operates. We interact with local
people by making donations to local events and inviting them to our summer
festival. We co-sponsored the autumn festival organized by a nearby facility
providing assisted living/rehabilitation services for the disabled. During the
event our car park was opened for visitors to the facility. In Amagasaki City,
SPP’s hometown, we took part in the municipality’s Next-Generation
Development Project, organizing plant tours for elementary school pupils.
Seihokai, the group of SPP's front-line foremen, spearheads the
annual cleanup of walks and
ditches around the SPP Main
Plant. We also takes part in
Hyogo Prefecture’s “Hyogo
Adopt—Lighting Maintenance
Partners” project, helping
maintain road lighting installed
along a prefectural route.
The SPP group started full-fledged CSR activities in April 2006. Chaired
by the President, the CSR Committee has built a framework for CSR
activities to probe into group management from the CSR perspective.
At the same time, we have established the “Code of Conduct” on the
basis of the “Company Principles.” Copies of a brochure describing our
CSR activities and the above rules and basic ideas are distributed to all
employees to develop a keen CSR awareness.
Particular emphasis is placed on compliance activities. Measures include
education for directors and executives by lawyer lectures and other
programs, maintaining a contact for whistle-blowing and consulting on
legal violations, and distribution of an ethics test sheet and card showing
the whistle-blowing contact to all employees.
CSR Activit ies
Employee Relat ions
The “Regulations on Measures against Natural Disasters” provide for
emergencies caused by natural disasters such as earthquakes and
typhoons. Following procedures stated in these regulations, every
July the company registers equipment likely to cause a hazard during
natural disasters, designates evacuation routes and spaces, and
maintains an emergency contact network. In addition, drills on
responding to an earthquake early warning (EEW) are conducted
regularly—in May and November—to ensure the safety of employees.
Emergencies other than natural disasters are addressed by
establishing the “Crisis Management Regulations.” Cards showing
“Action to Be Taken in Emergencies Such as Earthquakes and
Terrorist Attacks” are provided to all employees to ensure the
fastest possible action and communication in the event of a
disaster.
Measures against natural disasters and other emergencies2
Local contr ibutions2
Social contr ibutions1
Human r ights4To increase employee awareness of human rights and thereby prevent
and eliminate all forms of discrimination, SPP provides relevant
education programs including an annual human rights lecture meeting as
well as educational material distributed to all employees during Human
Rights Week (December 4 to 10). In addition, we strive to take every
opportunity to raise the employee awareness of the need to eliminate
discrimination. Examples include providing education for new employees
(both new graduates and mid-career employees) and having
representatives participate in education programs provided by authorities.
SPP properly addresses harassment—most typically sexual harassment
and workplace bullying—by making separate contacts available for both
men and women.
In the medium term, SPP has the basic policy of hiring 10 to 20 university
and college graduates and 20 to 30 graduates from professional schools
and high schools on a periodical basis. The company also responds
flexibly to the needs to expand operations by recruiting mid-career
employees. (SPP welcomed 41 periodically hired employees in April
2015, after recruiting 24 mid-career employees during fiscal 2014.)
The SPP management also faces up to the challenge of promoting
diversity. Specific measures include positive recruitment of the disabled
(the current employment of 34 persons surpasses the legally required
number of 30) and establishing and improving structures for empowering
women (In fiscal 2015, Amagasaki City approved SPP as a gender
equality promotor). In recent years, the company has also committed to
recruiting foreign employees. A further highlight in fiscal 2015 is the
appointment of a female External Director.
Recruitment plans and diversity commitment1
In addition to committing itself to safety education, SPP holds meetings of
the Safety and Health Committee and monthly ceremonies to pray for safety
at an in-house shrine to improve the safety awareness of all employees.
In 2015, we give priority to three areas: continued implementation of measures
to increase safety sensibility, continued operation of the Occupational Safety
and Health Management System (S-OSHMS), and maintenance and
strengthening of the workplace safety and health management structure.
As part of our commitment toward employee mental health, SPP asks an
external counselor to visit the company twice a month to open a temporary
clinic for consultation on various concerns (such as those over psychological
and physical health, human relationships, and family problems).
Safety, health, and f i re prevention3
Year20132014
2015(As of end of June)
001
711
Accidents resulting in leave Accidents not resulting in leave
Relat ions with Society
In fiscal 2014, SPP provided donations and support for various
educational institutions and cultural/sports initiatives. We took part in the
All Japan Student Indoor Flying Robot Contest as presenter, providing
and presenting winners with extra prizes.
SPP’s biannual blood donation events attracted a total of 227
contributors in fiscal 2014.
Shareholder and Investor Relat ions
IR activit ies and disclosure
SPP conducts active IR activities to help shareholders and investors
better understand our business policies and strategies. More specifically,
these include biannual (spring and autumn) presentations of financial
results for institutional investors and analysts, financial summaries and
annual reports for shareholders, and communication via the SPP website.
We will continue to disclose material facts and other relevant
information in an appropriate
manner via the security exchange,
news media, and our website.
We will remain committed to
upgrading our information disclosure
and ensuring the timeliness and usefulness of IR information.
C S R A c t i v i t i e s
Following the Sumitomo business slogan of “valuing credibility and
ensuring reliability,” the Sumitomo Precision Products group conducts
business on the following company principles. In so doing we
discharge our responsibilities to different stakeholders in ensuring
sustained business development and an increase in corporate value.
Company Principles
1. COMPLIANCE: Complying with laws and regulations, we will conduct all business activities based on the highest ethical standards.
2. CUSTOMER SATISFACTION: Focusing intensely on market demands and clients´ needs, we will continue to offer quality products and services to achieve the highest customer satisfaction possible.
3. CHANGE & CHALLENGE: Responding sensitively to global trends, we will boldly try to fully meet these changes and keep our eyes open to new opportunities that accompany this changing atmosphere.
4. HUMAN RESOURCES: Respect ing our human resources, we wi l l provide a support ive environment that encourages each individual's fulfillment and harmony among all employees.
5. COEXISTENCE WITH SOCIETY: By playing an active role in society, we will promote good citizenship with our community and harmony with the surrounding environment.
“Toward a Promising Future”Sumitomo Precision Products Group will continue to increase i ts g loba l p resence wi th innovative technology, and will pave its way toward a prosperous tomorrow.
15 16
Noise generated from around the landing gear during aircraft landing is measured to conduct a numerical analysis of noise sources which helps improve landing gear design
Source: JAXAhttp://www.aero.jaxa.jp/research/ecat/fquroh/
Environmental Management RepresentativeGeneral Manager of Corporate EnvironmentalControl & Facilities Engineering Department
Corporate Environmental Control &Facilities Engineering Department
Environmental ManagementCommittee
Internal EnvironmentalAuditor
Working Departments
Environmental Management Officer
1. Establish an environmental management system. Set and review environmental objectives and targets under the system to develop and continually improve environmental preservation activities involving all employees.
2. Reduce the environmental impact of individual phases of business operations, for example by preventing environmental pollution.
3. Comply with environmental laws, ordinances, and other requirements.4. Improve the environmental awareness of employees and facilitate
their environmental preservation activities.5. Promote company-wide activities for resources/energy saving and recycling.6. Take advantage of basic technologies that have long been developed
in individual fields including Aerospace, Hydraulic Control, Heat Control, and Industrial Products, and Environmental Systems to promote the development of environmental preservation technologies and products as a means of social contribution.
Purchasing / Research /Corporate Environmental Control &Facilities Engineering Department
Sensor /New Operation Department
Industrial Equipment Systems Department
Heat ExchangersDepartment
AerospaceDepartment
Management andSales Department
As a responsible member of society, we recognize the significant need to
preserve the local and global environment and meet the challenge of
“harmony with the surrounding environment” stated in the company principle
as one of the top priorities in management, through the following actions:
Environmental Pol icy and Environmental Management
To reduce the environmental impact of its operations, SPP strongly commits
itself toward company-wide activities for saving energy and resources.
The resources-saving initiative focuses on recycling activities, including
not only the reuse of metallic waste generated from the production
process, but also the reuse of logistics and packaging materials and the
recycling of paper by meticulous separation.
The energy-saving work is spearheaded by the Energy-Saving
Committee. Individual workplaces are expected to reduce energy use
through stringent control. In addition, they try to make a difference
through small efforts, such as switching to energy-saving equipment,
removal of some lights, and turning off the power to unused equipment.
These activities do not immediately result in a substantial reduction in
company-wide energy usage because, at SPP, energy usage during
manufacturing differs depending on the product. But they do help us in
our efforts to maintain it at certain levels and even reduce it.
In developing new aerospace products, SPP always focuses on weight
savings, because component weight is an important determinant of the
aircraft’s fuel consumption, hence its environmental impact. SPP
development engineers also work actively to reduce noise emissions as
a way of contributing to environmental protection.
Environmental ly-Fr iendly Products
Aerospace and Related Products
Noise perceived around airports has
long been a problem in selecting
airport locations and is therefore being
controlled increasingly by international
regulations. As a partner to the JAXA FQUROH (Flight demonstration of
QUiet technology to Reduce nOise from High-lift configurations) project, SPP
has been developing a low-noise landing gear system, which features
reduced levels of wind noise during landing. The company aims to have
the new landing gear adopted in next-generation regional jets.
■ Development of a low-noise landing gear system
All hydraulic pumps from SPP not only feature low energy consumption,
but also generate very low levels of noise.
■ Low-consumption and low-noise hydraulic pumps
Efficient, compact, and lightweight, SPP heat exchangers for aircraft
engines help increase aircraft fuel efficiency. Some of them feature
shapes that help reduce air drag, contributing to reducing noise.
■ Heat exchangers for energy-saving aircraft engines
Energy usage GJ(Thousand)
Specificconsumption
2009 2010 2011 2012 2013 2014
Energy usage GJSpecific consumption per ¥million of added value
▶ E n e r g y u s a g e
In the area of heat exchangers, SPP offers many product lines
that help spread clean energy sources and promote the efficient
use of energy by providing support in saving energy and reducing
environmental impact. Environmentally-friendly products account
for half of the SPP heat exchanger lineup.
Heat Exchangers
Natural gas is regarded as friendly
to the environment since it generates
low emissions of CO2 and NOx
and no sulfur oxides during
combustion. SPP develops and
produces equipment that vaporizes
natural gas liquefied for transport
purposes (LNG).
■ LNG vaporizers
Gas produced at oil fields today is mostly
injected back or burned in the atmosphere,
accelerating global warming.
CompactGTL, a partner of SPP, develops plants
for generating synthetic crude oil from associated
gas—an innovative technology that eliminates gas
emissions while at the same time increasing oil production. SPP is responsible
for the development of reactors that support the CompactGTL process.
■ Reactors for oil field-associated gas liquefying plants
■ Development of fuel cells
Here, SPP works on landfill leachate treatment systems using
ozone and energy visualization systems. Fuel cells, which are
drawing enthusiastic attention as an environmentally friendly
power generation technology, are a further area of development
at SPP. Environmentally-friendly products account for some 40%
of SPP offerings in this category.
Other Industr ial Products
QT PumpsHS PumpHeat exchangers for aircraft engines
Committed toward social contributions through its business
activities, SPP offers many environmentally-friendly products,
which are designed to reduce environmental risks, increase the
efficiency of resources and energy use, or facilitate environmental
preservation. The company also strives to develop new environmental
products and technologies.
O2-
e-
ElectrolyteAnode electrode Cathode electrode
e-
hydrogen H2
Water H2O
reformingFuel**Such as utility gas, LP gas, or kerosene
Oxygen O2 air
E n v i r o n m e n t a l P r e s e r v a t i o n
Ini t iat ives for reducing environmental impact
Fuel cells generate electricity in an electrochemical reaction between oxygen from the air and hydrogen extracted from various fuels such as utility gas. With its high generating efficiency, fuel cell technology produces lower CO2 emissions compared with thermal power generation. It improves energy efficiency even further since the heat generated during power generation can also be used as an energy source. Another highlight is that it generates very little noise, sulfur oxides, or nitrogen oxides.
Hydrogen is raising expectations as a clean source of energy since
the gas generates no CO2 emissions during combustion. All-out
national efforts are now under way to build a hydrogen society.
Hydrogen supply infrastructure is the key requirement for a
widespread use of hydrogen fuel cell vehicles. In this connection, SPP
works on the development of heat exchangers for hydrogen stations.
■ Development of heat exchangers for hydrogen stations
■ AOP treatment equipment (landfill leachate treatment system)
■ EcoWizard (energy visualization system)
17 18
0
100
200
300
400
500
600
0
0.2
0.4
0.6
0.8
1.0
1.2
Mil l ions of YenThousands of U.S. Dol lars
(Note 1)
2015 2014 2015
Mil l ions of YenThousands of U.S. Dol lars
(Note 1)
2015 2014 2015
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
C o n s o l i d a t e d B a l a n c e S h e e tM a r c h 3 1 , 2 0 1 5
ASSETS
CURRENT ASSETS:
Cash and cash equiva lents (Note 12)
Notes and accounts receivable (Note 12) :
Trade
Unconsol idated subsid iar ies and associated companies
A l lowance for doubtfu l accounts
Inventor ies (Note 5)
Deferred tax assets (Note 10)
Other current assets
Tota l current assets
PROPERTY, PLANT AND EQUIPMENT:
Land (Note 6)
Bui ld ings and structures (Note 6)
Machinery and equipment
Lease assets (Note 11)
Construct ion in progress
Tota l
Accumulated depreciat ion
Net property, p lant and equipment
INVESTMENTS AND OTHER ASSETS:
Investment secur i t ies (Notes 4 and 12)
Investments in and advances to unconsolidated subsidiaries and associated companies
Intangib le assets:
Goodwi l l
Other intangib le assets
Deferred tax assets (Note 10)
Other assets
A l lowance for doubtfu l accounts
A l lowance for investment loss
Tota l investments and other assets
TOTAL
¥8,968
20,714
216
(9)
25,643
1,068
378
56,978
4,683
19,198
35,566
415
69
59,931
(40,407)
19,524
2,187
1,710
159
712
400
251
(22)
5,397
¥81,899
¥9,832
20,117
916
(8)
22,104
784
1,113
54,858
4,229
18,525
32,806
375
1,017
56,952
(37,676)
19,276
1,834
1,934
175
434
621
1,062
(186)
(60)
5,814
¥79,948
$74,640
172,401
1,798
(75)
213,425
8,889
3,146
474,224
38,976
159,784
296,013
3,454
574
498,801
(336,305)
162,496
18,202
14,232
1,323
5,926
3,329
2,090
(183)
44,919
$681,639
¥13,610
2,461
2,795
5,085
22
251
2,827
1,103
1,310
1,946
31,410
13,364
759
742
134
80
15,079
10,312
11,332
12,965
(95)
696
194
(680)
34,724
686
35,410
¥81,899
¥15,157
2,330
3,134
4,728
77
3,158
2,374
176
1,172
1,641
33,947
10,488
740
1,073
131
337
12,769
10,312
11,332
11,877
(92)
404
(35)
(1,054)
32,744
488
33,232
¥79,948
$113,275
20,483
23,263
42,322
183
2,089
23,529
9,180
10,903
16,196
261,423
111,228
6,317
6,176
1,115
665
125,501
85,826
94,315
107,907
(791)
5,793
1,615
(5,660)
289,005
5,710
294,715
$681,639
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short- term bank loans (Notes 6 and 12)
Current port ion of long-term debt (Notes 6 and 12)
Payables (Notes 12) :
Trade notes
Trade accounts
Unconsol idated subsid iar ies and associated companies
Construct ion
Other
Income taxes payable
Accrued expenses
Other current l iab i l i t ies
Tota l current l iab i l i t ies
LONG-TERM LIABILITIES:
Long-term debt (Notes 6 and 12)
Deferred tax l iab i l i t ies (Note 10)
L iabi l i ty for ret i rement benef i ts (Note 7)
Asset ret i rement obl igat ions
Other long-term l iab i l i t ies
Tota l long-term l iab i l i t ies
COMMITMENTS AND CONTINGENT LIABILITIES (Note 13)
EQUITY (Notes 6, 8 and 16):
Common stock, authorized, 200,000,000 shares; issued, 53,167,798 shares in 2015 and 2014
Capi ta l surp lus
Reta ined earn ings
Treasury stock - at cost 227,082 shares in 2015 and 222,298 shares in 2014
Accumulated other comprehensive income:
Unreal ized gain on avai lable- for-sa le secur i t ies
Fore ign currency t rans lat ion adjustments
Def ined ret i rement benef i t p lans
Tota l
Minor i ty interests
Tota l equi ty
TOTAL
See notes to consol idated f inancia l statements.
19 20
Mil l ions of YenThousands of U.S. Dol lars
(Note 1)
Yen U.S. Dol lars
2015 2014 2015
Mil l ions of YenThousands of U.S. Dol lars
(Note 1)
2015 2014 2015
Thousands of Shares/Mi l l ions of Yen
Common Stock
Shares Amount Capita lSurplus
Reta inedEarnings
Shares Amount
UnrealizedGain on
Available -for-Sale Securities
ForeignCurrency
TranslationAdjustments
DefinedRetirement
BenefitPlans
Tota l Minor i tyInterests
Tota lEqui ty
Treasury StockAccumulated Other
Comprehensive Income
Thousands of U.S. Dol lars (Note 1)
CommonStock
Amount Capita lSurplus
Reta inedEarnings
Amount
UnrealizedGain on
Available -for-Sale Securities
ForeignCurrency
TranslationAdjustments
DefinedRetirement
BenefitPlans
Tota l Minor i tyInterests
Tota lEqui ty
TreasuryStock
Accumulated Other Comprehensive Income
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
C o n s o l i d a t e d S t a t e m e n t o f I n c o m eY e a r E n d e d M a r c h 3 1 , 2 0 1 5
C o n s o l i d a t e d S t a t e m e n t o f C h a n g e s i n E q u i t yY e a r E n d e d M a r c h 3 1 , 2 0 1 5
NET SALES
COST OF SALES (Note 11) Gross prof i t
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 9 and 11) Operat ing income
OTHER INCOME (EXPENSES): Interest and div idend income Interest expense Loss on disposal of property, p lant and equipment Gain on fore ign currency exchange Equity in earn ings of associated companies Provis ion of a l lowance for doubtfu l accounts Provis ion of a l lowance for investment loss Gain on sa les of investment secur i t ies Other - net Other income - net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS
INCOME TAXES (Note 10) : Current Deferred Tota l income taxes
NET INCOME BEFORE MINORITY INTERESTS
MINORITY INTEREST IN NET INCOME
NET INCOME
PER SHARE OF COMMON STOCK (Note 2.w): Basic net income Cash div idends appl icable to the year
BALANCE, APRIL 1, 2013
Net income
Cash div idends, ¥7.0 per share
Purchase of t reasury stock
Net change in the year
BALANCE, MARCH 31, 2014
Cumulative effect of accounting change
BALANCE, APRIL 1, 2014
Net income
Cash div idends, ¥7.0 per share
Change in scope of consolidation
Purchase of t reasury stock
Net change in the year
BALANCE, MARCH 31, 2015
¥47,135
36,30910,826
9,2281,598
350(274)(249)
69189
(281)
508100934
2,532
1,290(335)
955
1,577
127
¥1,450
¥27.397.00
53,168
53,168
53,168
53,168
¥10,312
10,312
10,312
¥10,312
¥11,332
11,332
11,332
¥11,332
¥11,662
585
(370)
11,877
(20)
11,857
1,450
(370)
28
¥12,965
(194)
(28)
(222)
(222)
(5)
(227)
¥(80)
(12)
(92)
(92)
(3)
¥(95)
¥329
75
404
404
292
¥696
¥(250)
215
(35)
(35)
229
¥194
¥33,305
585
(370)
(12)
(764)
32,744
(20)
32,724
1,450
(370)
28
(3)
895
¥34,724
¥313
175
488
488
198
¥686
¥33,618
585
(370)
(12)
(589)
33,232
(20)
33,212
1,450
(370)
28
(3)
1,093
¥35,410
¥(1,054)
(1,054)
(1,054)
374
¥(680)
BALANCE, MARCH 31, 2014
Cumulat ive effect of account ing change
BALANCE, APRIL 1, 2014 (as restated)
Net income
Cash div idends, $0.06 per share
Change in scope of consol idat ion
Purchase of t reasury stock
Net change in the year
BALANCE, MARCH 31, 2015
$85,826
85,826
$85,826
$94,315
94,315
$94,315
$98,851
(166)
98,685
12,068
(3,079)
233
$107,907
$(766)
(766)
(25)
$(791)
$3,362
3,362
2,431
$5,793
$(291)
(291)
1,906
$1,615
$272,525
(166)
272,359
12,068
(3,079)
233
(25)
7,449
$289,005
$4,062
4,062
1,648
$5,710
$276,587
(166)
276,421
12,068
(3,079)
233
(25)
9,097
$294,715
$(8,772)
(8,772)
3,112
$(5,660)
¥45,032
35,2559,777
8,814963
168(261)
(17)761
21(163)
(60)
(32)417
1,380
396281677
703
118
¥585
¥11.057.00
Di luted net income per share is not presented because no di lut ive secur i t ies ex ist .
See notes to consol idated f inancia l statements.
$392,301
302,19790,104
76,80413,300
2,913(2,280)(2,072)
5,751741
(2,339)
4,228832
7,774
21,074
10,736(2,788)
7,948
13,126
1,058
$12,068
$0.230.06
C o n s o l i d a t e d S t a t e m e n t o f C o m p r e h e n s i v e I n c o m eY e a r E n d e d M a r c h 3 1 , 2 0 1 5
NET INCOME BEFORE MINORITY INTERESTS
OTHER COMPREHENSIVE INCOME (Note 14) : Unreal ized gain on avai lable- for-sa le secur i t ies Fore ign currency t rans lat ion adjustments Def ined ret i rement benef i t p lans Share of other comprehensive income in associates Tota l other comprehensive income
COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent Minor i ty interests
¥1,577
292201374
76943
¥2,520
¥2,345175
¥703
75180
98353
¥1,056
¥876180
See notes to consol idated f inancia l statements.
See notes to consol idated f inancia l statements.
$13,126
2,4311,6723,113
6327,848
$20,974
$19,5171,457
(APRIL 1, 2014, as previously reported)
(as restated)
(APRIL 1, 2014, as previously reported)
21 22
Mil l ions of Yen
Thousands of U.S. Dol lars
(Note 1)
2015 2014 2015
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sY e a r E n d e d M a r c h 3 1 , 2 0 1 5
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
C o n s o l i d a t e d S t a t e m e n t o f C a s h F l o w sY e a r E n d e d M a r c h 3 1 , 2 0 1 5
OPERATING ACTIVITIES:
Income before income taxes and minor i ty interests
Adjustments for :
Income taxes paid
Income taxes refunded
Depreciat ion and amort izat ion
Amort izat ion of goodwi l l
Loss on disposal of property, p lant and equipment
Increase in a l lowance for doubtfu l accounts
Increase in accrued expenses
Decrease ( increase) in l iab i l i ty for ret i rement benef i ts
Increase in a l lowance for investment loss
Increase in asset ret i rement obl igat ions
Gain on sa les of investment secur i t ies
Gain on fore ign currency exchange
Equi ty in earn ings of associated companies
Changes in assets and l iab i l i t ies, net of ef fects:
Decrease in t rade notes and accounts receivable
Increase in inventor ies
Decrease ( increase) in other current assets
Increase (decrease) in t rade notes and accounts payable
Decrease ( increase) in other current l iab i l i t ies
Other - net
Tota l adjustments
Net cash prov ided by (used in ) operat ing act iv i t ies
INVESTING ACTIVITIES:
Purchases of property, p lant and equipment
Purchase of intangib le assets
Proceeds f rom sales of property, p lant and equipment
Purchases of investments in subsidiaries resulting in change in scope of consolidation
Purchases of investments in consol idated subsid iary
Purchases of investment secur i t ies
Proceeds f rom sales of investment secur i t ies
Payments of loans receivable
Proceeds f rom col lect ion of long-term loans receivable
Other - net
Net cash used in invest ing act iv i t ies
FINANCING ACTIVITIES:
Increase (decrease) in short- term bank loans - net
Proceeds f rom long-term debt
Repayments of long-term debt
D iv idends paid
Payments for sa les and redempt ion by insta l lment payment
Cash div idends paid to minor i ty shareholders
Other - net
Net cash prov ided by f inancing act iv i t ies
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARIES
CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consol idated f inancia l statements.
1.BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Sumitomo
Precision Products Co., Ltd. (the "Company") have been prepared in
accordance with the provisions set forth in the Japanese Financial
Instruments and Exchange Act and its related accounting regulations and in
accordance with 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 Company's consolidated
financial statements issued domestically in order to present them in a form
which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2014 consolidated financial
statements to conform to the classifications used in 2015.
The consolidated financial statements are stated in Japanese yen, the
currency of the country in which the Company is incorporated and operates.
The translations of Japanese yen amounts into U.S. dollar amounts are
included solely for the convenience of readers outside Japan and have been
made at the rate of ¥120.15 to $1, the approximate rate of exchange at
March 31, 2015. Such translations should not be construed as
representations 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 March 31,
2015, include the accounts of the Company and its thirteen (ten in 2014)
significant subsidiaries (together, the "Group"). SPP Nagasaki
Engineering Co., Ltd., Shinsen Seiki Co., Ltd. and M2M Technologies
Inc. became consolidated subsidiaries during the period.
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.
Investments in four (four in 2014) associated companies are accounted
for by the equity method.
Investments in the remaining unconsolidated subsidiary and associated
company are stated at cost. If the equity method of accounting had
been applied to the investments in these companies, the effect on the
accompanying consolidated financial statements would not be material.
The excess of the cost of acquisition over the fair value of the net assets
of an acquired subsidiary at the date of acquisition is being amortized
over a period of 10 years.
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 - In May 2006, the Accounting
Standards Board of Japan (the "ASBJ") issued ASBJ Practical Issues
Task Force (PITF) No. 18, "Practical Solution on Unification of Accounting
Policies Applied to Foreign Subsidiaries for the Consolidated Financial
Statements." PITF No. 18 prescribes that the accounting policies and
procedures applied to a parent company and its subsidiaries for similar
transactions and events 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
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 other comprehensive income; (c) expensing capitalized
development costs of R&D; (d) cancellation of the fair value model of
accounting for property, plant and equipment and investment properties
and incorporation of the cost model of accounting; and (e) exclusion of
minority interests from net income, if contained in net income.
c. Unification of Accounting Policies Applied to Foreign Associated
Companies for the Equity Method - In March 2008, the ASBJ issued
ASBJ Statement No. 16, "Accounting Standard for Equity Method of
Accounting for Investments." The new standard requires adjustments to
be made to conform the associate's accounting policies for similar
transactions and events under similar circumstances to those of the
parent company when the associate's financial statements are used in
applying the equity method unless it is impracticable to determine such
adjustments. In addition, financial statements prepared by foreign
associated companies in accordance with either International Financial
Reporting Standards or generally accepted accounting principles in the
United States of America tentatively may be used in applying the equity
method if the following items are adjusted 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 other comprehensive income; (c) expensing capitalized
development costs of R&D; (d) cancellation of the fair value model of
accounting for property, plant and equipment and investment properties
and incorporation of the cost model of accounting; and (e) exclusion of
minority interests from net income, if contained in net income.
d. Business Combinations - In October 2003, the Business Accounting
Council issued a Statement of Opinion, "Accounting for Business
Combinations," and in December 2005, the ASBJ issued ASBJ
Statement No. 7, "Accounting Standard for Business Divestitures" and
ASBJ Guidance No. 10, "Guidance for Accounting Standard for
Business Combinations and Business Divestitures." The accounting
standard for business combinations allowed companies to apply the
pooling-of-interests method of accounting only when certain specific
criteria are met such that the business combination is essentially
regarded as a uniting-of-interests. For business combinations that do
not meet the uniting-of-interests criteria, the business combination is
considered to be an acquisition and the purchase method of accounting
is required. This standard also prescribes the accounting for
combinations of entities under common control and for joint ventures.
¥2,532
(412)45
2,46120
249284
29(17)
3(508)
(25)(89)
512(2,998)
83315
(299)23
(324)2,208
(4,453)(118)
(21)(7)
(31)511
(520)546
11(4,082)
(1,599)5,281
(2,299)(370)(201)
(2)(2 )
808
108(958)
9,83294
¥8,968
¥1,380
(355)7
2,1301817
170117
660
3
(265)(21)
68(2,746)
(178)(1,511)
415(72)
(2,137)(757)
(1,170)(128)
15
(708)(320)
(164)3432
(2,409)
8432,337
(2,548)(370)(218)
(5)(3 )36
200(2,930)12,762
¥9,832
$21,074
(3,429)375
20,483166
2,0722,364
241(141)
25(4,228)
(208)(741)
4,261(24,952)
6912,622
(2,489)191
(2,697)18,377
(37,062)(982)
(175)(58)
(258)4,253
(4,328)4,544
92(33,974)
(13,308)43,953
(19,134)(3,079)(1,673)
(17)(17)
6,725
899(7,973)81,831
782$74,640
23 24
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
In December 2008, the ASBJ issued a revised accounting standard for
business combinations, ASBJ Statement No. 21, "Accounting Standard
for Business Combinations." Major accounting changes under the
revised accounting standard are as follows: (1) The revised standard
requires accounting for business combinations only by the purchase
method. As a result, the pooling of interests method of accounting is no
longer allowed. (2) The previous accounting standard required research
and development costs to be charged to income as incurred. Under the
revised standard, in-process research and development costs (IPR&D)
acquired in the business combination are capitalized as an intangible
asset. (3) The previous accounting standard provided for a bargain
purchase gain (negative goodwill) to be systematically amortized over a
period not exceeding 20 years. Under the revised standard, the acquirer
recognizes the bargain purchase gain in profit or loss immediately on the
acquisition date after reassessing and confirming that all of the assets
acquired and all of the liabilities assumed have been identified after a
review of the procedures used in the purchase price allocation. The
revised standard was applicable to business combinations undertaken
on or after April 1, 2010.
The Group acquired 100% of SPP Nagasaki Engineering Co, Ltd. on April
1, 2014, and accounted for it by the purchase method of accounting.
e. 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, which mature or become due
within three months of the date of acquisition.
f. Inventories - Inventories are stated at the lower of cost, determined by the
average method for finished goods, semi-finished goods, and work in
process, by the specific identification method for certain work in process,
and by the moving-average method for all raw materials and supplies, or
net selling value.
g. Investment Securities - The standard requires all applicable securities to
be classified and accounted for, depending on management's intent, as
trading securities, held-to-maturity debt securities or available-for-sale
securities. The Group does not have securities in the former two
categories.
Available-for-sale securities, which are not classified as either trading
securities or held-to-maturity debt securities, are reported at fair value,
with unrealized gains and losses, net of applicable taxes, reported in a
separate component of equity.
Nonmarketable available-for-sale securities are stated at cost
determined by the moving-average method. For other-than-temporary
declines in fair value, investment securities are reduced to net realizable
value by a charge to income.
h. Property, Plant and Equipment - Property, plant and equipment are
stated at cost. Depreciation of property, plant and equipment of the
Company and its consolidated domestic subsidiaries is computed
generally by the declining-balance method, while the straight-line method
is principally applied to buildings and lease assets of the Company and
property, plant and equipment of consolidated foreign subsidiaries. The
range of useful lives is principally from 3 to 50 years for buildings and
structures and from 4 to 9 years for machinery and equipment. The
useful lives for lease assets are the terms of the respective leases.
i. Other Intangible Assets - Intangible assets, except for goodwill, are
stated at cost less accumulated amortization, which is computed by the
straight-line method over the estimated useful lives of the assets. The
useful life is principally 5 years for software for internal use.
j. Long-Lived Assets - The Group reviews its long-lived assets for
impairment whenever events or changes in circumstances indicate the
carrying amount of an asset or asset group may not be recoverable. An
impairment loss is recognized if the carrying amount of an asset or asset
group exceeds the sum of the undiscounted future cash flows expected
to result from the continued use and eventual disposition of the asset or
asset group. The impairment loss would be measured as the amount by
which the carrying amount of the asset exceeds its recoverable amount,
which is the higher of the discounted cash flows from the continued use
and eventual disposition of the asset or the net selling price at
disposition.
k. Derivatives and Hedging Activities - The Group uses derivative financial
instruments to manage its exposures to fluctuations in foreign exchange
and interest rates. Foreign exchange forward contracts and interest rate
swaps are utilized by the Group to reduce foreign currency exchange
and interest rate risks. The Group does not enter into derivatives for
trading or speculative purposes.
Derivative financial instruments are classified and accounted for as
follows: (1) all derivatives are recognized as either assets or liabilities and
measured at fair value, and gains or losses on derivative transactions are
recognized in the consolidated statement of income, and (2) for
derivatives used for hedging purposes, if such derivatives qualify for
hedge accounting because of high correlation and effectiveness
between the hedging instruments and the hedged items, gains or losses
on derivatives are deferred until maturity of the hedged transactions.
Interest rate swaps, which qualify for hedge accounting and meet
specific matching criteria are not remeasured at market value but the
differential paid or received under the swap agreements is recognized
and included in interest expense.
l. Allowance for Doubtful Accounts - Notes and accounts receivable,
including loans and other receivables, are valued by providing individually
estimated uncollectible amounts plus the amounts for probable losses
calculated by applying a percentage based on collection experience to
the remaining accounts.
m. Allowance for Investment Loss - Allowance for investment loss provides
for loss from investments to associated companies. The amount is
estimated in light of the financial standings of the associated companies.
n. Retirement Benefits - The Company and its consolidated domestic
subsidiaries have defined benefit retirement plans covering substantially
all of their employees. The Group accounts for the liability for retirement
benefits based on projected benefit obligations and plan assets at the
consolidated balance sheet date.
Effective April 1, 2000, the Company adopted a new accounting
standard for retirement benefits and accounted for the liability for
retirement benefits based on the projected benefit obligations and plan
assets at the consolidated balance sheet date. The projected benefit
obligations are attributed to periods on a straight-line basis. Actuarial
gains and losses are amortized on a straight-line basis over 10 years
within the average remaining service period. Past service costs are
amortized on a straight-line basis over 10 years within the average
remaining service period.
In May 2012, the ASBJ issued ASBJ Statement No. 26, "Accounting
Standard for Retirement Benefits" and ASBJ Guidance No. 25,
"Guidance on Accounting Standard for Retirement Benefits," which
replaced the accounting standard for retirement benefits that had been
issued by the Business Accounting Council in 1998 with an effective date
of April 1, 2000, and the other related practical guidance, and were
followed by partial amendments from time to time through 2009.
(a) Under the revised accounting standard, actuarial gains and losses
and past service costs that are yet to be recognized in profit or loss
are recognized within equity (accumulated other comprehensive
income), after adjusting for tax effects, and any resulting deficit or
surplus is recognized as a liability (liability for retirement benefits) or
asset (asset for retirement benefits).
(b) The revised accounting standard does not change how to recognize
actuarial gains and losses and past service costs in profit or loss.
Those amounts are recognized in profit or loss over a certain period
no longer than the expected average remaining service period of the
employees. However, actuarial gains and losses and past service
costs that arose in the current period and have not yet been
recognized in profit or loss are included in other comprehensive
income and actuarial gains and losses and past service costs that
were recognized in other comprehensive income in prior periods and
then recognized in profit or loss in the current period are treated as
reclassification adjustments.
(c) The revised accounting standard also made certain amendments
relating to the method of attributing expected benefit to periods, the
discount rate and expected future salary increases.
This accounting standard and the guidance for (a) and (b) above are
effective for the end of annual periods beginning on or after April 1, 2013,
and for (c) above are effective for the beginning of annual periods
beginning on or after April 1, 2014, or for the beginning of annual periods
beginning on or after April 1, 2015, subject to certain disclosure in March
2015, all with earlier application being permitted from the beginning of
annual periods beginning on or after April 1, 2013. However, no
retrospective application of this accounting standard to consolidated
financial statements in prior periods is required.
The Group applied the revised accounting standard and guidance for
retirement benefits for (a) and (b) above, effective March 31, 2014, and
for (c) above, effective April 1, 2014.
With respect to (c) above, the Group changed the method of attributing
the expected benefit to periods from a straight-line basis to a benefit
formula basis and the method of determining the discount rate from
using the period which approximates the expected average remaining
service period to using a single weighted average discount rate reflecting
the estimated timing and amount of benefit payment, and recorded the
effect of (c) above as of April 1, 2014, in retained earnings. The effects of
adopting the revised accounting standard are immaterial.
o. Research and Development Costs - Research and development costs
are charged to income as incurred.
p. Asset Retirement Obligations - In March 2008, the ASBJ issued ASBJ
Statement No. 18, "Accounting Standard for Asset Retirement Obligations"
and ASBJ Guidance No. 21, "Guidance on Accounting Standard for Asset
Retirement Obligations." Under this accounting standard, an asset
retirement obligation is defined as a legal obligation imposed either by law
or contract that results from the acquisition, construction, development and
normal operation of a tangible fixed asset and is associated with the
retirement 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 the carrying amount of the liability and the capitalized
amount of the related asset retirement cost.
q. Leases - In March 2007, the ASBJ issued ASBJ Statement No. 13,
"Accounting Standard for Lease Transactions," which revised the
previous accounting standard for lease transactions. The revised
accounting standard for lease transactions was effective for fiscal years
beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases that were
deemed to transfer ownership of the leased property to the lessee were
capitalized. However, other finance 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 requires that all finance
lease transactions be capitalized by recognizing lease assets and lease
obligations in the consolidated balance sheet.
The Company and its consolidated domestic subsidiaries applied the
revised accounting standard effective April 1, 2008.
All other leases are accounted for as operating leases.
r. Bonuses to Directors and Audit & Supervisory Board Members -
Bonuses to directors and Audit & Supervisory Board members are
accrued at the end of the year to which such bonuses are attributable.
s. Construction Contracts - In December 2007, the ASBJ issued ASBJ
Statement No. 15, "Accounting Standard for Construction Contracts"
and ASBJ Guidance No. 18, "Guidance on Accounting Standard for
Construction Contracts." Under this accounting standard, construction
revenue and construction costs should be recognized by the
percentage-of-completion method if the outcome of a construction
contract can be estimated reliably. When total construction revenue,
total construction costs and the stage of completion of the contract at
the consolidated balance sheet date can be reliably measured, the
outcome of a construction contract is deemed to be estimated reliably.
If the outcome of a construction contract cannot be reliably estimated,
the completed-contract method should be applied. When it is probable
that the total construction costs will exceed total construction revenue,
25 26
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
an estimated loss on the contract should be immediately recognized by
providing for a loss on construction contracts.
t. Income Taxes - The provision for income taxes is computed based on the
pretax income included in the consolidated statement of income. 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 of assets and
liabilities. Deferred taxes are measured by applying currently enacted
income tax rates to the temporary differences.
u. 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 at the consolidated
balance sheet date. The foreign exchange gains and losses from
translation are recognized in the consolidated statement of income.
v. Foreign Currency Financial Statements - The consolidated balance sheet
accounts and revenue and expense accounts of the consolidated foreign
subsidiaries are translated into Japanese yen at the current exchange rate
as of the consolidated 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.
w. Per Share Information - Basic net income per share is computed by
dividing net income available to common shareholders by the
weighted-average number of common shares outstanding for the period,
retroactively adjusted for stock splits. The number of common shares
used in computing basic net income per share was 52,943 thousand
shares for 2015 and 52,968 thousand shares for 2014.
Diluted net income per share reflects the potential dilution that could occur
if securities were exercised or converted into common stock. Diluted net
income per share of common stock assumes full conversion of the
outstanding convertible notes and bonds at the beginning of the year (or at
the time of issuance) with an applicable adjustment for related interest
expense, net of tax, and full exercise of outstanding warrants (if any).
Diluted net income per share is not disclosed because there were no potentially
dilutive securities outstanding for the years ended March 31, 2015 and 2014.
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.
x. Accounting Changes and Error Corrections - In December 2009, the ASBJ
issued ASBJ Statement No. 24, "Accounting Standard for Accounting
Changes and Error Corrections" and ASBJ Guidance No. 24, "Guidance on
Accounting Standard for Accounting Changes and Error 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 specific
transitional 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 the change if the change affects that period only, and is
accounted for prospectively if the change affects both the period 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.
y. New Accounting Pronouncements
Accounting Standards for Business Combinations and Consolidated
Financial Statements - In September 2013, the ASBJ issued revised ASBJ
Statement No. 21, "Accounting Standard for Business Combinations,"
revised ASBJ Guidance No. 10, "Guidance on Accounting Standards for
Business Combinations and Business Divestitures," and revised ASBJ
Statement No. 22, "Accounting Standard for Consolidated Financial
Statements." Major accounting changes are as follows:
(a) Transactions with noncontrolling interest - A parent's ownership
interest in a subsidiary might change if the parent purchases or sells
ownership interests in its subsidiary. The carrying amount of minority
interest is adjusted to reflect the change in the parent's ownership
interest in its subsidiary while the parent retains its controlling interest
in its subsidiary. Under the current accounting standard, any
difference between the fair value of the consideration received or paid
and the amount by which the minority interest is adjusted is
accounted for as an adjustment of goodwill or as profit or loss in the
consolidated statement of income. Under the revised accounting
standard, such difference shall be accounted for as capital surplus as
long as the parent retains control over its subsidiary.
(b) Presentation of the consolidated balance sheet - In the consolidated
balance sheet, "minority interest" under the current accounting
standard will be changed to "noncontrolling interest" under the
revised accounting standard.
(c) Presentation of the consolidated statement of income - In the
consolidated statement of income, "income before minority interest"
under the current accounting standard will be changed to "net
income" under the revised accounting standard, and "net income"
under the current accounting standard will be changed to "net
income attributable to owners of the parent" under the revised
accounting standard.
(d) Provisional accounting treatments for a business combination - If the
initial accounting for a business combination is incomplete by the end
of the reporting period in which the business combination occurs, an
acquirer shall report in its financial statements provisional amounts for
the items for which the accounting is incomplete. Under the current
accounting standard guidance, the impact of adjustments to
provisional amounts recorded in a business combination on profit or
loss is recognized as profit or loss in the year in which the
measurement is completed. Under the revised accounting standard
guidance, during the measurement period, which shall not exceed
one year from the acquisition, the acquirer shall retrospectively adjust
the provisional amounts recognized at the acquisition date to reflect
new information obtained about facts and circumstances that existed
as of the acquisition date and that would have affected the
measurement of the amounts recognized as of that date. Such
adjustments shall be recognized as if the accounting for the business
combination had been completed at the acquisition date.
(e) Acquisition-related costs - Acquisition-related costs are costs, such
as advisory fees or professional fees, which an acquirer incurs to
effect a business combination. Under the current accounting standard,
the acquirer accounts for acquisition-related costs by including
them in the acquisition costs of the investment. Under the revised
accounting standard, acquisition-related costs shall be accounted
for as expenses in the periods in which the costs are incurred.
The above accounting standards and guidance for (a) transactions with
noncontrolling interest, (b) presentation of the consolidated balance
sheet, (c) presentation of the consolidated statement of income, and (e)
acquisition-related costs are effective for the beginning of annual periods
beginning on or after April 1, 2015. Earlier application is permitted from
the beginning of annual periods beginning on or after April 1, 2014,
except for (b) presentation of the consolidated balance sheet and (c)
presentation of the consolidated statement of income. In the case of
earlier application, all accounting standards and guidance above, except
for (b) presentation of the consolidated balance sheet and (c)
presentation of the consolidated statement of income, should be applied
simultaneously.
Either retrospective or prospective application of the revised accounting
standards and guidance for (a) transactions with noncontrolling interest
and (e) acquisition-related costs is permitted. In retrospective application
of the revised standards and guidance, the accumulated effects of
retrospective adjustments for all (a) transactions with noncontrolling
interest and (e) acquisition-related costs which occurred in the past shall
be reflected as adjustments to the beginning balance of capital surplus
and retained earnings for the year of the first-time application. In
prospective application, the new standards and guidance shall be
applied prospectively from the beginning of the year of the first-time
application.
The revised accounting standards and guidance for (b) presentation of
the consolidated balance sheet and (c) presentation of the consolidated
statement of income shall be applied to all periods presented in financial
statements containing the first-time application of the revised standards
and guidance.
The revised standards and guidance for (d) provisional accounting
treatments for a business combination are effective for a business
combination which occurs on or after the beginning of annual periods
beginning on or after April 1, 2015. Earlier application is permitted for a
business combination which occurs on or after the beginning of annual
periods beginning on or after April 1, 2014.
The Company expects to apply the revised accounting standards and
guidance for (a), (b), (c) and (e) above from April 1, 2015, and for (d)
above for a business combination which will occur on or after April 1,
2015, and is in the process of measuring the effects of applying the
revised accounting standards and guidance in future applicable periods.
3.CHANGES IN PRESENTATIONS
"Payments of loans receivable" and "Proceeds from collection of long-term
loans receivable" were included in "Other - net" among the investing
activities section of the consolidated statement of cash flows for the year
ended March 31, 2014. Since the amounts increased, such amounts are
separately presented in the investing activities section of the consolidated
statement of cash flows the year ended March 31, 2015. The amounts
included in "Other - net" as of March 31, 2014, were ¥164 million and ¥34
million, respectively.
4.INVESTMENT SECURITIES
The cost and aggregate fair value of available-for-sale securities at March
31, 2015 and 2014, were as follows:
The proceeds, realized gains and realized losses of the available-for-sale
securities which were sold during the year ended March 31, 2015, were as
follows:
5.INVENTORIES
Inventories at March 31, 2015 and 2014, consisted of the following:
6.SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans bear interest at rates ranging from 0.43% to 6.00%
at March 31, 2015, and from 0.44% to 6.00% at March 31, 2014.
Long-term debt at March 31, 2015 and 2014, consisted of the following:
Equity securities
Cost
¥957
UnrealizedGains
Millions of YenUnrealized
LossesFair Value
¥614 ¥1,571
March 31, 2014
Equity securities
Cost
$8,198
UnrealizedGains
Thousands of U.S. DollarsUnrealized
LossesFair Value
$7,940 $16,138
March 31, 2015
Equity securities
Cost
¥985
UnrealizedGains
Millions of YenUnrealized
LossesFair Value
¥954 ¥1,939
March 31, 2015
Equity securities
Proceeds
¥511
RealizedGains
Millions of YenRealized
Loss
¥508
March 31, 2015
Finished products and semi-finished products
Work in process
Raw materials and supplies
Total
2015
¥5,413
11,678
8,552
¥25,643
¥4,590
10,160
7,354
¥22,104
$45,052
71,178
97,195
$213,425
2014 2015
Millions of Yen Thousands ofU.S. Dollars
Equity securities
Proceeds
$4,253
RealizedGains
Thousands of U.S. DollarsRealized
Loss
$4,228
March 31, 2015
27 28
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
Annual maturities of long-term debt, as of March 31, 2015, for the next five
years and thereafter were as follows:
The carrying amounts of assets pledged as collateral for long-term bank
loans of ¥3,479 million ($28,955 thousand) and long-term payables of ¥62
million ($516 thousand) at March 31, 2015, were as follows:
The above assets are provided for the factory foundation mortgage.
The above collateralized long-term debt and long-term payables include the
current portion of long-term debt and long-term payables.
Long-term bank loans include syndicate loan agreements amounting to
¥6,600 million ($54,931 thousand) at March 31, 2015. In the event that any
of the following covenants are violated, the Company may lose the benefit of
the term for all the liabilities under these agreements.
These agreements include the following financial restriction provisions:(1) Ordinary income in the consolidated or nonconsolidated statements of
operations should not be negative for two consecutive years on or after
the fiscal year ended March 31, 2012. Ordinary income means income
before income taxes less extraordinary items. The amount of ordinary
income in the consolidated and nonconsolidated statements of
operations for the year ended March 31, 2015, are ¥2,024 million and
¥1,880 million, respectively. (2) The amount of equity in the consolidated balance sheet at the end of
fiscal year should be more than ¥22,500 million.(3) The amount of equity in the nonconsolidated balance sheet at the end of
fiscal year should be more than ¥22,000 million. The amount of equity in
the nonconsolidated balance sheet for the year ended March 31, 2015,
is ¥35,575 million.
7.RETIREMENT BENEFITS
The Company and its domestic consolidated subsidiaries have defined
benefit retirement plans for employees.
Employees terminating their employment are, under most circumstances,
entitled to retirement benefits determined based on the rate of pay at the
time of termination, length of service, and conditions under which the
termination occurs. If the termination is involuntary, caused by retirement at
the mandatory retirement age or caused by death, the employee is entitled
to greater payments than in the case of voluntary termination.
Employees of the Company who retire at the mandatory retirement age are
entitled to receive approximately 50% of their benefits in the form of an
annuity with the balance in a lump-sum payment upon retirement. The
funds for the annuity payments are entrusted to an outside trustee.
(1) The changes in defined benefit obligation for the years ended March 31,
2015 and 2014, were as follows:
(2) The changes in plan assets for the years ended March 31, 2015 and
2014, were as follows:
(3) Reconciliation between the liability recorded in the consolidated
balance sheet and the balances of defined benefit obligation and plan
assets
(4) The components of net periodic retirement benefit costs for the years
ended March 31, 2015 and 2014, were as follows:
Loans from banks and insurance companies, due serially to 2018 with interest rates ranging from 0.45% to 5.13% (2015) and from 0.71% to 5.13% (2014)
Collateralized
Unsecured
Obligation under finance leases
Total
Less current portion
Long-term debt, less current portion
2015
¥3,479
12,005
341
15,825
(2,461)
¥13,364
¥932
11,189
697
12,818
(2,330)
¥10,488
$28,955
99,917
2,839
131,711
(20,483)
$111,228
2014 2015
Millions of Yen Thousands ofU.S. Dollars
2016
2017
2018
2019
2020
2021 and thereafter
Total
¥2,461
7,896
1,417
1,211
1,955
885
¥15,825
$20,483
65,718
11,794
10,079
16,271
7,366
$131,711
Thousands ofU.S. Dollars
Millions ofYen
Year Ending March 31
Land
Buildings and structures
Total
¥409
79
¥488
$3,404
658
$4,062
Thousands ofU.S. Dollars
Millions ofYen
Balance at beginning of year (as previously reported)
Cumulative effect of accounting change
Balance at beginning of year (as restated)
Increase due to inclusion of subsidiaries in consolidation
Current service cost
Interest cost
Actuarial losses
Benefits paid
Balance at end of year
2015
¥5,627
30
5,657
224
347
74
240
(767)
¥5,775
¥5,622
5,622
344
83
25
(447)
¥5,627
$46,833
250
47,083
1,864
2,888
616
1,998
(6,384)
$48,065
2014 2015
Millions of Yen Thousands ofU.S. Dollars
Balance at beginning of year
Expected return on plan assets
Actuarial gains
Contributions from the employer
Benefits paid
Balance at end of year
2015
¥4,554
137
465
201
(324)
¥5,033
¥3,971
119
276
415
(227)
¥4,554
$37,903
1,140
3,870
1,673
(2,697)
$41,889
2014 2015
Millions of Yen Thousands ofU.S. Dollars
Defined benefit obligation
Plan assets
Net liability arising from defined benefit obligation
2015
¥5,775
(5,033)
¥742
¥5,627
(4,554)
¥1,073
$48,065
(41,889)
$6,176
2014 2015
Millions of Yen Thousands ofU.S. Dollars
(5) Amounts recognized in other comprehensive income (before income tax
effect) in respect of defined retirement benefit plans for the years ended
March 31, 2015 and 2014:
(6) Amounts recognized in accumulated other comprehensive income
(before income tax effect) in respect of defined retirement benefit plans
as of March 31, 2015 and 2014:
(7) Plan assets
a. Components of plan assets
Plan assets as of March 31, 2015 and 2014, consisted of the following:
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 March 31, 2015 and 2014, were set
forth as follows:
8.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. For companies that meet certain criteria,
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. The Company meets the above criteria.
The Companies Act permits companies to distribute dividends in-kind
(noncash assets) to shareholders subject to a certain limitation and
additional requirements.
Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles 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 the equity account charged upon the payment of such
dividends, until the aggregate amount of legal reserve and additional
paid-in capital equals 25% of the common stock. Under the Companies
Act, the total amount of additional paid-in capital and legal reserve may
be reversed without limitation. 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
with 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 by resolution 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 and treasury stock. Such treasury stock acquisition
rights are presented as a separate component of equity or deducted
directly from stock acquisition rights.
9.SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March 31,
2015 and 2014, principally consisted of the following:
Debt investments
Equity investments
Cash and cash equivalents
Others
Total
37%
49
4
10
100%
39%
51
4
6
100%
Discount rate
Expected rate of return on plan assets
Expected rate of salary increase
1.5%
3.0%
1.5-2.4%
0.865-1.011%
3.0%
1.5-2.4%
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial losses
Others
Net periodic benefit costs
2015
¥347
74
(137)
(6)
350
15
¥643
¥344
83
(119)
(6)
358
4
¥664
$2,888
616
(1,140)
(50)
2,913
125
$5,352
2014 2015
Millions of Yen Thousands ofU.S. Dollars
Prior service cost
Actuarial losses
Total
2015
¥6
(575)
¥(569)
$50
(4,786)
$(4,736)
2014 2015
Millions of Yen Thousands ofU.S. Dollars
Unrecognized prior service cost
Unrecognized actuarial losses
Total
2015
2015 2014
2015 2014
¥(42)
1,110
¥1,068
¥(48)
1,685
¥1,637
$(349)
9,238
$8,889
2014 2015
Millions of Yen Thousands ofU.S. Dollars
29 30
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
10.INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese
national and local income taxes which, in the aggregate, resulted in normal
effective statutory tax rates of 35.6% and 38.0% for the years ended March
31, 2015 and 2014, respectively.
The tax effects of significant temporary differences and loss carryforwards
which resulted in deferred tax assets and liabilities at March 31, 2015 and
2014, were as follows:
A reconciliation between the normal effective statutory tax rates and the
actual effective tax rates reflected in the accompanying consolidated
statement of income for the year ended March 31, 2015, with the
corresponding figures for 2014, is as follows:
New tax reform laws enacted in 2015 in Japan changed the normal effective
statutory tax rate for the fiscal year beginning on or after April 1, 2015, to
approximately 33.0% and for the fiscal year beginning on or after April 1,
2016, to approximately 32.3%. The effect of these changes was immaterial.
At March 31, 2015, certain subsidiaries have expiring tax loss carryforwards
aggregating approximately ¥3,210 million ($26,717 thousand) which are
available to be offset against taxable income of such subsidiaries in future
years. These tax loss carryforwards, if not utilized, will expire as follows:
11.LEASES
Total rental expenses including lease payments under finance lease
agreements that do not transfer ownership of the leased property to the
Group, accounted for as operating lease, were ¥336 million ($2,797
thousand) and ¥317 million for the years ended March 31, 2015 and 2014,
respectively.
12.FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
(1) Group policy for financial instruments
The Group uses financial instruments, mainly long-term debt including
bank loans and convertible bonds, based on its capital financing plan.
Cash surpluses, if any, are invested in low risk financial assets.
Short-term bank loans are used to fund the Group's ongoing operations.
Derivatives are used, not for speculative purposes, but to manage
exposure to financial risks as described in (2) below. (2) Nature and extent of risks arising from financial instruments
Receivables, such as trade notes and trade accounts, are exposed to
customer credit risk. Although receivables in foreign currencies are
exposed to the market risk of fluctuation in foreign currency exchange
Employees' salaries and bonuses
Net periodic retirement benefit costs
Depreciation and amortization
Research and development costs
Goodwill amortization
2015
¥3,018
177
391
1,145
20
¥2,702
203
371
1,097
18
$25,119
1,473
3,254
9,530
166
2014 2015
Millions of Yen Thousands ofU.S. Dollars
Deferred tax assets:
Reserve for accrued bonuses
Liability for retirement benefits
Loss on devaluation of inventories
Loss on devaluation of investment securities
Tax loss carryforwards
Other
Less valuation allowance
Total
Deferred tax liabilities:
Roll-over relief on property, plant and equipment
Net unrealized gain on available-for-sale securities
Prepaid pension cost
Other
Total
Net deferred tax assets
2015
¥422
388
289
27
861
762
(1,167)
¥1,582
¥(147)
(318)
(198)
(210)
¥(873)
¥709
¥418
582
213
25
563
465
(799)
¥1,467
¥(140)
(210)
(221)
(231)
¥(802)
¥665
$3,512
3,229
2,405
225
7,166
6,343
(9,713)
$13,167
$(1,223)
(2,647)
(1,648)
(1,748)
$(7,266)
$5,901
2014 2015
Millions of Yen Thousands ofU.S. Dollars
Note:
The amounts of net deferred tax assets are shown in the following accounts
in the consolidated balance sheets as of March 31, 2015 and 2014.
Deferred tax assets - current
Deferred tax assets - noncurrent
Long-term liabilities - noncurrent
2015
¥1,068
400
(759)
¥784
621
(740)
$8,889
3,329
(6,317)
2014 2015
Millions of Yen Thousands ofU.S. Dollars
Normal effective statutory tax rate
Nontax deductible expenses
Tax rate difference in foreign subsidiaries
Per capita in local tax
Amortization of goodwill
Equity in earnings of associated companies
Change in valuation allowance
Tax credit
Tax on unrealized intercompany profit
Decrease adjustment of deferred tax assets for changing the tax rate
Other - net
Actual effective tax rate
35.6%
0.7
0.1
0.6
0.3
(1.3)
9.6
(8.6)
(0.7)
1.4
0.0
37.7%
38.0%
1.3
(0.2)
1.1
0.5
(0.6)
11.3
(5.9)
(1.1)
3.7
1.0
49.1%
2015 2014
2016
2017
2018
2019
2020
2021 and thereafter
Total
¥49
277
242
188
397
2,057
¥3,210
$408
2,305
2,014
1,565
3,304
17,121
$26,717
Thousands ofU.S. Dollars
Millions ofYen
Year Ending March 31
rates, those risks are hedged by using forward foreign currency
contracts. Investment securities are mainly equity securities and their fair
market value are monitored on a quarterly basis.
Payment terms of payables, such as trade notes and trade accounts, are
less than one year. Although payables in foreign currencies are exposed
to the market risk of fluctuation in foreign currency exchange rates, those
risks are generally hedged by using forward foreign currency contracts.
Maturities of bank loans and lease obligations are less than seven and a
half years after the consolidated balance sheet date. Although a part of
such bank loans and lease obligations are exposed to market risks from
changes in variable interest rates, those risks are mitigated by using
derivatives of interest rate swaps. See Note 13 for more details about
derivatives. (3) Risk management for financial instruments
Credit Risk Management
Credit risk is the risk of economic loss arising from a counterparty's
failure to repay or service debt according to the contractual terms. The
Group manages its credit risk from receivables on the basis of internal
guidelines, which include monitoring payment terms and balances of
major customers by each business administration department to identify
the default r isk of customers at an early stage. Because the
counterparties to derivatives are limited to major international financial
institutions, the Group does not anticipate any losses arising from credit
risk. See Note 13 for more details about derivatives.
Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market
risk resulting from fluctuations in foreign currency exchange rates. Such
foreign exchange risk is hedged principally by forward foreign currency
contracts. Interest rate swaps are used to manage exposure to market
risks from changes in the interest rates of loan payables.
Investment securities are managed by monitoring market value and the
financial position of issuers on a regular basis.
Derivative transactions entered into by the Group have been made in
accordance with internal policies which regulate the authorization and
credit limit amount by the corporate treasury department.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its
contractual obligations in full on their maturity dates. The Group manages
its liquidity risk by holding adequate volumes of liquid assets along with
adequate financial planning by the corporate treasury department.(4) Fair value of financial instruments
Fair values of financial instruments are based on quoted prices in active
markets. If a quoted price is not available, other rational valuation
techniques are used instead. See Note 13 for the details of fair value for
derivatives.
(a) Fair value of financial instruments
The above long-term debt includes the current portion of long-term debt.
Cash and cash equivalents and Notes and accounts receivable
The carrying values approximate fair value because of their short maturities.
Investment securities
The fair values are measured at the quoted market price of the stock
exchange for the equity instruments. Fair value information for the
investment securities by classification is included in Note 4.
Short-term bank loans and Payables
The carrying values approximate fair value because of their short maturities.
Long-term debt
The fair values of long-term debt and lease obligations are determined by
discounting the cash flows related to the debt at the Group's assumed
corporate borrowing rate.
Derivatives
Fair value information for derivatives is included in Note 13.
(b) Carrying amount of financial instruments whose fair value cannot be
reliably determined
Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total
Short-term bank loans
Payables
Long-term debt
Total
CarryingAmount
Millions of YenFair Value
UnrealizedLoss
¥8,968
20,921
1,565
¥31,454
¥(13,610)
(10,980)
(15,825)
¥(40,415)
¥8,968
20,921
1,565
¥31,454
¥(13,610)
(10,980)
(15,834)
¥(40,424)
¥(9)
¥(9)
March 31, 2015
Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total
Short-term bank loans
Payables
Long-term debt
Total
CarryingAmount
Millions of YenFair Value
UnrealizedLoss
¥9,832
21,025
1,169
¥32,026
¥(15,157)
(13,471)
(12,818)
¥(41,446)
¥9,832
21,025
1,169
¥32,026
¥(15,157)
(13,471)
(12,831)
¥(41,459)
¥(13)
¥(13)
March 31, 2014
Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total
Short-term bank loans
Payables
Long-term debt
Total
CarryingAmount
Thousands of U.S. DollarsFair Value
UnrealizedLoss
$74,640
174,124
13,025
$261,789
$(113,275)
(91,386)
(131,711)
$(336,372)
$74,640
174,124
13,025
$261,789
$(113,275)
(91,386)
(131,786)
$(336,447)
$(75)
$(75)
March 31, 2015
31 32
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
(5) Maturity analysis for financial assets with contractual maturities
See Note 6 for annual maturities of long-term debt.
13.DERIVATIVES
The Group enters into derivative contracts to hedge market risks such as
foreign exchange and interest rate fluctuations associated with certain
assets and liabilities.
It is the Group's policy to use derivatives only for the purpose of reducing
market risks associated with assets and liabilities. The Group does not hold
or issue derivatives for speculative purposes.
Since all of the Group's derivative transactions are related to qualified
hedges of underlying business exposures, market gain or loss risk in the
derivative instruments is basically offset by opposite movements in the value
of the hedged assets or liabilities.
Derivative transactions entered into by the Group have been made in accordance
with internal policies which regulate the authorization and credit limit amount.
Derivative transactions to which hedge accounting is applied.
The above interest rate swaps which qualify for hedge accounting and meet
specific matching criteria are not remeasured at market value but the
differential paid or received under the swap agreements is recognized and
included in interest expense. In addition, the fair value of such interest rate
swaps in Note 12 is included in that of hedged items (i.e., long-term debt).
The contract or notional amounts of derivatives which are shown in the
above table do not represent the amounts exchanged by the parties and do
not measure the Group's exposure to credit or market risk.
14.OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March
31, 2015 and 2014, were as follows:
15.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
Investments in equity instruments that do not have a quoted market price in an active market
Investments in limited partnerships
Total
2015
¥591
31
¥622
¥620
45
¥665
$4,919
258
$5,177
2014 2015
Millions of Yen Thousands ofU.S. Dollars
Cash and cash equivalents
Notes and accounts receivable
Total
Due after1 Yearthrough5 Years
Due in1 Yearor Less
Due after5 Yearsthrough10 Years
Due after10 Years
Millions of Yen
¥8,968
20,921
¥29,889
March 31, 2015
Interest rate swaps:(fixed rate payment, floating rate receipt)
ContractAmount
HedgedItem
Long-termdebt
¥2,060 ¥2,030
ContractAmount
Due afterOne Year
FairValue
Millions of YenAt March 31, 2015
Interest rate swaps:(fixed rate payment, floating rate receipt)
ContractAmount
HedgedItem
Long-termdebt
$17,145 $16,896
ContractAmount
Due afterOne Year
FairValue
Thousands of U.S. DollarsAt March 31, 2015
Interest rate swaps:(fixed rate payment, floating rate receipt)
ContractAmount
HedgedItem
Long-termdebt
¥680 ¥660
ContractAmount
Due afterOne Year
FairValue
Millions of YenAt March 31, 2014
Cash and cash equivalents
Notes and accounts receivable
Total
Due after1 Yearthrough5 Years
Due in1 Yearor Less
Due after5 Yearsthrough10 Years
Due after10 Years
Thousands of U.S. Dollars
$74,640
174,124
$248,764
March 31, 2015
Unrealized gain on available-for-sale securities:
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Foreign currency translation adjustments:
Adjustments arising during the year
Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive income in associates:
Gains arising during the year
Total
Total other comprehensive income
2015
¥908
(508)
400
(108)
¥292
¥201
¥201
¥225
344
569
(195)
¥374
¥76
¥76
¥943
¥117
117
(42)
¥75
¥180
¥180
¥98
¥98
¥353
$7,557
(4,228)
3,329
(898)
$2,431
$1,672
$1,672
$1,873
2,863
4,736
(1,623)
$3,113
$632
$632
$7,848
2014 2015
Millions of Yen Thousands ofU.S. Dollars
performance. Generally, segment information is required to be reported
on the same basis as is used internally for evaluating operating segment
performance and deciding how to allocate resources to operating
segments.
1. Description of reportable segments
The Group's reportable segments are those for which separate financial
information is available and regular evaluation by the Company's
management is being performed in order to decide how resources are
allocated among the Group. Therefore, the Group consists of two
segments: aerospace and related products and industrial products.
Aerospace and related products consists of manufacturing propeller
systems, landing gear systems, heat control systems, space equipment,
hydraulic pumps, hydraulic valves and others. Industrial products
consists of manufacturing LNG vaporizers, heat exchangers, ozone
generators, semiconductor equipment and others.
2. Methods of measurement for the amounts of sales, profit, assets 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."
3. Information about sales, profit, assets, and other items
4. Information about geographical areas
(1) Sales
(2) Property, plant and equipment
Information about property, plant and equipment by geographical
area is not disclosed because Japanese GAAP does not require
such disclosure if total assets in Japan represent more than 90% of
the consolidated amounts.
5. Information about major customers
Information about major customers is not disclosed for the year ended
March 31, 2015, because there is no customer that represents more
than 10% of net sales in the consolidated statement of income.
6. Information about amortization of goodwill
Sales:
Sales to external customers
Intersegment sales or transfers
TotalSegment profit
(operating income)
Segment assets
Other:
Depreciation
Amortization of goodwillInvestment in associated companies accounted for by the equity methodIncrease in property, plant and equipment and intangible assets
Consolidated
Millions of Yen2015
¥47,135
¥47,135
¥1,598
81,899
2,461
20
1,164
2,261
¥9,243
¥47,135
¥47,135
¥1,598
72,656
2,461
20
1,164
2,261
¥17,806
¥17,806
¥242
25,417
1,127
1,164
486
¥29,329
¥29,329
¥1,356
47,239
1,334
20
1,775
ReconciliationsTotalIndustrialProducts
Reportable SegmentAerospace and
Related Products
Sales:
Sales to external customers
Intersegment sales or transfers
TotalSegment profit
(operating income)
Segment assets
Other:
Depreciation
Amortization of goodwillInvestment in associated companies accounted for by the equity methodIncrease in property, plant and equipment and intangible assets
Consolidated
Millions of Yen2014
¥45,032
¥45,032
¥963
79,948
2,130
18
998
4,754
¥10,780
¥45,032
¥45,032
¥963
69,168
2,130
18
998
4,754
¥18,393
¥18,393
¥157
27,417
904
998
3,493
¥26,639
¥26,639
¥806
41,751
1,226
18
1,261
ReconciliationsTotalIndustrialProducts
Reportable SegmentAerospace and
Related Products
Sales:
Sales to external customers
Intersegment sales or transfers
TotalSegment profit
(operating income)
Segment assets
Other:
Depreciation
Amortization of goodwillInvestment in associated companies accounted for by the equity methodIncrease in property, plant and equipment and intangible assets
Consolidated
Thousands of U.S. Dollars2015
$392,301
$392,301
$13,300
681,639
20,483
166
9,688
18,818
$76,928
$392,301
$392,301
$13,300
604,711
20,483
166
9,688
18,818
$148,198
$148,198
$2,014
211,544
9,380
9,688
4,045
$244,103
$244,103
$11,286
393,167
11,103
166
14,773
ReconciliationsTotalIndustrialProducts
Reportable SegmentAerospace and
Related Products
¥47,135
Tota l
¥193
Other
¥8,029
Asia
¥3,171
Europe
¥11,643
North America
¥24,099
Japan
Millions of Yen2015
¥45,032
Tota l
¥169
Other
¥5,758
Asia
¥3,744
Europe
¥10,750
North America
¥24,611
Japan
Millions of Yen2014
$392,301
Tota l
$1,606
Other
$66,825
Asia
$26,392
Europe
$96,904
North America
$200,574
Japan
Thousands of U.S. Dollars2015
Note: Sales are classified by country or region based on the location of customers.
Amortization of goodwill
Goodwill at March 31, 2015
Millions of Yen2015
¥20
159
Aerospace andRelated Products
IndustrialProducts
Elimination/Corporate
¥20
159
Total
Aerospace and Related Products
Related Segment Name
¥4,530
Millions of Yen
Ministry of Defense
Name of Customer
2014Sales
Amortization of goodwill
Goodwill at March 31, 2014
Millions of Yen2014
¥18
175
Aerospace andRelated Products
IndustrialProducts
Elimination/Corporate
¥18
175
Total
33 34
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
16.SUBSEQUENT EVENTS
(a) Appropriations of Retained Earnings
At the general shareholders' meeting held on June 26, 2015, the
Company's shareholders approved the following appropriations of
retained earnings as of March 31, 2015:
(b) Business Combination(1) Acquisition of stock
On June 4, 2015, SPP Canada Aircraft, Inc. (SPPCA), a wholly-owned
subsidiary of the Company, acquired 100% of the shares of
Tecnickrome Aéronautique Inc. (Tecnickrome), a provider of surface
finishing technologies for the aerospace market based in Quebec,
Canada.
The acquisition enables the Company to provide flexible and
high-value services to our customers throughout North America and
Europe through SPPCA. This will also significantly enhance the
overall capability of the Group, which includes the recently-acquired
CFN Precision Ltd., to provide a stable supply of products. Tecnickrome
will benefit from the opportunity to provide its high-value products to
a broader customer base by expanding its traditional business with
the anticipation of further growth.
The aggregate cost of the acquisition was CA$ 15.5 million and the
value of assets acquired and liabilities assumed has not been
determined.(2) Acquisition of businesses
On June 25, 2015, the board of the Company resolved that SPP
Technologies Co., Ltd. (SPT), a subsidiary of the Company, should
establish a wholly-owned new company in the United States, SPT
USA, Inc., and acquire the Thermal Product (TP) business from SPTS
Technologies UK Limited on June 30, 2015.
The acquisition of the TP business will lead to an expansion of the
Microtechnology business unit operated mainly by SPT, by
generating a synergy effect with the existing SPT products and
technologies, and by obtaining an overseas network.
The aggregate cost of the acquisition was approximately US$ 22
million and the value of assets acquired and liabilities assumed has
not been determined.
Amortization of goodwill
Goodwill at March 31, 2015
Thousands of U.S. Dollars2015
$166
1,323
Aerospace andRelated Products
IndustrialProducts
Elimination/Corporate
$166
1,323
Total
Appropriations:
Cash dividends, ¥3.5 ($0.03) per share¥185 $1,540
Thousands ofU.S. Dollars
Millions ofYen
C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s
I n d e p e n d e n t A u d i t o r ’ s R e p o r tM a r c h 3 1 , 2 0 1 5
35 36
53,167 thousandshares
Ind iv iduals and other33.8%
Financia l Inst i tut ions10.5%
Domest ic Corporat ions
44.8%
Foreign Investors
8.5%
Treasury Stock0.4%
Financia l Instrument Companies
2.0%
Sumitomo Precision Products Co., Ltd.
January, 1961
¥10,311 million
Shinichi Miki
1,709 (Consolidated)
1,118 (Non-consolidated)
1-10 Fuso-cho, Amagasaki, Hyogo 660-0891, Japan
Main Plant (Amagasaki), Shiga Plant, Wakayama Plant (Plant site area:136,844 square meters)
http://www.spp.co.jp
D o m e s t i c a n d O v e r s e a s B a s e sA s o f J u l y 1 , 2 0 1 5
D o m e s t i c
O v e r s e a s
■ Head Office & Main Plant
■ Sumisei Engineering Co., Ltd. (Design, drawing and engineering services) ■ Sumisei Sangyo Co., Ltd. (Sales of all types of materials and machinery parts) ■ Shinsen Seiki Co., Ltd. (Processing of all types of machinery parts)
■ SPP Nagasaki Engineering Co., Ltd (Maintenance, repair and overhaul on aircraft landing gear systems and customer support)
■ Shiga Plant
■ Nagoya Sales Office
■ Tokyo Head Office
■ SPP Technologies Co., Ltd. (Production, sales and support of MEMS/ semiconductor related process tools)
■ Sumisei Hydraulic Systems Co., Ltd. (Production, maintenance and sales of aerospace and hydraulic equipment)
■ Wakayama Plant
■ M2M Technologies Inc. (Solution services utilizing machine to machine communication and cloud computing technology)
■ Sumitomo Precision USA, Inc. (Production and sales of heat exchangers for aerospace)
■ New York Office
■ London Office
■ SPP Canada Aircraft, Inc. (Design, assembly, sales and customer support for Commercial Landing Gear Systems)
■ Sumitomo Precision Shanghai Co., Ltd. (Development and sales of environmental systems)
■ Ningbo SPP Hydraulics Co., Ltd. (Production and sales of QT pumps)
■ Aviocast Inc. (Production and sales of casting products)
■ Silicon Sensing Systems Ltd. (Production and sales of motion sensors)
■ Office & Plant / ■ Overseas Office / ■ Main Affiliated Company
■ Iruma Plant
■ Tecnickrome Aéronautique Inc. (Surface finishing of aircraft parts)
■ CFN Precision Ltd. (Production and sales of aircraft parts)
■ SPT Microtechnologies USA, Inc. (Manufacture and sales of thermal process furnace equipment etc. and relevant services for semiconductor related device industry)
C o m p a n y P r o f i l e / S t o c k I n f o r m a t i o n
C o m p a n y P r o f i l e ( A s o f M a r c h 3 1 , 2 0 1 5 )
Company Name
Establ ished
Pain- in Capi ta l
Pres ident
Number of Employees
Head Of f ice
Plant
URL
S t o c k I n f o r m a t i o n ( A s o f M a r c h 3 1 , 2 0 1 5 )
F iscal Year
Ordinary Shareholder Meet ing
Record Date
Transfer Agent
Method of Publ ic Not ices
Stock Code
Number of Author ized Shares
Number of Issued Shares
Number of Shareholders
Min imum Trading Uni t
Stock Exchange L ist ing
From April 1 of each year through March 31 of the following year
June
Ordinary Shareholder Meeting: March 31
Year-end Dividends: March 31
Interim Dividends: September 30
1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan
Sumitomo Mitsui Trust Bank, Limited
To be posted on the Company’s Website (http://www.spp.co.jp)
6355
200,000,000
53,167,798
6,082
1,000
Tokyo
▶ Major Shareholders▶ Breakdown of Shareholders
Name of Shareholder
Nippon Steel & Sumitomo Metal Corporation
Masayoshi Yamauchi
Sumitomo Precision Products Co., Ltd. Kyoeikai
Sumitomo Corporation
The Master Trust Bank of Japan, Ltd. (trust account)
CBNY DFA INTL SMALL CAP VALUE PORTFOLIO
Japan Trustee Services Bank, Ltd. (trust account)
Sumitomo Mitsui Banking Corporation
BNYM SA/NV FOR BNYM CLIENT ACCOUNT MPCS JAPAN
Tatsuo Yamamoto
21,394
1,014
972
880
859
676
621
543
504
500
Number ofShares
(thousands)
ShareholdingRatio
(%)
40.41
1.92
1.84
1.66
1.62
1.28
1.17
1.03
0.95
0.94
37 38
1-10 Fuso-cho, Amagasaki, Hyogo 660-0891, JapanPhone 81-(0)6-6482-8811 Fax 81-(0)6-6489-5801http://www.spp.co.jp/
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