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TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
ANNUAL REPORT 2012For the year ended March 31 2012
n Topcon studies the possibilities of ldquolightrdquo creates new values toward the
future and contributes to build a rich human society
n Topcon will maintain a proactive and responsive attitude by foreseeing
any changes and place the utmost priority on compliance under all
circumstances thereby continually striving to be a trustworthy partner to all
stakeholders
n Topcon will do its utmost to improve quality in all stages from development
and design to manufacturing sales and service supply products of the
highest quality and develop our customers businesses
n Topcon will build relationships of mutual trust and partnership with sales
agents and other business partners and mutually develop business through
information sharing and close cooperation
n Topcon will implement two-way communication with employees and
will respect diverse individualities values and the sprit of creation and
innovation and maximize the employeesrsquo skills
n Topcon as a member of the global and local community will respect global
standards concerning human rights the environment labor standards and
anti-corruption measures and contribute to building sustainable markets
n Topcon will appropriately disclose information to shareholders in a timely
manner work to build a relationship of trust with them and continually strive
to improve our corporate value
01
Ever since its establishment in 1932 the Topcon Group has maintained optical technology as its core tech-
nology and has now merged this field with digital technology to develop a wide range of businesses The
Companyrsquos optical technology spanning a wide range of wavelengths from electron beams to infrared rays
is our major strength
Furthermore from early on we have sought customers from many regions and have thus cultivated markets
in such areas as the United States and Europe As a result we are currently implementing a global manage-
ment system with development production and sales centers in countries throughout the world
The Topcon Group aims to create new value and by extension contribute to mankind by differentiating itself
from its rivals through the provision of the worldrsquos top as well as attractive products faster than anyone else
01
PROFILE
CONTENTS
Profile
01Special Feature 2TopconrsquosTechnologicalProwess
18
Special Feature 1Mid-term Business Plan
14DirectorsCorporateAuditorsand ExecutiveOfficers
34
CSR
32
CorporateGovernance
30
Topconrsquos Business Fields
02At a Glance(For the year ended March 31 2012)
20FinancialSection
35
TopconrsquosStrengthA Wide Rangeof Wavelengths
04Positioning(Smart InfrastructureCompanyPositioningCompany)
22CorporateProfile
47
ConsolidatedFinancialHighlights
06Eye Care(Eye Care Company)
24StockInformation
47
To OurStakeholders
08History ofTopcon
26Japanese andOverseas GroupCompanies
48
Interview withthe President
10Global Network
28
SurveyingTopconrsquos total stations are widely used in the global market We offer a lineup of products suited for various applications includ-ing imaging stations equipped with CCDs and capable of perform-ing image measurements and high precision total stations that can monitor large structures In addition we recently launched total stations equipped with the worldrsquos first TSshield user sup-port system which provides highly reliable customer support
Construction and Civil EngineeringOur machine control systems efficiently improve time savings and dramatically increase productivity of a wide variety of construction machinery on con-struction sites worldwide
Precision AgricultureBy applying Topconrsquos machine control technology to the global agricultural mar-ketplace the automation of agricultural machinery and the incorporation of infor-mation technology is improving any size farm operation Agricultural machines equipped with Topconrsquos innovative sys-temsmdashfrom crop monitoring to applica-tion control and from field guidance to land levelingmdashincrease yield while mini-mizing environmental impact
Machine Control 3D-MC mmGPS
Plant Nutrition Sensor CropSpecMobile Mapping System IP-S2 Lite
Robotic Total Station PS Series
TSshieldMobile 3D MeasurementBy simply mounting our sensor of Mobile Mapping System unit on a vehicle and driv-ing you can collect surrounding 3D posi-tional information and 360 degree images to create 3D virtual space using our worldrsquos first image processing technology
Ophthalmic InstrumentsAll over the world we supply diagnostic instruments that enable the observation and measurement of all parts of the eye including the cornea the crystalline lens and the retina In particular we maintain the top global market share for ophthalmic data management systems Moreover we are expanding our business to include not only diagnostic instruments but also instruments used in treatment and operating rooms such as laser photocoagulators and operation microscopes
Treatment
Ophthalmic IT SolutionsExamination
Instruments for eyeglasses shopsWe provide all types of vision-testing instrument and lens edgers used at eyeglasses shops Topconrsquos vision tester an instrument containing lenses for refraction of eye and other such devices are highly regarded not only in Japan but around the world
Ophthalmic Laser PhotocoagulatorPASCALreg
Compu VisionCV-5000S
Optical Coherence Tomography3D OCT Series
IMAGEnetTM
LED Chip Defect Inspection SystemVi-SW200C
Spectroradiometer SR-LED
LED-relatedIn LED-related fields we supply domes-tic and foreign LED chip manufacturers with spectroradiometers used for con-trolling the quality of LED lights LCD panel backlights and automotive head-lights The equipment controls lumi-nance and chromaticity levels color temperature characteristics and color rendering properties We also supply defect inspection equipment special-ized for use on LED chips
02
TOPCONrsquoS BUSINESS FIELDS
The Topcon Group provides many attractive products based on our unparalleled optical and cutting-edge digital technologies
A world leader in high-precision GPS and automated machine controlThe Positioning Company (formerly part of the Positioning Business Unit) is expanding exist-ing markets and developing new markets for automated construction machine control and precision agriculture through the integration of new technologies including machine con-trol image processing and GPS
A top three surveying instruments manufacturerThe Smart Infrastructure Company (formerly part of the Positioning Business Unit) has been Topconrsquos largest business segment since its establishment providing surveying instruments based on the opto-mechatronics technologies for measuring positions with distances and angles Utilizing laser and image processing technologies we provide various prod-ucts for high-precision measurement as a pioneer in the global market In the field of mobile 3D measure-ment our business is expanding into a wide range of applications including utilization of base mapping of ITS (Intelligent Transport Systems)
POSITIONINGCOMPANY
SMARTINFRA-STRUCTURECOMPANY
SurveyingTopconrsquos total stations are widely used in the global market We offer a lineup of products suited for various applications includ-ing imaging stations equipped with CCDs and capable of perform-ing image measurements and high precision total stations that can monitor large structures In addition we recently launched total stations equipped with the worldrsquos first TSshield user sup-port system which provides highly reliable customer support
Construction and Civil EngineeringOur machine control systems efficiently improve time savings and dramatically increase productivity of a wide variety of construction machinery on con-struction sites worldwide
Precision AgricultureBy applying Topconrsquos machine control technology to the global agricultural mar-ketplace the automation of agricultural machinery and the incorporation of infor-mation technology is improving any size farm operation Agricultural machines equipped with Topconrsquos innovative sys-temsmdashfrom crop monitoring to applica-tion control and from field guidance to land levelingmdashincrease yield while mini-mizing environmental impact
Machine Control 3D-MC mmGPS
Plant Nutrition Sensor CropSpecMobile Mapping System IP-S2 Lite
Robotic Total Station PS Series
TSshieldMobile 3D MeasurementBy simply mounting our sensor of Mobile Mapping System unit on a vehicle and driv-ing you can collect surrounding 3D posi-tional information and 360 degree images to create 3D virtual space using our worldrsquos first image processing technology
Ophthalmic InstrumentsAll over the world we supply diagnostic instruments that enable the observation and measurement of all parts of the eye including the cornea the crystalline lens and the retina In particular we maintain the top global market share for ophthalmic data management systems Moreover we are expanding our business to include not only diagnostic instruments but also instruments used in treatment and operating rooms such as laser photocoagulators and operation microscopes
Treatment
Ophthalmic IT SolutionsExamination
Instruments for eyeglasses shopsWe provide all types of vision-testing instrument and lens edgers used at eyeglasses shops Topconrsquos vision tester an instrument containing lenses for refraction of eye and other such devices are highly regarded not only in Japan but around the world
Ophthalmic Laser PhotocoagulatorPASCALreg
Compu VisionCV-5000S
Optical Coherence Tomography3D OCT Series
IMAGEnetTM
LED Chip Defect Inspection SystemVi-SW200C
Spectroradiometer SR-LED
LED-relatedIn LED-related fields we supply domes-tic and foreign LED chip manufacturers with spectroradiometers used for con-trolling the quality of LED lights LCD panel backlights and automotive head-lights The equipment controls lumi-nance and chromaticity levels color temperature characteristics and color rendering properties We also supply defect inspection equipment special-ized for use on LED chips
03
A top global brand of ophthalmic medical instrumentsWe provide ophthalmic diagnostic and treatment instruments ophthalmic diagnosis support systems primarily for use in ophthalmology departments in hospitals and optometric vision testing instruments for eyeglasses shops Furthermore we have lately been focusing on systems solutions the development of advanced ophthalmic medical instruments and preventative medical devices for such applications as the screening of compli-cations caused by diabetes
EYECARECOMPANY
OTHERBUSINESSES
1Å
1nm
1μm
1mm
1nm 10μ400nm 500nm 700nm 1μ(Electron(ElectronBeam)
(Ultraviolet) (Visible) (Infrared)
(Measurement PrecisionResolution)
( Wavelength( Wavelength Used) Used)
(Radio Waves)(Radio Waves)
Rotating Laser
3D OCT
Retinal Camera
Image Measurement
Total Station
SpecularMicroscopeMicroscope
SpecularMicroscope
Specular
GNSSMachineControls
Topconrsquos Strength A Wide Range of Wavelengths
Hybrid ElectronMicroscopes
SubstrateProjection Steppers
Chip DefectInspection System
Optical Measurement
Ophthalmic LaserPhotocoagulatorsOphthalmic LaserPhotocoagulatorsOphthalmic Laser
Auto RefractometerAuto Kerato-Refractometer
Rotating LaserRotating lasers improve the efficiency of various types of construction work by leveraging the characteristics of la-ser light and integrating unique func-tions (ie highly visible green lasers mmGPS that can achieve accurate lev-eling at a construction site having large difference in height and so on)
Image MeasurementOur image analysis and measurement technologies which are gained through our long years of experience enable non-contact measurement of objects They can also be applied to analysis and mea-surement using video images These ad-vanced technologies are widely utilized on mobile mapping systems analysis of 3D scanner data and imaging total stations
Total StationTotal stations measure 3D positions at distances of up to several ki-lometers with extremely high precision in the range from millimeters to centimeters in surveying and construction sites based on dis-tance and angle measurement technologies that use light Our di-verse product lineup supports various applications including models that can measure the surface point of an object without a prism models that are capable of highly accurate distance and angle mea-surement for monitoring of a large structure and industrial measure-ment and models equipped with a camera that can display live images superimposed by measurement results design data etc
Plant NutritionPlant NutritionSensors
Smart Infrastructure Company
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
04
TOPCONrsquoS STRENGTHA WIDE RANGEOF WAVELENGTHS
One of the strengths of the Topcon Group lies in our optical technology which spans a wide range of wavelengths from electron beams to infrared rays Leveraging this technological strength we continue to launch the worldrsquos first and No 1 products which are both unique and outstanding
3D OCT(Optical Coherence Tomography)The 3D OCT is a diagnostic instrument that combines a retinal camera with Optical Co-herence Tomography (OCT) which ac-quires a cross-sectional image of a biological body employing infrared light This instrument not only provides fundus photography but also 3D cross-sectional images of the layers inside the retina The 3D OCT enables the early detection and di-agnosis of various ophthalmic diseases
Ophthalmic Laser PhotocoagulatorsAn ophthalmic laser photocoagulator treats the ret-ina by using laser irradiation to burn diseased parts It is used to prevent formation of new breakable fragile blood vessels in the retina due to blocked blood flow caused by a clogged blood vessel or to burn away newly formed blood vessels to prevent bleeding The equipment is essential for ophthal-mic care and is used in the treatment of such con-ditions as diabetic retinopathy and retinal break which causes retinal detachment
GNSSTopcon pioneered the use of multi-constella-tion (GPS+GLONASS) GNSS receivers and its innovative leadership continues today Our high-precision GNSS receivers include unique features like universal channels that can track virtually any GNSS signal Fence Antennatrade technology for industry-leading tracking sensi-tivity and versatile communications options
Plant Nutrition SensorsTopcon has some revolutionary systems One is CropSpec which enables the appropriate application of fertilizer in real time by perform-ing non-contact monitoring of crop conditions using a broad spectrum laser Other systems provide guidance for agricultural machines and soil preparation Agricultural machines equipped with Topconrsquos revolutionary systems can dra-matically improve production while minimizing the environmental load
Machine ControlsTopcon is a world leader in automating con-struction equipment Our systems provide two- and three-dimensional grading excavat-ing or paving control Using sonic laser total station or GPS as control sources Topcon machine control systems increase the effi-ciency and quality of earthmoving and paving around the globe
Substrate Projection SteppersProjection steppers feature a large-aper-ture high-resolution objective lens (the worldrsquos No1) incorporating all of Topconrsquos optic technology They are used for the wiring patterning processes of the semi-conductor package substrate (substrate board) which is increasingly being minia-turized
Hybrid Electron MicroscopesThis product features an electron micro-scope equipped with an optical micro-scope and it realizes the worldrsquos first simultaneous observations by combining an SEM with an optical microscope It is an all-in-one electron microscope that represents a new concept and it features various other functions including height measurement elemental analysis un-coated observations etc
Auto RefractometerAuto Kerato-RefractometerAuto refractometers and auto kerato-refractome-ters automatically measure refractive error of the eye (near-sightedness far-sightedness and astig-matism) by using invisible near-infrared light They are used at many eyeglasses shops and ophthal-mology clinics An auto kerato-refractometer mea-sures the corneal curvature radius which is required for prescriptions for contact lenses
Eye Care Company
Positioning Company
Other Businesses
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1No1No1No1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
05
06
CONSOLIDATED FINANCIAL HIGHLIGHTSTopcon Corporation and Consolidated Subsidiaries
Operating results Net sales Positioning Business Eye Care Business Finetech Business Overseas Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio ()
yen 110818 50928 39828 20061 81027 10975 9205 7736 2893 3478 268 10178 (16185)
yen 56082 139362 43329
yen 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192
yen 112666 58031 33503 21131 83684 (6944) (9326) (9992) 2620 4619 1828 11589 (6991)
yen 39801 119702 49706
yen (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash
yen 94862 49350 31561 13950 69138 1405 545 133 2109 4531 1846 9609 1112
yen 40490 125539 51501
yen 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770
yen 102470 51559 30946 19964 74210 1799 608 (1288) 4499 3689 1596 10275 (7903)
yen 36908 124816 55300
yen (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash
yen 98834 52656 32598 13579 73949 2080 467 (3686) 3443 3115 1660 8707 (3575)
yen 32667 120777 58882
yen (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash
$ 1202513 640670 396621 165221 899739 25316 5685 (44851) 41890 37902 20200 105947 (43500)
$ 397457 1469490 716420
$ (0484) 4291
20083 20093 20103 20113 20123
Millions of yen
20123
Thousands ofUS dollars
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 Depreciation and amortization excludes the amortization of goodwill
07
NET SALES AND OVERSEAS NET SALES RATIO
120000 80
100000 75
80000 70
60000 65
40000 60
20000 55
0 0
(Millions of yen) ()
103093083 113 123
OPERATING INCOME (LOSS) AND OPERATING INCOME RATIO
12000 15
8000 10
4000 5
0 0
-4000 -5
-8000 -10
(Millions of yen) ()
103093083 113 123
Operating income (loss) (left)
Operating income ratio (right)
NET INCOME (LOSS) ANDNET INCOME RATIO
10000 10
5000 5
0 0
-5000 -5
-10000 -10
(Millions of yen) ()
103093083 113 123
Net income (loss) (left)
Net income ratio (right)
FREE CASH FLOWS AND DE RATIO
CAPITAL EXPENDITURES ANDDEPRECIATION AND AMORTIZATION
RampD EXPENDITURES AND RATIO OFRampD EXPENDITURES TO NET SALES
12000 12
10000 10
8000 8
6000 6
4000 4
2000 2
0 0
(Millions of yen) ()
RampD expenditures (left)
Ratio of RampD expenditures to net sales (right)
Free cash flow (left)
DE ratio (right)
Capital expenditures
Depreciation and amortization
ROE AND ROA
15
5
-5
10
0
-10
-15
-20
-25
()
Return on equity (ROE)
Return on assets (ROA)
PER AND PBR
400
300
200
100
0
20
15
10
05
0
(Times) (Times)
Price earnings ratio (PER) (left)
Price-book value ratio (PBR) (right)
INTEREST-BEARING LIABILITIES AND EQUITY RATIO
60000 60
50000 50
40000 40
30000 30
20000 20
10000 10
0 0
(Millions of yen) ()
Interest-bearing liabilities (left)
Equity ratio (right)
20000 200
10000 100
0 0
-10000 -100
-20000 -200
(Millions of yen) ()5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123 103093083 113 123 103093083 113 123
103093083 113 123 103093083 113 123 103093083 113 123
Positioning Business (left) Eye Care Business (left)
Finetech Business (left) Overseas net sales ratio (right)
FY2011 Financial Earnings Highlights
bullConsolidatednetsalesinFY2011endedMarch312012fell35yearonyeartoyen98834million
bullOperatingincomeclimbed156yearonyeartoyen2080million
bullTheCompanyrecordedanetlossofyen3686millionfromincurringextraordinarylossesincludinglosses posted in connection with the downsizing of the Finetech Business and solicitation for voluntary retirement
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
n Topcon studies the possibilities of ldquolightrdquo creates new values toward the
future and contributes to build a rich human society
n Topcon will maintain a proactive and responsive attitude by foreseeing
any changes and place the utmost priority on compliance under all
circumstances thereby continually striving to be a trustworthy partner to all
stakeholders
n Topcon will do its utmost to improve quality in all stages from development
and design to manufacturing sales and service supply products of the
highest quality and develop our customers businesses
n Topcon will build relationships of mutual trust and partnership with sales
agents and other business partners and mutually develop business through
information sharing and close cooperation
n Topcon will implement two-way communication with employees and
will respect diverse individualities values and the sprit of creation and
innovation and maximize the employeesrsquo skills
n Topcon as a member of the global and local community will respect global
standards concerning human rights the environment labor standards and
anti-corruption measures and contribute to building sustainable markets
n Topcon will appropriately disclose information to shareholders in a timely
manner work to build a relationship of trust with them and continually strive
to improve our corporate value
01
Ever since its establishment in 1932 the Topcon Group has maintained optical technology as its core tech-
nology and has now merged this field with digital technology to develop a wide range of businesses The
Companyrsquos optical technology spanning a wide range of wavelengths from electron beams to infrared rays
is our major strength
Furthermore from early on we have sought customers from many regions and have thus cultivated markets
in such areas as the United States and Europe As a result we are currently implementing a global manage-
ment system with development production and sales centers in countries throughout the world
The Topcon Group aims to create new value and by extension contribute to mankind by differentiating itself
from its rivals through the provision of the worldrsquos top as well as attractive products faster than anyone else
01
PROFILE
CONTENTS
Profile
01Special Feature 2TopconrsquosTechnologicalProwess
18
Special Feature 1Mid-term Business Plan
14DirectorsCorporateAuditorsand ExecutiveOfficers
34
CSR
32
CorporateGovernance
30
Topconrsquos Business Fields
02At a Glance(For the year ended March 31 2012)
20FinancialSection
35
TopconrsquosStrengthA Wide Rangeof Wavelengths
04Positioning(Smart InfrastructureCompanyPositioningCompany)
22CorporateProfile
47
ConsolidatedFinancialHighlights
06Eye Care(Eye Care Company)
24StockInformation
47
To OurStakeholders
08History ofTopcon
26Japanese andOverseas GroupCompanies
48
Interview withthe President
10Global Network
28
SurveyingTopconrsquos total stations are widely used in the global market We offer a lineup of products suited for various applications includ-ing imaging stations equipped with CCDs and capable of perform-ing image measurements and high precision total stations that can monitor large structures In addition we recently launched total stations equipped with the worldrsquos first TSshield user sup-port system which provides highly reliable customer support
Construction and Civil EngineeringOur machine control systems efficiently improve time savings and dramatically increase productivity of a wide variety of construction machinery on con-struction sites worldwide
Precision AgricultureBy applying Topconrsquos machine control technology to the global agricultural mar-ketplace the automation of agricultural machinery and the incorporation of infor-mation technology is improving any size farm operation Agricultural machines equipped with Topconrsquos innovative sys-temsmdashfrom crop monitoring to applica-tion control and from field guidance to land levelingmdashincrease yield while mini-mizing environmental impact
Machine Control 3D-MC mmGPS
Plant Nutrition Sensor CropSpecMobile Mapping System IP-S2 Lite
Robotic Total Station PS Series
TSshieldMobile 3D MeasurementBy simply mounting our sensor of Mobile Mapping System unit on a vehicle and driv-ing you can collect surrounding 3D posi-tional information and 360 degree images to create 3D virtual space using our worldrsquos first image processing technology
Ophthalmic InstrumentsAll over the world we supply diagnostic instruments that enable the observation and measurement of all parts of the eye including the cornea the crystalline lens and the retina In particular we maintain the top global market share for ophthalmic data management systems Moreover we are expanding our business to include not only diagnostic instruments but also instruments used in treatment and operating rooms such as laser photocoagulators and operation microscopes
Treatment
Ophthalmic IT SolutionsExamination
Instruments for eyeglasses shopsWe provide all types of vision-testing instrument and lens edgers used at eyeglasses shops Topconrsquos vision tester an instrument containing lenses for refraction of eye and other such devices are highly regarded not only in Japan but around the world
Ophthalmic Laser PhotocoagulatorPASCALreg
Compu VisionCV-5000S
Optical Coherence Tomography3D OCT Series
IMAGEnetTM
LED Chip Defect Inspection SystemVi-SW200C
Spectroradiometer SR-LED
LED-relatedIn LED-related fields we supply domes-tic and foreign LED chip manufacturers with spectroradiometers used for con-trolling the quality of LED lights LCD panel backlights and automotive head-lights The equipment controls lumi-nance and chromaticity levels color temperature characteristics and color rendering properties We also supply defect inspection equipment special-ized for use on LED chips
02
TOPCONrsquoS BUSINESS FIELDS
The Topcon Group provides many attractive products based on our unparalleled optical and cutting-edge digital technologies
A world leader in high-precision GPS and automated machine controlThe Positioning Company (formerly part of the Positioning Business Unit) is expanding exist-ing markets and developing new markets for automated construction machine control and precision agriculture through the integration of new technologies including machine con-trol image processing and GPS
A top three surveying instruments manufacturerThe Smart Infrastructure Company (formerly part of the Positioning Business Unit) has been Topconrsquos largest business segment since its establishment providing surveying instruments based on the opto-mechatronics technologies for measuring positions with distances and angles Utilizing laser and image processing technologies we provide various prod-ucts for high-precision measurement as a pioneer in the global market In the field of mobile 3D measure-ment our business is expanding into a wide range of applications including utilization of base mapping of ITS (Intelligent Transport Systems)
POSITIONINGCOMPANY
SMARTINFRA-STRUCTURECOMPANY
SurveyingTopconrsquos total stations are widely used in the global market We offer a lineup of products suited for various applications includ-ing imaging stations equipped with CCDs and capable of perform-ing image measurements and high precision total stations that can monitor large structures In addition we recently launched total stations equipped with the worldrsquos first TSshield user sup-port system which provides highly reliable customer support
Construction and Civil EngineeringOur machine control systems efficiently improve time savings and dramatically increase productivity of a wide variety of construction machinery on con-struction sites worldwide
Precision AgricultureBy applying Topconrsquos machine control technology to the global agricultural mar-ketplace the automation of agricultural machinery and the incorporation of infor-mation technology is improving any size farm operation Agricultural machines equipped with Topconrsquos innovative sys-temsmdashfrom crop monitoring to applica-tion control and from field guidance to land levelingmdashincrease yield while mini-mizing environmental impact
Machine Control 3D-MC mmGPS
Plant Nutrition Sensor CropSpecMobile Mapping System IP-S2 Lite
Robotic Total Station PS Series
TSshieldMobile 3D MeasurementBy simply mounting our sensor of Mobile Mapping System unit on a vehicle and driv-ing you can collect surrounding 3D posi-tional information and 360 degree images to create 3D virtual space using our worldrsquos first image processing technology
Ophthalmic InstrumentsAll over the world we supply diagnostic instruments that enable the observation and measurement of all parts of the eye including the cornea the crystalline lens and the retina In particular we maintain the top global market share for ophthalmic data management systems Moreover we are expanding our business to include not only diagnostic instruments but also instruments used in treatment and operating rooms such as laser photocoagulators and operation microscopes
Treatment
Ophthalmic IT SolutionsExamination
Instruments for eyeglasses shopsWe provide all types of vision-testing instrument and lens edgers used at eyeglasses shops Topconrsquos vision tester an instrument containing lenses for refraction of eye and other such devices are highly regarded not only in Japan but around the world
Ophthalmic Laser PhotocoagulatorPASCALreg
Compu VisionCV-5000S
Optical Coherence Tomography3D OCT Series
IMAGEnetTM
LED Chip Defect Inspection SystemVi-SW200C
Spectroradiometer SR-LED
LED-relatedIn LED-related fields we supply domes-tic and foreign LED chip manufacturers with spectroradiometers used for con-trolling the quality of LED lights LCD panel backlights and automotive head-lights The equipment controls lumi-nance and chromaticity levels color temperature characteristics and color rendering properties We also supply defect inspection equipment special-ized for use on LED chips
03
A top global brand of ophthalmic medical instrumentsWe provide ophthalmic diagnostic and treatment instruments ophthalmic diagnosis support systems primarily for use in ophthalmology departments in hospitals and optometric vision testing instruments for eyeglasses shops Furthermore we have lately been focusing on systems solutions the development of advanced ophthalmic medical instruments and preventative medical devices for such applications as the screening of compli-cations caused by diabetes
EYECARECOMPANY
OTHERBUSINESSES
1Å
1nm
1μm
1mm
1nm 10μ400nm 500nm 700nm 1μ(Electron(ElectronBeam)
(Ultraviolet) (Visible) (Infrared)
(Measurement PrecisionResolution)
( Wavelength( Wavelength Used) Used)
(Radio Waves)(Radio Waves)
Rotating Laser
3D OCT
Retinal Camera
Image Measurement
Total Station
SpecularMicroscopeMicroscope
SpecularMicroscope
Specular
GNSSMachineControls
Topconrsquos Strength A Wide Range of Wavelengths
Hybrid ElectronMicroscopes
SubstrateProjection Steppers
Chip DefectInspection System
Optical Measurement
Ophthalmic LaserPhotocoagulatorsOphthalmic LaserPhotocoagulatorsOphthalmic Laser
Auto RefractometerAuto Kerato-Refractometer
Rotating LaserRotating lasers improve the efficiency of various types of construction work by leveraging the characteristics of la-ser light and integrating unique func-tions (ie highly visible green lasers mmGPS that can achieve accurate lev-eling at a construction site having large difference in height and so on)
Image MeasurementOur image analysis and measurement technologies which are gained through our long years of experience enable non-contact measurement of objects They can also be applied to analysis and mea-surement using video images These ad-vanced technologies are widely utilized on mobile mapping systems analysis of 3D scanner data and imaging total stations
Total StationTotal stations measure 3D positions at distances of up to several ki-lometers with extremely high precision in the range from millimeters to centimeters in surveying and construction sites based on dis-tance and angle measurement technologies that use light Our di-verse product lineup supports various applications including models that can measure the surface point of an object without a prism models that are capable of highly accurate distance and angle mea-surement for monitoring of a large structure and industrial measure-ment and models equipped with a camera that can display live images superimposed by measurement results design data etc
Plant NutritionPlant NutritionSensors
Smart Infrastructure Company
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
04
TOPCONrsquoS STRENGTHA WIDE RANGEOF WAVELENGTHS
One of the strengths of the Topcon Group lies in our optical technology which spans a wide range of wavelengths from electron beams to infrared rays Leveraging this technological strength we continue to launch the worldrsquos first and No 1 products which are both unique and outstanding
3D OCT(Optical Coherence Tomography)The 3D OCT is a diagnostic instrument that combines a retinal camera with Optical Co-herence Tomography (OCT) which ac-quires a cross-sectional image of a biological body employing infrared light This instrument not only provides fundus photography but also 3D cross-sectional images of the layers inside the retina The 3D OCT enables the early detection and di-agnosis of various ophthalmic diseases
Ophthalmic Laser PhotocoagulatorsAn ophthalmic laser photocoagulator treats the ret-ina by using laser irradiation to burn diseased parts It is used to prevent formation of new breakable fragile blood vessels in the retina due to blocked blood flow caused by a clogged blood vessel or to burn away newly formed blood vessels to prevent bleeding The equipment is essential for ophthal-mic care and is used in the treatment of such con-ditions as diabetic retinopathy and retinal break which causes retinal detachment
GNSSTopcon pioneered the use of multi-constella-tion (GPS+GLONASS) GNSS receivers and its innovative leadership continues today Our high-precision GNSS receivers include unique features like universal channels that can track virtually any GNSS signal Fence Antennatrade technology for industry-leading tracking sensi-tivity and versatile communications options
Plant Nutrition SensorsTopcon has some revolutionary systems One is CropSpec which enables the appropriate application of fertilizer in real time by perform-ing non-contact monitoring of crop conditions using a broad spectrum laser Other systems provide guidance for agricultural machines and soil preparation Agricultural machines equipped with Topconrsquos revolutionary systems can dra-matically improve production while minimizing the environmental load
Machine ControlsTopcon is a world leader in automating con-struction equipment Our systems provide two- and three-dimensional grading excavat-ing or paving control Using sonic laser total station or GPS as control sources Topcon machine control systems increase the effi-ciency and quality of earthmoving and paving around the globe
Substrate Projection SteppersProjection steppers feature a large-aper-ture high-resolution objective lens (the worldrsquos No1) incorporating all of Topconrsquos optic technology They are used for the wiring patterning processes of the semi-conductor package substrate (substrate board) which is increasingly being minia-turized
Hybrid Electron MicroscopesThis product features an electron micro-scope equipped with an optical micro-scope and it realizes the worldrsquos first simultaneous observations by combining an SEM with an optical microscope It is an all-in-one electron microscope that represents a new concept and it features various other functions including height measurement elemental analysis un-coated observations etc
Auto RefractometerAuto Kerato-RefractometerAuto refractometers and auto kerato-refractome-ters automatically measure refractive error of the eye (near-sightedness far-sightedness and astig-matism) by using invisible near-infrared light They are used at many eyeglasses shops and ophthal-mology clinics An auto kerato-refractometer mea-sures the corneal curvature radius which is required for prescriptions for contact lenses
Eye Care Company
Positioning Company
Other Businesses
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1No1No1No1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
05
06
CONSOLIDATED FINANCIAL HIGHLIGHTSTopcon Corporation and Consolidated Subsidiaries
Operating results Net sales Positioning Business Eye Care Business Finetech Business Overseas Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio ()
yen 110818 50928 39828 20061 81027 10975 9205 7736 2893 3478 268 10178 (16185)
yen 56082 139362 43329
yen 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192
yen 112666 58031 33503 21131 83684 (6944) (9326) (9992) 2620 4619 1828 11589 (6991)
yen 39801 119702 49706
yen (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash
yen 94862 49350 31561 13950 69138 1405 545 133 2109 4531 1846 9609 1112
yen 40490 125539 51501
yen 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770
yen 102470 51559 30946 19964 74210 1799 608 (1288) 4499 3689 1596 10275 (7903)
yen 36908 124816 55300
yen (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash
yen 98834 52656 32598 13579 73949 2080 467 (3686) 3443 3115 1660 8707 (3575)
yen 32667 120777 58882
yen (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash
$ 1202513 640670 396621 165221 899739 25316 5685 (44851) 41890 37902 20200 105947 (43500)
$ 397457 1469490 716420
$ (0484) 4291
20083 20093 20103 20113 20123
Millions of yen
20123
Thousands ofUS dollars
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 Depreciation and amortization excludes the amortization of goodwill
07
NET SALES AND OVERSEAS NET SALES RATIO
120000 80
100000 75
80000 70
60000 65
40000 60
20000 55
0 0
(Millions of yen) ()
103093083 113 123
OPERATING INCOME (LOSS) AND OPERATING INCOME RATIO
12000 15
8000 10
4000 5
0 0
-4000 -5
-8000 -10
(Millions of yen) ()
103093083 113 123
Operating income (loss) (left)
Operating income ratio (right)
NET INCOME (LOSS) ANDNET INCOME RATIO
10000 10
5000 5
0 0
-5000 -5
-10000 -10
(Millions of yen) ()
103093083 113 123
Net income (loss) (left)
Net income ratio (right)
FREE CASH FLOWS AND DE RATIO
CAPITAL EXPENDITURES ANDDEPRECIATION AND AMORTIZATION
RampD EXPENDITURES AND RATIO OFRampD EXPENDITURES TO NET SALES
12000 12
10000 10
8000 8
6000 6
4000 4
2000 2
0 0
(Millions of yen) ()
RampD expenditures (left)
Ratio of RampD expenditures to net sales (right)
Free cash flow (left)
DE ratio (right)
Capital expenditures
Depreciation and amortization
ROE AND ROA
15
5
-5
10
0
-10
-15
-20
-25
()
Return on equity (ROE)
Return on assets (ROA)
PER AND PBR
400
300
200
100
0
20
15
10
05
0
(Times) (Times)
Price earnings ratio (PER) (left)
Price-book value ratio (PBR) (right)
INTEREST-BEARING LIABILITIES AND EQUITY RATIO
60000 60
50000 50
40000 40
30000 30
20000 20
10000 10
0 0
(Millions of yen) ()
Interest-bearing liabilities (left)
Equity ratio (right)
20000 200
10000 100
0 0
-10000 -100
-20000 -200
(Millions of yen) ()5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123 103093083 113 123 103093083 113 123
103093083 113 123 103093083 113 123 103093083 113 123
Positioning Business (left) Eye Care Business (left)
Finetech Business (left) Overseas net sales ratio (right)
FY2011 Financial Earnings Highlights
bullConsolidatednetsalesinFY2011endedMarch312012fell35yearonyeartoyen98834million
bullOperatingincomeclimbed156yearonyeartoyen2080million
bullTheCompanyrecordedanetlossofyen3686millionfromincurringextraordinarylossesincludinglosses posted in connection with the downsizing of the Finetech Business and solicitation for voluntary retirement
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
01
Ever since its establishment in 1932 the Topcon Group has maintained optical technology as its core tech-
nology and has now merged this field with digital technology to develop a wide range of businesses The
Companyrsquos optical technology spanning a wide range of wavelengths from electron beams to infrared rays
is our major strength
Furthermore from early on we have sought customers from many regions and have thus cultivated markets
in such areas as the United States and Europe As a result we are currently implementing a global manage-
ment system with development production and sales centers in countries throughout the world
The Topcon Group aims to create new value and by extension contribute to mankind by differentiating itself
from its rivals through the provision of the worldrsquos top as well as attractive products faster than anyone else
01
PROFILE
CONTENTS
Profile
01Special Feature 2TopconrsquosTechnologicalProwess
18
Special Feature 1Mid-term Business Plan
14DirectorsCorporateAuditorsand ExecutiveOfficers
34
CSR
32
CorporateGovernance
30
Topconrsquos Business Fields
02At a Glance(For the year ended March 31 2012)
20FinancialSection
35
TopconrsquosStrengthA Wide Rangeof Wavelengths
04Positioning(Smart InfrastructureCompanyPositioningCompany)
22CorporateProfile
47
ConsolidatedFinancialHighlights
06Eye Care(Eye Care Company)
24StockInformation
47
To OurStakeholders
08History ofTopcon
26Japanese andOverseas GroupCompanies
48
Interview withthe President
10Global Network
28
SurveyingTopconrsquos total stations are widely used in the global market We offer a lineup of products suited for various applications includ-ing imaging stations equipped with CCDs and capable of perform-ing image measurements and high precision total stations that can monitor large structures In addition we recently launched total stations equipped with the worldrsquos first TSshield user sup-port system which provides highly reliable customer support
Construction and Civil EngineeringOur machine control systems efficiently improve time savings and dramatically increase productivity of a wide variety of construction machinery on con-struction sites worldwide
Precision AgricultureBy applying Topconrsquos machine control technology to the global agricultural mar-ketplace the automation of agricultural machinery and the incorporation of infor-mation technology is improving any size farm operation Agricultural machines equipped with Topconrsquos innovative sys-temsmdashfrom crop monitoring to applica-tion control and from field guidance to land levelingmdashincrease yield while mini-mizing environmental impact
Machine Control 3D-MC mmGPS
Plant Nutrition Sensor CropSpecMobile Mapping System IP-S2 Lite
Robotic Total Station PS Series
TSshieldMobile 3D MeasurementBy simply mounting our sensor of Mobile Mapping System unit on a vehicle and driv-ing you can collect surrounding 3D posi-tional information and 360 degree images to create 3D virtual space using our worldrsquos first image processing technology
Ophthalmic InstrumentsAll over the world we supply diagnostic instruments that enable the observation and measurement of all parts of the eye including the cornea the crystalline lens and the retina In particular we maintain the top global market share for ophthalmic data management systems Moreover we are expanding our business to include not only diagnostic instruments but also instruments used in treatment and operating rooms such as laser photocoagulators and operation microscopes
Treatment
Ophthalmic IT SolutionsExamination
Instruments for eyeglasses shopsWe provide all types of vision-testing instrument and lens edgers used at eyeglasses shops Topconrsquos vision tester an instrument containing lenses for refraction of eye and other such devices are highly regarded not only in Japan but around the world
Ophthalmic Laser PhotocoagulatorPASCALreg
Compu VisionCV-5000S
Optical Coherence Tomography3D OCT Series
IMAGEnetTM
LED Chip Defect Inspection SystemVi-SW200C
Spectroradiometer SR-LED
LED-relatedIn LED-related fields we supply domes-tic and foreign LED chip manufacturers with spectroradiometers used for con-trolling the quality of LED lights LCD panel backlights and automotive head-lights The equipment controls lumi-nance and chromaticity levels color temperature characteristics and color rendering properties We also supply defect inspection equipment special-ized for use on LED chips
02
TOPCONrsquoS BUSINESS FIELDS
The Topcon Group provides many attractive products based on our unparalleled optical and cutting-edge digital technologies
A world leader in high-precision GPS and automated machine controlThe Positioning Company (formerly part of the Positioning Business Unit) is expanding exist-ing markets and developing new markets for automated construction machine control and precision agriculture through the integration of new technologies including machine con-trol image processing and GPS
A top three surveying instruments manufacturerThe Smart Infrastructure Company (formerly part of the Positioning Business Unit) has been Topconrsquos largest business segment since its establishment providing surveying instruments based on the opto-mechatronics technologies for measuring positions with distances and angles Utilizing laser and image processing technologies we provide various prod-ucts for high-precision measurement as a pioneer in the global market In the field of mobile 3D measure-ment our business is expanding into a wide range of applications including utilization of base mapping of ITS (Intelligent Transport Systems)
POSITIONINGCOMPANY
SMARTINFRA-STRUCTURECOMPANY
SurveyingTopconrsquos total stations are widely used in the global market We offer a lineup of products suited for various applications includ-ing imaging stations equipped with CCDs and capable of perform-ing image measurements and high precision total stations that can monitor large structures In addition we recently launched total stations equipped with the worldrsquos first TSshield user sup-port system which provides highly reliable customer support
Construction and Civil EngineeringOur machine control systems efficiently improve time savings and dramatically increase productivity of a wide variety of construction machinery on con-struction sites worldwide
Precision AgricultureBy applying Topconrsquos machine control technology to the global agricultural mar-ketplace the automation of agricultural machinery and the incorporation of infor-mation technology is improving any size farm operation Agricultural machines equipped with Topconrsquos innovative sys-temsmdashfrom crop monitoring to applica-tion control and from field guidance to land levelingmdashincrease yield while mini-mizing environmental impact
Machine Control 3D-MC mmGPS
Plant Nutrition Sensor CropSpecMobile Mapping System IP-S2 Lite
Robotic Total Station PS Series
TSshieldMobile 3D MeasurementBy simply mounting our sensor of Mobile Mapping System unit on a vehicle and driv-ing you can collect surrounding 3D posi-tional information and 360 degree images to create 3D virtual space using our worldrsquos first image processing technology
Ophthalmic InstrumentsAll over the world we supply diagnostic instruments that enable the observation and measurement of all parts of the eye including the cornea the crystalline lens and the retina In particular we maintain the top global market share for ophthalmic data management systems Moreover we are expanding our business to include not only diagnostic instruments but also instruments used in treatment and operating rooms such as laser photocoagulators and operation microscopes
Treatment
Ophthalmic IT SolutionsExamination
Instruments for eyeglasses shopsWe provide all types of vision-testing instrument and lens edgers used at eyeglasses shops Topconrsquos vision tester an instrument containing lenses for refraction of eye and other such devices are highly regarded not only in Japan but around the world
Ophthalmic Laser PhotocoagulatorPASCALreg
Compu VisionCV-5000S
Optical Coherence Tomography3D OCT Series
IMAGEnetTM
LED Chip Defect Inspection SystemVi-SW200C
Spectroradiometer SR-LED
LED-relatedIn LED-related fields we supply domes-tic and foreign LED chip manufacturers with spectroradiometers used for con-trolling the quality of LED lights LCD panel backlights and automotive head-lights The equipment controls lumi-nance and chromaticity levels color temperature characteristics and color rendering properties We also supply defect inspection equipment special-ized for use on LED chips
03
A top global brand of ophthalmic medical instrumentsWe provide ophthalmic diagnostic and treatment instruments ophthalmic diagnosis support systems primarily for use in ophthalmology departments in hospitals and optometric vision testing instruments for eyeglasses shops Furthermore we have lately been focusing on systems solutions the development of advanced ophthalmic medical instruments and preventative medical devices for such applications as the screening of compli-cations caused by diabetes
EYECARECOMPANY
OTHERBUSINESSES
1Å
1nm
1μm
1mm
1nm 10μ400nm 500nm 700nm 1μ(Electron(ElectronBeam)
(Ultraviolet) (Visible) (Infrared)
(Measurement PrecisionResolution)
( Wavelength( Wavelength Used) Used)
(Radio Waves)(Radio Waves)
Rotating Laser
3D OCT
Retinal Camera
Image Measurement
Total Station
SpecularMicroscopeMicroscope
SpecularMicroscope
Specular
GNSSMachineControls
Topconrsquos Strength A Wide Range of Wavelengths
Hybrid ElectronMicroscopes
SubstrateProjection Steppers
Chip DefectInspection System
Optical Measurement
Ophthalmic LaserPhotocoagulatorsOphthalmic LaserPhotocoagulatorsOphthalmic Laser
Auto RefractometerAuto Kerato-Refractometer
Rotating LaserRotating lasers improve the efficiency of various types of construction work by leveraging the characteristics of la-ser light and integrating unique func-tions (ie highly visible green lasers mmGPS that can achieve accurate lev-eling at a construction site having large difference in height and so on)
Image MeasurementOur image analysis and measurement technologies which are gained through our long years of experience enable non-contact measurement of objects They can also be applied to analysis and mea-surement using video images These ad-vanced technologies are widely utilized on mobile mapping systems analysis of 3D scanner data and imaging total stations
Total StationTotal stations measure 3D positions at distances of up to several ki-lometers with extremely high precision in the range from millimeters to centimeters in surveying and construction sites based on dis-tance and angle measurement technologies that use light Our di-verse product lineup supports various applications including models that can measure the surface point of an object without a prism models that are capable of highly accurate distance and angle mea-surement for monitoring of a large structure and industrial measure-ment and models equipped with a camera that can display live images superimposed by measurement results design data etc
Plant NutritionPlant NutritionSensors
Smart Infrastructure Company
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
04
TOPCONrsquoS STRENGTHA WIDE RANGEOF WAVELENGTHS
One of the strengths of the Topcon Group lies in our optical technology which spans a wide range of wavelengths from electron beams to infrared rays Leveraging this technological strength we continue to launch the worldrsquos first and No 1 products which are both unique and outstanding
3D OCT(Optical Coherence Tomography)The 3D OCT is a diagnostic instrument that combines a retinal camera with Optical Co-herence Tomography (OCT) which ac-quires a cross-sectional image of a biological body employing infrared light This instrument not only provides fundus photography but also 3D cross-sectional images of the layers inside the retina The 3D OCT enables the early detection and di-agnosis of various ophthalmic diseases
Ophthalmic Laser PhotocoagulatorsAn ophthalmic laser photocoagulator treats the ret-ina by using laser irradiation to burn diseased parts It is used to prevent formation of new breakable fragile blood vessels in the retina due to blocked blood flow caused by a clogged blood vessel or to burn away newly formed blood vessels to prevent bleeding The equipment is essential for ophthal-mic care and is used in the treatment of such con-ditions as diabetic retinopathy and retinal break which causes retinal detachment
GNSSTopcon pioneered the use of multi-constella-tion (GPS+GLONASS) GNSS receivers and its innovative leadership continues today Our high-precision GNSS receivers include unique features like universal channels that can track virtually any GNSS signal Fence Antennatrade technology for industry-leading tracking sensi-tivity and versatile communications options
Plant Nutrition SensorsTopcon has some revolutionary systems One is CropSpec which enables the appropriate application of fertilizer in real time by perform-ing non-contact monitoring of crop conditions using a broad spectrum laser Other systems provide guidance for agricultural machines and soil preparation Agricultural machines equipped with Topconrsquos revolutionary systems can dra-matically improve production while minimizing the environmental load
Machine ControlsTopcon is a world leader in automating con-struction equipment Our systems provide two- and three-dimensional grading excavat-ing or paving control Using sonic laser total station or GPS as control sources Topcon machine control systems increase the effi-ciency and quality of earthmoving and paving around the globe
Substrate Projection SteppersProjection steppers feature a large-aper-ture high-resolution objective lens (the worldrsquos No1) incorporating all of Topconrsquos optic technology They are used for the wiring patterning processes of the semi-conductor package substrate (substrate board) which is increasingly being minia-turized
Hybrid Electron MicroscopesThis product features an electron micro-scope equipped with an optical micro-scope and it realizes the worldrsquos first simultaneous observations by combining an SEM with an optical microscope It is an all-in-one electron microscope that represents a new concept and it features various other functions including height measurement elemental analysis un-coated observations etc
Auto RefractometerAuto Kerato-RefractometerAuto refractometers and auto kerato-refractome-ters automatically measure refractive error of the eye (near-sightedness far-sightedness and astig-matism) by using invisible near-infrared light They are used at many eyeglasses shops and ophthal-mology clinics An auto kerato-refractometer mea-sures the corneal curvature radius which is required for prescriptions for contact lenses
Eye Care Company
Positioning Company
Other Businesses
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1No1No1No1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
05
06
CONSOLIDATED FINANCIAL HIGHLIGHTSTopcon Corporation and Consolidated Subsidiaries
Operating results Net sales Positioning Business Eye Care Business Finetech Business Overseas Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio ()
yen 110818 50928 39828 20061 81027 10975 9205 7736 2893 3478 268 10178 (16185)
yen 56082 139362 43329
yen 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192
yen 112666 58031 33503 21131 83684 (6944) (9326) (9992) 2620 4619 1828 11589 (6991)
yen 39801 119702 49706
yen (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash
yen 94862 49350 31561 13950 69138 1405 545 133 2109 4531 1846 9609 1112
yen 40490 125539 51501
yen 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770
yen 102470 51559 30946 19964 74210 1799 608 (1288) 4499 3689 1596 10275 (7903)
yen 36908 124816 55300
yen (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash
yen 98834 52656 32598 13579 73949 2080 467 (3686) 3443 3115 1660 8707 (3575)
yen 32667 120777 58882
yen (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash
$ 1202513 640670 396621 165221 899739 25316 5685 (44851) 41890 37902 20200 105947 (43500)
$ 397457 1469490 716420
$ (0484) 4291
20083 20093 20103 20113 20123
Millions of yen
20123
Thousands ofUS dollars
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 Depreciation and amortization excludes the amortization of goodwill
07
NET SALES AND OVERSEAS NET SALES RATIO
120000 80
100000 75
80000 70
60000 65
40000 60
20000 55
0 0
(Millions of yen) ()
103093083 113 123
OPERATING INCOME (LOSS) AND OPERATING INCOME RATIO
12000 15
8000 10
4000 5
0 0
-4000 -5
-8000 -10
(Millions of yen) ()
103093083 113 123
Operating income (loss) (left)
Operating income ratio (right)
NET INCOME (LOSS) ANDNET INCOME RATIO
10000 10
5000 5
0 0
-5000 -5
-10000 -10
(Millions of yen) ()
103093083 113 123
Net income (loss) (left)
Net income ratio (right)
FREE CASH FLOWS AND DE RATIO
CAPITAL EXPENDITURES ANDDEPRECIATION AND AMORTIZATION
RampD EXPENDITURES AND RATIO OFRampD EXPENDITURES TO NET SALES
12000 12
10000 10
8000 8
6000 6
4000 4
2000 2
0 0
(Millions of yen) ()
RampD expenditures (left)
Ratio of RampD expenditures to net sales (right)
Free cash flow (left)
DE ratio (right)
Capital expenditures
Depreciation and amortization
ROE AND ROA
15
5
-5
10
0
-10
-15
-20
-25
()
Return on equity (ROE)
Return on assets (ROA)
PER AND PBR
400
300
200
100
0
20
15
10
05
0
(Times) (Times)
Price earnings ratio (PER) (left)
Price-book value ratio (PBR) (right)
INTEREST-BEARING LIABILITIES AND EQUITY RATIO
60000 60
50000 50
40000 40
30000 30
20000 20
10000 10
0 0
(Millions of yen) ()
Interest-bearing liabilities (left)
Equity ratio (right)
20000 200
10000 100
0 0
-10000 -100
-20000 -200
(Millions of yen) ()5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123 103093083 113 123 103093083 113 123
103093083 113 123 103093083 113 123 103093083 113 123
Positioning Business (left) Eye Care Business (left)
Finetech Business (left) Overseas net sales ratio (right)
FY2011 Financial Earnings Highlights
bullConsolidatednetsalesinFY2011endedMarch312012fell35yearonyeartoyen98834million
bullOperatingincomeclimbed156yearonyeartoyen2080million
bullTheCompanyrecordedanetlossofyen3686millionfromincurringextraordinarylossesincludinglosses posted in connection with the downsizing of the Finetech Business and solicitation for voluntary retirement
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
SurveyingTopconrsquos total stations are widely used in the global market We offer a lineup of products suited for various applications includ-ing imaging stations equipped with CCDs and capable of perform-ing image measurements and high precision total stations that can monitor large structures In addition we recently launched total stations equipped with the worldrsquos first TSshield user sup-port system which provides highly reliable customer support
Construction and Civil EngineeringOur machine control systems efficiently improve time savings and dramatically increase productivity of a wide variety of construction machinery on con-struction sites worldwide
Precision AgricultureBy applying Topconrsquos machine control technology to the global agricultural mar-ketplace the automation of agricultural machinery and the incorporation of infor-mation technology is improving any size farm operation Agricultural machines equipped with Topconrsquos innovative sys-temsmdashfrom crop monitoring to applica-tion control and from field guidance to land levelingmdashincrease yield while mini-mizing environmental impact
Machine Control 3D-MC mmGPS
Plant Nutrition Sensor CropSpecMobile Mapping System IP-S2 Lite
Robotic Total Station PS Series
TSshieldMobile 3D MeasurementBy simply mounting our sensor of Mobile Mapping System unit on a vehicle and driv-ing you can collect surrounding 3D posi-tional information and 360 degree images to create 3D virtual space using our worldrsquos first image processing technology
Ophthalmic InstrumentsAll over the world we supply diagnostic instruments that enable the observation and measurement of all parts of the eye including the cornea the crystalline lens and the retina In particular we maintain the top global market share for ophthalmic data management systems Moreover we are expanding our business to include not only diagnostic instruments but also instruments used in treatment and operating rooms such as laser photocoagulators and operation microscopes
Treatment
Ophthalmic IT SolutionsExamination
Instruments for eyeglasses shopsWe provide all types of vision-testing instrument and lens edgers used at eyeglasses shops Topconrsquos vision tester an instrument containing lenses for refraction of eye and other such devices are highly regarded not only in Japan but around the world
Ophthalmic Laser PhotocoagulatorPASCALreg
Compu VisionCV-5000S
Optical Coherence Tomography3D OCT Series
IMAGEnetTM
LED Chip Defect Inspection SystemVi-SW200C
Spectroradiometer SR-LED
LED-relatedIn LED-related fields we supply domes-tic and foreign LED chip manufacturers with spectroradiometers used for con-trolling the quality of LED lights LCD panel backlights and automotive head-lights The equipment controls lumi-nance and chromaticity levels color temperature characteristics and color rendering properties We also supply defect inspection equipment special-ized for use on LED chips
02
TOPCONrsquoS BUSINESS FIELDS
The Topcon Group provides many attractive products based on our unparalleled optical and cutting-edge digital technologies
A world leader in high-precision GPS and automated machine controlThe Positioning Company (formerly part of the Positioning Business Unit) is expanding exist-ing markets and developing new markets for automated construction machine control and precision agriculture through the integration of new technologies including machine con-trol image processing and GPS
A top three surveying instruments manufacturerThe Smart Infrastructure Company (formerly part of the Positioning Business Unit) has been Topconrsquos largest business segment since its establishment providing surveying instruments based on the opto-mechatronics technologies for measuring positions with distances and angles Utilizing laser and image processing technologies we provide various prod-ucts for high-precision measurement as a pioneer in the global market In the field of mobile 3D measure-ment our business is expanding into a wide range of applications including utilization of base mapping of ITS (Intelligent Transport Systems)
POSITIONINGCOMPANY
SMARTINFRA-STRUCTURECOMPANY
SurveyingTopconrsquos total stations are widely used in the global market We offer a lineup of products suited for various applications includ-ing imaging stations equipped with CCDs and capable of perform-ing image measurements and high precision total stations that can monitor large structures In addition we recently launched total stations equipped with the worldrsquos first TSshield user sup-port system which provides highly reliable customer support
Construction and Civil EngineeringOur machine control systems efficiently improve time savings and dramatically increase productivity of a wide variety of construction machinery on con-struction sites worldwide
Precision AgricultureBy applying Topconrsquos machine control technology to the global agricultural mar-ketplace the automation of agricultural machinery and the incorporation of infor-mation technology is improving any size farm operation Agricultural machines equipped with Topconrsquos innovative sys-temsmdashfrom crop monitoring to applica-tion control and from field guidance to land levelingmdashincrease yield while mini-mizing environmental impact
Machine Control 3D-MC mmGPS
Plant Nutrition Sensor CropSpecMobile Mapping System IP-S2 Lite
Robotic Total Station PS Series
TSshieldMobile 3D MeasurementBy simply mounting our sensor of Mobile Mapping System unit on a vehicle and driv-ing you can collect surrounding 3D posi-tional information and 360 degree images to create 3D virtual space using our worldrsquos first image processing technology
Ophthalmic InstrumentsAll over the world we supply diagnostic instruments that enable the observation and measurement of all parts of the eye including the cornea the crystalline lens and the retina In particular we maintain the top global market share for ophthalmic data management systems Moreover we are expanding our business to include not only diagnostic instruments but also instruments used in treatment and operating rooms such as laser photocoagulators and operation microscopes
Treatment
Ophthalmic IT SolutionsExamination
Instruments for eyeglasses shopsWe provide all types of vision-testing instrument and lens edgers used at eyeglasses shops Topconrsquos vision tester an instrument containing lenses for refraction of eye and other such devices are highly regarded not only in Japan but around the world
Ophthalmic Laser PhotocoagulatorPASCALreg
Compu VisionCV-5000S
Optical Coherence Tomography3D OCT Series
IMAGEnetTM
LED Chip Defect Inspection SystemVi-SW200C
Spectroradiometer SR-LED
LED-relatedIn LED-related fields we supply domes-tic and foreign LED chip manufacturers with spectroradiometers used for con-trolling the quality of LED lights LCD panel backlights and automotive head-lights The equipment controls lumi-nance and chromaticity levels color temperature characteristics and color rendering properties We also supply defect inspection equipment special-ized for use on LED chips
03
A top global brand of ophthalmic medical instrumentsWe provide ophthalmic diagnostic and treatment instruments ophthalmic diagnosis support systems primarily for use in ophthalmology departments in hospitals and optometric vision testing instruments for eyeglasses shops Furthermore we have lately been focusing on systems solutions the development of advanced ophthalmic medical instruments and preventative medical devices for such applications as the screening of compli-cations caused by diabetes
EYECARECOMPANY
OTHERBUSINESSES
1Å
1nm
1μm
1mm
1nm 10μ400nm 500nm 700nm 1μ(Electron(ElectronBeam)
(Ultraviolet) (Visible) (Infrared)
(Measurement PrecisionResolution)
( Wavelength( Wavelength Used) Used)
(Radio Waves)(Radio Waves)
Rotating Laser
3D OCT
Retinal Camera
Image Measurement
Total Station
SpecularMicroscopeMicroscope
SpecularMicroscope
Specular
GNSSMachineControls
Topconrsquos Strength A Wide Range of Wavelengths
Hybrid ElectronMicroscopes
SubstrateProjection Steppers
Chip DefectInspection System
Optical Measurement
Ophthalmic LaserPhotocoagulatorsOphthalmic LaserPhotocoagulatorsOphthalmic Laser
Auto RefractometerAuto Kerato-Refractometer
Rotating LaserRotating lasers improve the efficiency of various types of construction work by leveraging the characteristics of la-ser light and integrating unique func-tions (ie highly visible green lasers mmGPS that can achieve accurate lev-eling at a construction site having large difference in height and so on)
Image MeasurementOur image analysis and measurement technologies which are gained through our long years of experience enable non-contact measurement of objects They can also be applied to analysis and mea-surement using video images These ad-vanced technologies are widely utilized on mobile mapping systems analysis of 3D scanner data and imaging total stations
Total StationTotal stations measure 3D positions at distances of up to several ki-lometers with extremely high precision in the range from millimeters to centimeters in surveying and construction sites based on dis-tance and angle measurement technologies that use light Our di-verse product lineup supports various applications including models that can measure the surface point of an object without a prism models that are capable of highly accurate distance and angle mea-surement for monitoring of a large structure and industrial measure-ment and models equipped with a camera that can display live images superimposed by measurement results design data etc
Plant NutritionPlant NutritionSensors
Smart Infrastructure Company
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
04
TOPCONrsquoS STRENGTHA WIDE RANGEOF WAVELENGTHS
One of the strengths of the Topcon Group lies in our optical technology which spans a wide range of wavelengths from electron beams to infrared rays Leveraging this technological strength we continue to launch the worldrsquos first and No 1 products which are both unique and outstanding
3D OCT(Optical Coherence Tomography)The 3D OCT is a diagnostic instrument that combines a retinal camera with Optical Co-herence Tomography (OCT) which ac-quires a cross-sectional image of a biological body employing infrared light This instrument not only provides fundus photography but also 3D cross-sectional images of the layers inside the retina The 3D OCT enables the early detection and di-agnosis of various ophthalmic diseases
Ophthalmic Laser PhotocoagulatorsAn ophthalmic laser photocoagulator treats the ret-ina by using laser irradiation to burn diseased parts It is used to prevent formation of new breakable fragile blood vessels in the retina due to blocked blood flow caused by a clogged blood vessel or to burn away newly formed blood vessels to prevent bleeding The equipment is essential for ophthal-mic care and is used in the treatment of such con-ditions as diabetic retinopathy and retinal break which causes retinal detachment
GNSSTopcon pioneered the use of multi-constella-tion (GPS+GLONASS) GNSS receivers and its innovative leadership continues today Our high-precision GNSS receivers include unique features like universal channels that can track virtually any GNSS signal Fence Antennatrade technology for industry-leading tracking sensi-tivity and versatile communications options
Plant Nutrition SensorsTopcon has some revolutionary systems One is CropSpec which enables the appropriate application of fertilizer in real time by perform-ing non-contact monitoring of crop conditions using a broad spectrum laser Other systems provide guidance for agricultural machines and soil preparation Agricultural machines equipped with Topconrsquos revolutionary systems can dra-matically improve production while minimizing the environmental load
Machine ControlsTopcon is a world leader in automating con-struction equipment Our systems provide two- and three-dimensional grading excavat-ing or paving control Using sonic laser total station or GPS as control sources Topcon machine control systems increase the effi-ciency and quality of earthmoving and paving around the globe
Substrate Projection SteppersProjection steppers feature a large-aper-ture high-resolution objective lens (the worldrsquos No1) incorporating all of Topconrsquos optic technology They are used for the wiring patterning processes of the semi-conductor package substrate (substrate board) which is increasingly being minia-turized
Hybrid Electron MicroscopesThis product features an electron micro-scope equipped with an optical micro-scope and it realizes the worldrsquos first simultaneous observations by combining an SEM with an optical microscope It is an all-in-one electron microscope that represents a new concept and it features various other functions including height measurement elemental analysis un-coated observations etc
Auto RefractometerAuto Kerato-RefractometerAuto refractometers and auto kerato-refractome-ters automatically measure refractive error of the eye (near-sightedness far-sightedness and astig-matism) by using invisible near-infrared light They are used at many eyeglasses shops and ophthal-mology clinics An auto kerato-refractometer mea-sures the corneal curvature radius which is required for prescriptions for contact lenses
Eye Care Company
Positioning Company
Other Businesses
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1No1No1No1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
05
06
CONSOLIDATED FINANCIAL HIGHLIGHTSTopcon Corporation and Consolidated Subsidiaries
Operating results Net sales Positioning Business Eye Care Business Finetech Business Overseas Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio ()
yen 110818 50928 39828 20061 81027 10975 9205 7736 2893 3478 268 10178 (16185)
yen 56082 139362 43329
yen 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192
yen 112666 58031 33503 21131 83684 (6944) (9326) (9992) 2620 4619 1828 11589 (6991)
yen 39801 119702 49706
yen (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash
yen 94862 49350 31561 13950 69138 1405 545 133 2109 4531 1846 9609 1112
yen 40490 125539 51501
yen 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770
yen 102470 51559 30946 19964 74210 1799 608 (1288) 4499 3689 1596 10275 (7903)
yen 36908 124816 55300
yen (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash
yen 98834 52656 32598 13579 73949 2080 467 (3686) 3443 3115 1660 8707 (3575)
yen 32667 120777 58882
yen (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash
$ 1202513 640670 396621 165221 899739 25316 5685 (44851) 41890 37902 20200 105947 (43500)
$ 397457 1469490 716420
$ (0484) 4291
20083 20093 20103 20113 20123
Millions of yen
20123
Thousands ofUS dollars
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 Depreciation and amortization excludes the amortization of goodwill
07
NET SALES AND OVERSEAS NET SALES RATIO
120000 80
100000 75
80000 70
60000 65
40000 60
20000 55
0 0
(Millions of yen) ()
103093083 113 123
OPERATING INCOME (LOSS) AND OPERATING INCOME RATIO
12000 15
8000 10
4000 5
0 0
-4000 -5
-8000 -10
(Millions of yen) ()
103093083 113 123
Operating income (loss) (left)
Operating income ratio (right)
NET INCOME (LOSS) ANDNET INCOME RATIO
10000 10
5000 5
0 0
-5000 -5
-10000 -10
(Millions of yen) ()
103093083 113 123
Net income (loss) (left)
Net income ratio (right)
FREE CASH FLOWS AND DE RATIO
CAPITAL EXPENDITURES ANDDEPRECIATION AND AMORTIZATION
RampD EXPENDITURES AND RATIO OFRampD EXPENDITURES TO NET SALES
12000 12
10000 10
8000 8
6000 6
4000 4
2000 2
0 0
(Millions of yen) ()
RampD expenditures (left)
Ratio of RampD expenditures to net sales (right)
Free cash flow (left)
DE ratio (right)
Capital expenditures
Depreciation and amortization
ROE AND ROA
15
5
-5
10
0
-10
-15
-20
-25
()
Return on equity (ROE)
Return on assets (ROA)
PER AND PBR
400
300
200
100
0
20
15
10
05
0
(Times) (Times)
Price earnings ratio (PER) (left)
Price-book value ratio (PBR) (right)
INTEREST-BEARING LIABILITIES AND EQUITY RATIO
60000 60
50000 50
40000 40
30000 30
20000 20
10000 10
0 0
(Millions of yen) ()
Interest-bearing liabilities (left)
Equity ratio (right)
20000 200
10000 100
0 0
-10000 -100
-20000 -200
(Millions of yen) ()5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123 103093083 113 123 103093083 113 123
103093083 113 123 103093083 113 123 103093083 113 123
Positioning Business (left) Eye Care Business (left)
Finetech Business (left) Overseas net sales ratio (right)
FY2011 Financial Earnings Highlights
bullConsolidatednetsalesinFY2011endedMarch312012fell35yearonyeartoyen98834million
bullOperatingincomeclimbed156yearonyeartoyen2080million
bullTheCompanyrecordedanetlossofyen3686millionfromincurringextraordinarylossesincludinglosses posted in connection with the downsizing of the Finetech Business and solicitation for voluntary retirement
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
SurveyingTopconrsquos total stations are widely used in the global market We offer a lineup of products suited for various applications includ-ing imaging stations equipped with CCDs and capable of perform-ing image measurements and high precision total stations that can monitor large structures In addition we recently launched total stations equipped with the worldrsquos first TSshield user sup-port system which provides highly reliable customer support
Construction and Civil EngineeringOur machine control systems efficiently improve time savings and dramatically increase productivity of a wide variety of construction machinery on con-struction sites worldwide
Precision AgricultureBy applying Topconrsquos machine control technology to the global agricultural mar-ketplace the automation of agricultural machinery and the incorporation of infor-mation technology is improving any size farm operation Agricultural machines equipped with Topconrsquos innovative sys-temsmdashfrom crop monitoring to applica-tion control and from field guidance to land levelingmdashincrease yield while mini-mizing environmental impact
Machine Control 3D-MC mmGPS
Plant Nutrition Sensor CropSpecMobile Mapping System IP-S2 Lite
Robotic Total Station PS Series
TSshieldMobile 3D MeasurementBy simply mounting our sensor of Mobile Mapping System unit on a vehicle and driv-ing you can collect surrounding 3D posi-tional information and 360 degree images to create 3D virtual space using our worldrsquos first image processing technology
Ophthalmic InstrumentsAll over the world we supply diagnostic instruments that enable the observation and measurement of all parts of the eye including the cornea the crystalline lens and the retina In particular we maintain the top global market share for ophthalmic data management systems Moreover we are expanding our business to include not only diagnostic instruments but also instruments used in treatment and operating rooms such as laser photocoagulators and operation microscopes
Treatment
Ophthalmic IT SolutionsExamination
Instruments for eyeglasses shopsWe provide all types of vision-testing instrument and lens edgers used at eyeglasses shops Topconrsquos vision tester an instrument containing lenses for refraction of eye and other such devices are highly regarded not only in Japan but around the world
Ophthalmic Laser PhotocoagulatorPASCALreg
Compu VisionCV-5000S
Optical Coherence Tomography3D OCT Series
IMAGEnetTM
LED Chip Defect Inspection SystemVi-SW200C
Spectroradiometer SR-LED
LED-relatedIn LED-related fields we supply domes-tic and foreign LED chip manufacturers with spectroradiometers used for con-trolling the quality of LED lights LCD panel backlights and automotive head-lights The equipment controls lumi-nance and chromaticity levels color temperature characteristics and color rendering properties We also supply defect inspection equipment special-ized for use on LED chips
03
A top global brand of ophthalmic medical instrumentsWe provide ophthalmic diagnostic and treatment instruments ophthalmic diagnosis support systems primarily for use in ophthalmology departments in hospitals and optometric vision testing instruments for eyeglasses shops Furthermore we have lately been focusing on systems solutions the development of advanced ophthalmic medical instruments and preventative medical devices for such applications as the screening of compli-cations caused by diabetes
EYECARECOMPANY
OTHERBUSINESSES
1Å
1nm
1μm
1mm
1nm 10μ400nm 500nm 700nm 1μ(Electron(ElectronBeam)
(Ultraviolet) (Visible) (Infrared)
(Measurement PrecisionResolution)
( Wavelength( Wavelength Used) Used)
(Radio Waves)(Radio Waves)
Rotating Laser
3D OCT
Retinal Camera
Image Measurement
Total Station
SpecularMicroscopeMicroscope
SpecularMicroscope
Specular
GNSSMachineControls
Topconrsquos Strength A Wide Range of Wavelengths
Hybrid ElectronMicroscopes
SubstrateProjection Steppers
Chip DefectInspection System
Optical Measurement
Ophthalmic LaserPhotocoagulatorsOphthalmic LaserPhotocoagulatorsOphthalmic Laser
Auto RefractometerAuto Kerato-Refractometer
Rotating LaserRotating lasers improve the efficiency of various types of construction work by leveraging the characteristics of la-ser light and integrating unique func-tions (ie highly visible green lasers mmGPS that can achieve accurate lev-eling at a construction site having large difference in height and so on)
Image MeasurementOur image analysis and measurement technologies which are gained through our long years of experience enable non-contact measurement of objects They can also be applied to analysis and mea-surement using video images These ad-vanced technologies are widely utilized on mobile mapping systems analysis of 3D scanner data and imaging total stations
Total StationTotal stations measure 3D positions at distances of up to several ki-lometers with extremely high precision in the range from millimeters to centimeters in surveying and construction sites based on dis-tance and angle measurement technologies that use light Our di-verse product lineup supports various applications including models that can measure the surface point of an object without a prism models that are capable of highly accurate distance and angle mea-surement for monitoring of a large structure and industrial measure-ment and models equipped with a camera that can display live images superimposed by measurement results design data etc
Plant NutritionPlant NutritionSensors
Smart Infrastructure Company
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
04
TOPCONrsquoS STRENGTHA WIDE RANGEOF WAVELENGTHS
One of the strengths of the Topcon Group lies in our optical technology which spans a wide range of wavelengths from electron beams to infrared rays Leveraging this technological strength we continue to launch the worldrsquos first and No 1 products which are both unique and outstanding
3D OCT(Optical Coherence Tomography)The 3D OCT is a diagnostic instrument that combines a retinal camera with Optical Co-herence Tomography (OCT) which ac-quires a cross-sectional image of a biological body employing infrared light This instrument not only provides fundus photography but also 3D cross-sectional images of the layers inside the retina The 3D OCT enables the early detection and di-agnosis of various ophthalmic diseases
Ophthalmic Laser PhotocoagulatorsAn ophthalmic laser photocoagulator treats the ret-ina by using laser irradiation to burn diseased parts It is used to prevent formation of new breakable fragile blood vessels in the retina due to blocked blood flow caused by a clogged blood vessel or to burn away newly formed blood vessels to prevent bleeding The equipment is essential for ophthal-mic care and is used in the treatment of such con-ditions as diabetic retinopathy and retinal break which causes retinal detachment
GNSSTopcon pioneered the use of multi-constella-tion (GPS+GLONASS) GNSS receivers and its innovative leadership continues today Our high-precision GNSS receivers include unique features like universal channels that can track virtually any GNSS signal Fence Antennatrade technology for industry-leading tracking sensi-tivity and versatile communications options
Plant Nutrition SensorsTopcon has some revolutionary systems One is CropSpec which enables the appropriate application of fertilizer in real time by perform-ing non-contact monitoring of crop conditions using a broad spectrum laser Other systems provide guidance for agricultural machines and soil preparation Agricultural machines equipped with Topconrsquos revolutionary systems can dra-matically improve production while minimizing the environmental load
Machine ControlsTopcon is a world leader in automating con-struction equipment Our systems provide two- and three-dimensional grading excavat-ing or paving control Using sonic laser total station or GPS as control sources Topcon machine control systems increase the effi-ciency and quality of earthmoving and paving around the globe
Substrate Projection SteppersProjection steppers feature a large-aper-ture high-resolution objective lens (the worldrsquos No1) incorporating all of Topconrsquos optic technology They are used for the wiring patterning processes of the semi-conductor package substrate (substrate board) which is increasingly being minia-turized
Hybrid Electron MicroscopesThis product features an electron micro-scope equipped with an optical micro-scope and it realizes the worldrsquos first simultaneous observations by combining an SEM with an optical microscope It is an all-in-one electron microscope that represents a new concept and it features various other functions including height measurement elemental analysis un-coated observations etc
Auto RefractometerAuto Kerato-RefractometerAuto refractometers and auto kerato-refractome-ters automatically measure refractive error of the eye (near-sightedness far-sightedness and astig-matism) by using invisible near-infrared light They are used at many eyeglasses shops and ophthal-mology clinics An auto kerato-refractometer mea-sures the corneal curvature radius which is required for prescriptions for contact lenses
Eye Care Company
Positioning Company
Other Businesses
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1No1No1No1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
05
06
CONSOLIDATED FINANCIAL HIGHLIGHTSTopcon Corporation and Consolidated Subsidiaries
Operating results Net sales Positioning Business Eye Care Business Finetech Business Overseas Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio ()
yen 110818 50928 39828 20061 81027 10975 9205 7736 2893 3478 268 10178 (16185)
yen 56082 139362 43329
yen 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192
yen 112666 58031 33503 21131 83684 (6944) (9326) (9992) 2620 4619 1828 11589 (6991)
yen 39801 119702 49706
yen (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash
yen 94862 49350 31561 13950 69138 1405 545 133 2109 4531 1846 9609 1112
yen 40490 125539 51501
yen 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770
yen 102470 51559 30946 19964 74210 1799 608 (1288) 4499 3689 1596 10275 (7903)
yen 36908 124816 55300
yen (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash
yen 98834 52656 32598 13579 73949 2080 467 (3686) 3443 3115 1660 8707 (3575)
yen 32667 120777 58882
yen (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash
$ 1202513 640670 396621 165221 899739 25316 5685 (44851) 41890 37902 20200 105947 (43500)
$ 397457 1469490 716420
$ (0484) 4291
20083 20093 20103 20113 20123
Millions of yen
20123
Thousands ofUS dollars
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 Depreciation and amortization excludes the amortization of goodwill
07
NET SALES AND OVERSEAS NET SALES RATIO
120000 80
100000 75
80000 70
60000 65
40000 60
20000 55
0 0
(Millions of yen) ()
103093083 113 123
OPERATING INCOME (LOSS) AND OPERATING INCOME RATIO
12000 15
8000 10
4000 5
0 0
-4000 -5
-8000 -10
(Millions of yen) ()
103093083 113 123
Operating income (loss) (left)
Operating income ratio (right)
NET INCOME (LOSS) ANDNET INCOME RATIO
10000 10
5000 5
0 0
-5000 -5
-10000 -10
(Millions of yen) ()
103093083 113 123
Net income (loss) (left)
Net income ratio (right)
FREE CASH FLOWS AND DE RATIO
CAPITAL EXPENDITURES ANDDEPRECIATION AND AMORTIZATION
RampD EXPENDITURES AND RATIO OFRampD EXPENDITURES TO NET SALES
12000 12
10000 10
8000 8
6000 6
4000 4
2000 2
0 0
(Millions of yen) ()
RampD expenditures (left)
Ratio of RampD expenditures to net sales (right)
Free cash flow (left)
DE ratio (right)
Capital expenditures
Depreciation and amortization
ROE AND ROA
15
5
-5
10
0
-10
-15
-20
-25
()
Return on equity (ROE)
Return on assets (ROA)
PER AND PBR
400
300
200
100
0
20
15
10
05
0
(Times) (Times)
Price earnings ratio (PER) (left)
Price-book value ratio (PBR) (right)
INTEREST-BEARING LIABILITIES AND EQUITY RATIO
60000 60
50000 50
40000 40
30000 30
20000 20
10000 10
0 0
(Millions of yen) ()
Interest-bearing liabilities (left)
Equity ratio (right)
20000 200
10000 100
0 0
-10000 -100
-20000 -200
(Millions of yen) ()5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123 103093083 113 123 103093083 113 123
103093083 113 123 103093083 113 123 103093083 113 123
Positioning Business (left) Eye Care Business (left)
Finetech Business (left) Overseas net sales ratio (right)
FY2011 Financial Earnings Highlights
bullConsolidatednetsalesinFY2011endedMarch312012fell35yearonyeartoyen98834million
bullOperatingincomeclimbed156yearonyeartoyen2080million
bullTheCompanyrecordedanetlossofyen3686millionfromincurringextraordinarylossesincludinglosses posted in connection with the downsizing of the Finetech Business and solicitation for voluntary retirement
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
1Å
1nm
1μm
1mm
1nm 10μ400nm 500nm 700nm 1μ(Electron(ElectronBeam)
(Ultraviolet) (Visible) (Infrared)
(Measurement PrecisionResolution)
( Wavelength( Wavelength Used) Used)
(Radio Waves)(Radio Waves)
Rotating Laser
3D OCT
Retinal Camera
Image Measurement
Total Station
SpecularMicroscopeMicroscope
SpecularMicroscope
Specular
GNSSMachineControls
Topconrsquos Strength A Wide Range of Wavelengths
Hybrid ElectronMicroscopes
SubstrateProjection Steppers
Chip DefectInspection System
Optical Measurement
Ophthalmic LaserPhotocoagulatorsOphthalmic LaserPhotocoagulatorsOphthalmic Laser
Auto RefractometerAuto Kerato-Refractometer
Rotating LaserRotating lasers improve the efficiency of various types of construction work by leveraging the characteristics of la-ser light and integrating unique func-tions (ie highly visible green lasers mmGPS that can achieve accurate lev-eling at a construction site having large difference in height and so on)
Image MeasurementOur image analysis and measurement technologies which are gained through our long years of experience enable non-contact measurement of objects They can also be applied to analysis and mea-surement using video images These ad-vanced technologies are widely utilized on mobile mapping systems analysis of 3D scanner data and imaging total stations
Total StationTotal stations measure 3D positions at distances of up to several ki-lometers with extremely high precision in the range from millimeters to centimeters in surveying and construction sites based on dis-tance and angle measurement technologies that use light Our di-verse product lineup supports various applications including models that can measure the surface point of an object without a prism models that are capable of highly accurate distance and angle mea-surement for monitoring of a large structure and industrial measure-ment and models equipped with a camera that can display live images superimposed by measurement results design data etc
Plant NutritionPlant NutritionSensors
Smart Infrastructure Company
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
04
TOPCONrsquoS STRENGTHA WIDE RANGEOF WAVELENGTHS
One of the strengths of the Topcon Group lies in our optical technology which spans a wide range of wavelengths from electron beams to infrared rays Leveraging this technological strength we continue to launch the worldrsquos first and No 1 products which are both unique and outstanding
3D OCT(Optical Coherence Tomography)The 3D OCT is a diagnostic instrument that combines a retinal camera with Optical Co-herence Tomography (OCT) which ac-quires a cross-sectional image of a biological body employing infrared light This instrument not only provides fundus photography but also 3D cross-sectional images of the layers inside the retina The 3D OCT enables the early detection and di-agnosis of various ophthalmic diseases
Ophthalmic Laser PhotocoagulatorsAn ophthalmic laser photocoagulator treats the ret-ina by using laser irradiation to burn diseased parts It is used to prevent formation of new breakable fragile blood vessels in the retina due to blocked blood flow caused by a clogged blood vessel or to burn away newly formed blood vessels to prevent bleeding The equipment is essential for ophthal-mic care and is used in the treatment of such con-ditions as diabetic retinopathy and retinal break which causes retinal detachment
GNSSTopcon pioneered the use of multi-constella-tion (GPS+GLONASS) GNSS receivers and its innovative leadership continues today Our high-precision GNSS receivers include unique features like universal channels that can track virtually any GNSS signal Fence Antennatrade technology for industry-leading tracking sensi-tivity and versatile communications options
Plant Nutrition SensorsTopcon has some revolutionary systems One is CropSpec which enables the appropriate application of fertilizer in real time by perform-ing non-contact monitoring of crop conditions using a broad spectrum laser Other systems provide guidance for agricultural machines and soil preparation Agricultural machines equipped with Topconrsquos revolutionary systems can dra-matically improve production while minimizing the environmental load
Machine ControlsTopcon is a world leader in automating con-struction equipment Our systems provide two- and three-dimensional grading excavat-ing or paving control Using sonic laser total station or GPS as control sources Topcon machine control systems increase the effi-ciency and quality of earthmoving and paving around the globe
Substrate Projection SteppersProjection steppers feature a large-aper-ture high-resolution objective lens (the worldrsquos No1) incorporating all of Topconrsquos optic technology They are used for the wiring patterning processes of the semi-conductor package substrate (substrate board) which is increasingly being minia-turized
Hybrid Electron MicroscopesThis product features an electron micro-scope equipped with an optical micro-scope and it realizes the worldrsquos first simultaneous observations by combining an SEM with an optical microscope It is an all-in-one electron microscope that represents a new concept and it features various other functions including height measurement elemental analysis un-coated observations etc
Auto RefractometerAuto Kerato-RefractometerAuto refractometers and auto kerato-refractome-ters automatically measure refractive error of the eye (near-sightedness far-sightedness and astig-matism) by using invisible near-infrared light They are used at many eyeglasses shops and ophthal-mology clinics An auto kerato-refractometer mea-sures the corneal curvature radius which is required for prescriptions for contact lenses
Eye Care Company
Positioning Company
Other Businesses
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1No1No1No1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
05
06
CONSOLIDATED FINANCIAL HIGHLIGHTSTopcon Corporation and Consolidated Subsidiaries
Operating results Net sales Positioning Business Eye Care Business Finetech Business Overseas Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio ()
yen 110818 50928 39828 20061 81027 10975 9205 7736 2893 3478 268 10178 (16185)
yen 56082 139362 43329
yen 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192
yen 112666 58031 33503 21131 83684 (6944) (9326) (9992) 2620 4619 1828 11589 (6991)
yen 39801 119702 49706
yen (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash
yen 94862 49350 31561 13950 69138 1405 545 133 2109 4531 1846 9609 1112
yen 40490 125539 51501
yen 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770
yen 102470 51559 30946 19964 74210 1799 608 (1288) 4499 3689 1596 10275 (7903)
yen 36908 124816 55300
yen (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash
yen 98834 52656 32598 13579 73949 2080 467 (3686) 3443 3115 1660 8707 (3575)
yen 32667 120777 58882
yen (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash
$ 1202513 640670 396621 165221 899739 25316 5685 (44851) 41890 37902 20200 105947 (43500)
$ 397457 1469490 716420
$ (0484) 4291
20083 20093 20103 20113 20123
Millions of yen
20123
Thousands ofUS dollars
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 Depreciation and amortization excludes the amortization of goodwill
07
NET SALES AND OVERSEAS NET SALES RATIO
120000 80
100000 75
80000 70
60000 65
40000 60
20000 55
0 0
(Millions of yen) ()
103093083 113 123
OPERATING INCOME (LOSS) AND OPERATING INCOME RATIO
12000 15
8000 10
4000 5
0 0
-4000 -5
-8000 -10
(Millions of yen) ()
103093083 113 123
Operating income (loss) (left)
Operating income ratio (right)
NET INCOME (LOSS) ANDNET INCOME RATIO
10000 10
5000 5
0 0
-5000 -5
-10000 -10
(Millions of yen) ()
103093083 113 123
Net income (loss) (left)
Net income ratio (right)
FREE CASH FLOWS AND DE RATIO
CAPITAL EXPENDITURES ANDDEPRECIATION AND AMORTIZATION
RampD EXPENDITURES AND RATIO OFRampD EXPENDITURES TO NET SALES
12000 12
10000 10
8000 8
6000 6
4000 4
2000 2
0 0
(Millions of yen) ()
RampD expenditures (left)
Ratio of RampD expenditures to net sales (right)
Free cash flow (left)
DE ratio (right)
Capital expenditures
Depreciation and amortization
ROE AND ROA
15
5
-5
10
0
-10
-15
-20
-25
()
Return on equity (ROE)
Return on assets (ROA)
PER AND PBR
400
300
200
100
0
20
15
10
05
0
(Times) (Times)
Price earnings ratio (PER) (left)
Price-book value ratio (PBR) (right)
INTEREST-BEARING LIABILITIES AND EQUITY RATIO
60000 60
50000 50
40000 40
30000 30
20000 20
10000 10
0 0
(Millions of yen) ()
Interest-bearing liabilities (left)
Equity ratio (right)
20000 200
10000 100
0 0
-10000 -100
-20000 -200
(Millions of yen) ()5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123 103093083 113 123 103093083 113 123
103093083 113 123 103093083 113 123 103093083 113 123
Positioning Business (left) Eye Care Business (left)
Finetech Business (left) Overseas net sales ratio (right)
FY2011 Financial Earnings Highlights
bullConsolidatednetsalesinFY2011endedMarch312012fell35yearonyeartoyen98834million
bullOperatingincomeclimbed156yearonyeartoyen2080million
bullTheCompanyrecordedanetlossofyen3686millionfromincurringextraordinarylossesincludinglosses posted in connection with the downsizing of the Finetech Business and solicitation for voluntary retirement
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
3D OCT(Optical Coherence Tomography)The 3D OCT is a diagnostic instrument that combines a retinal camera with Optical Co-herence Tomography (OCT) which ac-quires a cross-sectional image of a biological body employing infrared light This instrument not only provides fundus photography but also 3D cross-sectional images of the layers inside the retina The 3D OCT enables the early detection and di-agnosis of various ophthalmic diseases
Ophthalmic Laser PhotocoagulatorsAn ophthalmic laser photocoagulator treats the ret-ina by using laser irradiation to burn diseased parts It is used to prevent formation of new breakable fragile blood vessels in the retina due to blocked blood flow caused by a clogged blood vessel or to burn away newly formed blood vessels to prevent bleeding The equipment is essential for ophthal-mic care and is used in the treatment of such con-ditions as diabetic retinopathy and retinal break which causes retinal detachment
GNSSTopcon pioneered the use of multi-constella-tion (GPS+GLONASS) GNSS receivers and its innovative leadership continues today Our high-precision GNSS receivers include unique features like universal channels that can track virtually any GNSS signal Fence Antennatrade technology for industry-leading tracking sensi-tivity and versatile communications options
Plant Nutrition SensorsTopcon has some revolutionary systems One is CropSpec which enables the appropriate application of fertilizer in real time by perform-ing non-contact monitoring of crop conditions using a broad spectrum laser Other systems provide guidance for agricultural machines and soil preparation Agricultural machines equipped with Topconrsquos revolutionary systems can dra-matically improve production while minimizing the environmental load
Machine ControlsTopcon is a world leader in automating con-struction equipment Our systems provide two- and three-dimensional grading excavat-ing or paving control Using sonic laser total station or GPS as control sources Topcon machine control systems increase the effi-ciency and quality of earthmoving and paving around the globe
Substrate Projection SteppersProjection steppers feature a large-aper-ture high-resolution objective lens (the worldrsquos No1) incorporating all of Topconrsquos optic technology They are used for the wiring patterning processes of the semi-conductor package substrate (substrate board) which is increasingly being minia-turized
Hybrid Electron MicroscopesThis product features an electron micro-scope equipped with an optical micro-scope and it realizes the worldrsquos first simultaneous observations by combining an SEM with an optical microscope It is an all-in-one electron microscope that represents a new concept and it features various other functions including height measurement elemental analysis un-coated observations etc
Auto RefractometerAuto Kerato-RefractometerAuto refractometers and auto kerato-refractome-ters automatically measure refractive error of the eye (near-sightedness far-sightedness and astig-matism) by using invisible near-infrared light They are used at many eyeglasses shops and ophthal-mology clinics An auto kerato-refractometer mea-sures the corneal curvature radius which is required for prescriptions for contact lenses
Eye Care Company
Positioning Company
Other Businesses
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1No1No1No1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
WorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosWorldrsquosNo1No1No1No1
05
06
CONSOLIDATED FINANCIAL HIGHLIGHTSTopcon Corporation and Consolidated Subsidiaries
Operating results Net sales Positioning Business Eye Care Business Finetech Business Overseas Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio ()
yen 110818 50928 39828 20061 81027 10975 9205 7736 2893 3478 268 10178 (16185)
yen 56082 139362 43329
yen 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192
yen 112666 58031 33503 21131 83684 (6944) (9326) (9992) 2620 4619 1828 11589 (6991)
yen 39801 119702 49706
yen (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash
yen 94862 49350 31561 13950 69138 1405 545 133 2109 4531 1846 9609 1112
yen 40490 125539 51501
yen 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770
yen 102470 51559 30946 19964 74210 1799 608 (1288) 4499 3689 1596 10275 (7903)
yen 36908 124816 55300
yen (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash
yen 98834 52656 32598 13579 73949 2080 467 (3686) 3443 3115 1660 8707 (3575)
yen 32667 120777 58882
yen (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash
$ 1202513 640670 396621 165221 899739 25316 5685 (44851) 41890 37902 20200 105947 (43500)
$ 397457 1469490 716420
$ (0484) 4291
20083 20093 20103 20113 20123
Millions of yen
20123
Thousands ofUS dollars
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 Depreciation and amortization excludes the amortization of goodwill
07
NET SALES AND OVERSEAS NET SALES RATIO
120000 80
100000 75
80000 70
60000 65
40000 60
20000 55
0 0
(Millions of yen) ()
103093083 113 123
OPERATING INCOME (LOSS) AND OPERATING INCOME RATIO
12000 15
8000 10
4000 5
0 0
-4000 -5
-8000 -10
(Millions of yen) ()
103093083 113 123
Operating income (loss) (left)
Operating income ratio (right)
NET INCOME (LOSS) ANDNET INCOME RATIO
10000 10
5000 5
0 0
-5000 -5
-10000 -10
(Millions of yen) ()
103093083 113 123
Net income (loss) (left)
Net income ratio (right)
FREE CASH FLOWS AND DE RATIO
CAPITAL EXPENDITURES ANDDEPRECIATION AND AMORTIZATION
RampD EXPENDITURES AND RATIO OFRampD EXPENDITURES TO NET SALES
12000 12
10000 10
8000 8
6000 6
4000 4
2000 2
0 0
(Millions of yen) ()
RampD expenditures (left)
Ratio of RampD expenditures to net sales (right)
Free cash flow (left)
DE ratio (right)
Capital expenditures
Depreciation and amortization
ROE AND ROA
15
5
-5
10
0
-10
-15
-20
-25
()
Return on equity (ROE)
Return on assets (ROA)
PER AND PBR
400
300
200
100
0
20
15
10
05
0
(Times) (Times)
Price earnings ratio (PER) (left)
Price-book value ratio (PBR) (right)
INTEREST-BEARING LIABILITIES AND EQUITY RATIO
60000 60
50000 50
40000 40
30000 30
20000 20
10000 10
0 0
(Millions of yen) ()
Interest-bearing liabilities (left)
Equity ratio (right)
20000 200
10000 100
0 0
-10000 -100
-20000 -200
(Millions of yen) ()5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123 103093083 113 123 103093083 113 123
103093083 113 123 103093083 113 123 103093083 113 123
Positioning Business (left) Eye Care Business (left)
Finetech Business (left) Overseas net sales ratio (right)
FY2011 Financial Earnings Highlights
bullConsolidatednetsalesinFY2011endedMarch312012fell35yearonyeartoyen98834million
bullOperatingincomeclimbed156yearonyeartoyen2080million
bullTheCompanyrecordedanetlossofyen3686millionfromincurringextraordinarylossesincludinglosses posted in connection with the downsizing of the Finetech Business and solicitation for voluntary retirement
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
06
CONSOLIDATED FINANCIAL HIGHLIGHTSTopcon Corporation and Consolidated Subsidiaries
Operating results Net sales Positioning Business Eye Care Business Finetech Business Overseas Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio ()
yen 110818 50928 39828 20061 81027 10975 9205 7736 2893 3478 268 10178 (16185)
yen 56082 139362 43329
yen 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192
yen 112666 58031 33503 21131 83684 (6944) (9326) (9992) 2620 4619 1828 11589 (6991)
yen 39801 119702 49706
yen (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash
yen 94862 49350 31561 13950 69138 1405 545 133 2109 4531 1846 9609 1112
yen 40490 125539 51501
yen 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770
yen 102470 51559 30946 19964 74210 1799 608 (1288) 4499 3689 1596 10275 (7903)
yen 36908 124816 55300
yen (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash
yen 98834 52656 32598 13579 73949 2080 467 (3686) 3443 3115 1660 8707 (3575)
yen 32667 120777 58882
yen (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash
$ 1202513 640670 396621 165221 899739 25316 5685 (44851) 41890 37902 20200 105947 (43500)
$ 397457 1469490 716420
$ (0484) 4291
20083 20093 20103 20113 20123
Millions of yen
20123
Thousands ofUS dollars
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 Depreciation and amortization excludes the amortization of goodwill
07
NET SALES AND OVERSEAS NET SALES RATIO
120000 80
100000 75
80000 70
60000 65
40000 60
20000 55
0 0
(Millions of yen) ()
103093083 113 123
OPERATING INCOME (LOSS) AND OPERATING INCOME RATIO
12000 15
8000 10
4000 5
0 0
-4000 -5
-8000 -10
(Millions of yen) ()
103093083 113 123
Operating income (loss) (left)
Operating income ratio (right)
NET INCOME (LOSS) ANDNET INCOME RATIO
10000 10
5000 5
0 0
-5000 -5
-10000 -10
(Millions of yen) ()
103093083 113 123
Net income (loss) (left)
Net income ratio (right)
FREE CASH FLOWS AND DE RATIO
CAPITAL EXPENDITURES ANDDEPRECIATION AND AMORTIZATION
RampD EXPENDITURES AND RATIO OFRampD EXPENDITURES TO NET SALES
12000 12
10000 10
8000 8
6000 6
4000 4
2000 2
0 0
(Millions of yen) ()
RampD expenditures (left)
Ratio of RampD expenditures to net sales (right)
Free cash flow (left)
DE ratio (right)
Capital expenditures
Depreciation and amortization
ROE AND ROA
15
5
-5
10
0
-10
-15
-20
-25
()
Return on equity (ROE)
Return on assets (ROA)
PER AND PBR
400
300
200
100
0
20
15
10
05
0
(Times) (Times)
Price earnings ratio (PER) (left)
Price-book value ratio (PBR) (right)
INTEREST-BEARING LIABILITIES AND EQUITY RATIO
60000 60
50000 50
40000 40
30000 30
20000 20
10000 10
0 0
(Millions of yen) ()
Interest-bearing liabilities (left)
Equity ratio (right)
20000 200
10000 100
0 0
-10000 -100
-20000 -200
(Millions of yen) ()5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123 103093083 113 123 103093083 113 123
103093083 113 123 103093083 113 123 103093083 113 123
Positioning Business (left) Eye Care Business (left)
Finetech Business (left) Overseas net sales ratio (right)
FY2011 Financial Earnings Highlights
bullConsolidatednetsalesinFY2011endedMarch312012fell35yearonyeartoyen98834million
bullOperatingincomeclimbed156yearonyeartoyen2080million
bullTheCompanyrecordedanetlossofyen3686millionfromincurringextraordinarylossesincludinglosses posted in connection with the downsizing of the Finetech Business and solicitation for voluntary retirement
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
07
NET SALES AND OVERSEAS NET SALES RATIO
120000 80
100000 75
80000 70
60000 65
40000 60
20000 55
0 0
(Millions of yen) ()
103093083 113 123
OPERATING INCOME (LOSS) AND OPERATING INCOME RATIO
12000 15
8000 10
4000 5
0 0
-4000 -5
-8000 -10
(Millions of yen) ()
103093083 113 123
Operating income (loss) (left)
Operating income ratio (right)
NET INCOME (LOSS) ANDNET INCOME RATIO
10000 10
5000 5
0 0
-5000 -5
-10000 -10
(Millions of yen) ()
103093083 113 123
Net income (loss) (left)
Net income ratio (right)
FREE CASH FLOWS AND DE RATIO
CAPITAL EXPENDITURES ANDDEPRECIATION AND AMORTIZATION
RampD EXPENDITURES AND RATIO OFRampD EXPENDITURES TO NET SALES
12000 12
10000 10
8000 8
6000 6
4000 4
2000 2
0 0
(Millions of yen) ()
RampD expenditures (left)
Ratio of RampD expenditures to net sales (right)
Free cash flow (left)
DE ratio (right)
Capital expenditures
Depreciation and amortization
ROE AND ROA
15
5
-5
10
0
-10
-15
-20
-25
()
Return on equity (ROE)
Return on assets (ROA)
PER AND PBR
400
300
200
100
0
20
15
10
05
0
(Times) (Times)
Price earnings ratio (PER) (left)
Price-book value ratio (PBR) (right)
INTEREST-BEARING LIABILITIES AND EQUITY RATIO
60000 60
50000 50
40000 40
30000 30
20000 20
10000 10
0 0
(Millions of yen) ()
Interest-bearing liabilities (left)
Equity ratio (right)
20000 200
10000 100
0 0
-10000 -100
-20000 -200
(Millions of yen) ()5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123 103093083 113 123 103093083 113 123
103093083 113 123 103093083 113 123 103093083 113 123
Positioning Business (left) Eye Care Business (left)
Finetech Business (left) Overseas net sales ratio (right)
FY2011 Financial Earnings Highlights
bullConsolidatednetsalesinFY2011endedMarch312012fell35yearonyeartoyen98834million
bullOperatingincomeclimbed156yearonyeartoyen2080million
bullTheCompanyrecordedanetlossofyen3686millionfromincurringextraordinarylossesincludinglosses posted in connection with the downsizing of the Finetech Business and solicitation for voluntary retirement
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
08
TO OUR STAKEHOLDERS
Returning to a sustainable profit-making structure
to become a truly global and truly excellent company
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
09
BUSINESS RESULTSSovereign risk has emerged in Europe while the yen has re-mained at record-high levels for a prolonged period of time since the Lehman shock The unprecedented natural disas-ters of the Great East Japan Earthquake and the flooding in Thailand added to the severe conditions facing Japanrsquos manufacturing industry In these circumstances the Topcon Group accelerated measures to reduce fixed costs and cost of goods sold after judging it essential to further strengthen profitability and improve our fiscal position In addition we went ahead with large-scale downsizing of the Finetech Business whose earnings environment had deteriorated As a result although the Positioning Business and the Eye Care Business performed solidly consolidated net sales for fiscal 2011 declined 35 year on year to yen98834 million owing to a significant decrease in sales in the Fine-tech Business Nevertheless operating income bottomed out rising 156 year on year to yen2080 million a result that justifies an expectation of growth The Company ultimately recorded a net loss of yen3686 million due to the posting of a loss on withdrawal from the Finetech Business However we are convinced that we will return to a profit-making structure from the next fiscal year Therefore taking into account that the significant cost bur-den associated with our reform project has run its course in fiscal 2011 and prioritizing a stable dividend payout the Company distributed a full-year cash dividend of yen4 per share unchanged from the previous fiscal year in the fiscal year under review
BASIC POLICY OF MID-TERM BUSINESS PLAN 2014Even in an environment where the yen is hitting record highs against other major currencies the Topcon Group has set a goal of yen10 billion in overall cost reduction over three years under the Mid-Term Business Plan 2013 as we seek to transition to a business structure that allows sus-tainable profitability We expect to achieve this goal in two yearsrsquo time thanks to how swiftly we are implementing our measures Thus under the Mid-Term Business Plan 2014 beginning in fiscal 2012 we will shift the priority from Re-form to Enhancement
Specifically as part of our efforts to speed up man-agement the Topcon Group will reorganize its major businesses to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company In addition we will launch a series of new competitive products as we firmly push ahead with Enhancement our strategy for growth
A RETURN TO SUSTAINABLE PROFITSIn fiscal 2012 we will seek a rapid recovery of profitability in addition to accomplishing our set goal of Reform Our long-term management stance based on the TOP-CON WAY set out in April 2011 is to establish corporate governance that is trusted by all of our stakeholders with thoroughgoing compliance Moreover we will dedicate ourselves to promoting CSR such as efforts for the sake of the global environment and other activities that contribute to society At the same time we will push vigorously to-ward our goal of becoming a truly global and truly excellent company that remains globally competitive in the face of the ongoing appreciation of the yen I would like to ask you all for your continuing support and encouragement
August 2012
NORIO UCHIDA President
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
10
INTERVIEWWITH THE PRESIDENT
FISCAL 2011 RESULTSThe ongoing appreciation of the yen made for a very chal-lenging business environment in fiscal 2011 which ended March 31 2012 for the Topcon Group where over 70 of our sales are overseas Nevertheless a recovery trend emerged in terms of revenue as well thanks to accelera-tion of measures to reduce fixed costs and cost of goods sold including solicitation for voluntary retirement and ef-forts to enhance the competitiveness of core businesses that resulted in sales growth in the Positioning Business in the United States and Japan and the Eye Care Business in Europe However the Finetech Business which provides semiconductor and flat-panel display (FPD) equipment was downsized significantly as it became difficult to se-cure earnings amid the effects of the stagnating market for semiconductors and liquid crystal displays (LCDs) As a result operating income increased 156 year on year to yen2080 million even though net sales declined 35 to yen98834 million A net loss of yen3686 million (fiscal 2010 saw a yen1288 million net loss) was posted reflecting ex-
traordinary losses of yen4800 million recorded in connection with the downsizing of the Finetech Business neverthe-less we were able to move ahead with reinforcement of the revenue structure throughout the Topcon Group at a faster pace than planned
ISSUES GOING FORWARDWith the downsizing of the Finetech Business the process of Reform and the considerable pain that accompanied it are largely concluded In addition we expect to be able to achieve a reduction of fixed costs and cost of goods sold during fiscal 2012 one year ahead of plan Looking ahead the growth strategy of Enhancement will be our priority task That is we will leverage our world-leading technologi-cal prowess and rapidly improving cost-competitiveness in pursuit of ldquomonozukurirdquo (superb manufacturing) which is fundamental to growth as we transition to a resilient cor-porate structure capable of sustainable expansion of both sales and profit
Q1 Given the record high appreciation of the yen how would you sum up fiscal 2011
A1 Although our consolidated net sales decreased we were able to make rapid progress with
restructuring our business and operating income has been on track for recovery In addition
we are on track to meet our targets for the reform project
ANALYSIS OF GAIN AND LOSS IN OPERATING INCOME (YoY) (FY2010 Actual Results gt FY2011 Actual Results)(Billions of yen)
18
(13)
2334
(49)
21 16
34
(13)
21
Results for FY2010(including the impact
of the earthquake)
ExchangeFluctuations
Decrease ofFixed-cost
Reduction ofCost of Goods
Sales Price Down
Change in SalesChange in
Sales Mix etcTotal Amount of
Gain andLoss Factors
Operating Income for FY2011(without the impact of
the earthquake)
Impact ofthe Earthquake
Operating Income for FY2011(including the impact of
the earthquake)
(Codes are based on gain and loss)
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
11
The Mid-Term Business Plan 2014 is centered on three main strategies with the goal of completing total cost re-ductions (Reform) of more than yen100 billion during fiscal 2012 while shifting the priority to Enhancement (growth strategy) to achieve net sales of yen1300 billion operating income of yen165 billion and net income of yen80 billion in fis-cal 2014
STRATEGY 1 ORGANIZATIONAL CHANGEWe decided to significantly downsize the Finetech Busi-ness and concentrate management resources on the Positioning Business and the Eye Care Business Further-more the management structure was reorganized with our US subsidiary Topcon Positioning Systems (TPS) for-merly part of the Positioning Business upgraded to an in-house company as we transitioned to a structure of three in-house companies the Smart Infrastructure Company Positioning Company and Eye Care Company At the same time the Corporate Strategy Division was established to exercise cross-sectional control over the three companies This organizational change will allow us to realize both flex-ible company operations and overall optimization
STRATEGY 2 CONTINUING REFORMIn fiscal 2012 we expect to reduce fixed costs and cost of goods sold by yen121 billion compared to fiscal 2010 Ini-tially we had planned for a reduction of yen100 billion over
three years so we are now forecasting greater cost reduc-tions than planned one year ahead of schedule However given the uncertainty associated with the record high levels of appreciation of the yen and the sovereign risk in Europe we cannot let down our guard As competition in the mar-ket is inevitably intensifying we must maintain a tight grip on Reform Therefore we will continue our efforts to use management resources more efficiently through integra-tion of our plant locations in Japan introduction of the global business management system ERP (enterprise re-source planning) and lowering the ratio of SGampA expenses to sales as we seek to establish a corporate structure that will keep us one step ahead of the competition in the global market
STRATEGY 3 MAJOR INCREASE IN NEW PROD-UCT LAUNCHESAs the centerpiece of Enhancement we will exert our strengths as the creator of the worldrsquos first and No 1 products We will boost the number of new product launches group-wide to 58 models (compared to a total of 22 models over the past three years) during the Mid-Term Business Plan 2014 Furthermore we will enhance new businesses throughout the Group aiming for growth ranging from 130 to 280 in new business fields at the three companies
Q2 In light of the accelerated progress of the reform project where will the Topcon Group focus its
efforts under the Mid-Term Business Plan 2014
A2 Wewillimplementthreestrategieswiththeaimofachievingnetsalesofyen130billionandop-
eratingincomeofyen165billioninfiscal2014
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
12
GOAL OF THE 2 IN-HOUSE COMPANY STRUCTUREIn Topconrsquos largest business segment the former Position-ing Business Unit we have leveraged our state-of-the-art GPS laser and image-processing technologies to provide highly precise position information for a wide variety of fields including civil engineering precision agriculture sur-veying and GIS and measurement However in view of the considerable growth potential of the GPS field a core business of Topcon Positioning Systems (TPS) we have upgraded TPS to the Positioning Company in order to provide the company with greater authority to en-able speedier decision-making and management
BASIC STRATEGY OF THE 2 IN-HOUSE COMPANIESLet me offer a brief explanation of the mission of each company The Smart Infrastructure Company targets emerging countries as its main markets By introducing revolutionary new products and low-priced products in the surveying field we seek to capture more than 30 of the market in emerging countries mainly in Asia where infra-
structure is being improved at a rapid pace along with the growing economies In addition we will vigorously push forward with developing the infrastructure-improvement market by providing the worldrsquos first and No 1 share prod-ucts in the mobile 3D measurement field which integrates GPS and image-processing technologies The Positioning Company targets developed countries as its main markets seeking growth in new business fields through advanced utilization of GPS technology In particu-lar we are concentrating efforts on the spread of products that meet the need for higher productivity and more la-borsaving on engineering construction sites while at the same time promoting the supply of OEM to major con-struction-equipment manufacturers Furthermore in the precision-agriculture field which realizes the automation of agricultural machines and the incorporation of ICT into their operation the market is growing against the backdrop of food shortages and we are introducing the worldrsquos No1 products as we seek to expand the business
Q3 What is the intention behind separating the former Positioning Business Unit into
two companies
A3 We are pursuing a company operation that can respond more flexibly to the diverse needs of
the global market
ORGANIZATIONAL CHANGE
Eye CareBusiness Unit
Hiroshi Fukuzawa
Head of the Organization
PositioningBusiness Unit
Satoshi Hirano
TopconPositioningSystems (TPS)
Raymond OrsquoConnor
CorporateStrategy Division
Satoshi Hirano
Eye CareCompany
Hiroshi Fukuzawa
Smart InfrastructureCompany
Shigeyuki Sawaguchi
PositioningCompany (TPS)
Raymond OrsquoConnor
Major BusinessesbullSurveyingGISbull3D Measurement
Focus MarketsbullEmerging Countries
Major BusinessesbullMachine ControlbullPrecision Agriculture
Focus MarketsbullDeveloped Countries
TOPCON TOPCON
Strategy Division
Satoshi Hirano
Company
Hiroshi Fukuzawa
Company
Shigeyuki Sawaguchi
Company (TPS)
Raymond OrsquoConnor
Corporate Strategy Division leads cross-functional management
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
13
FISCAL 2012 OUTLOOKIn spite of the impact on the global economy of Europersquos sovereign risk the growth trend is continuing in the emerg-ing economies albeit at a slower rate than previously in addition to which the US economy remains steady More-over in Japan we are starting to see demand related to reconstruction after the Great East Japan Earthquake so the market environment surrounding the Topcon Group is not entirely negative In these circumstances the Topcon Group will complete its reform project started in fiscal 2010 one year ahead of sched-ule to swiftly realize a drastically enhanced business structure Meanwhile we will reallocate management resources from the downsized former Finetech Business Unit and invest them in research and development in the three in-house companies thereby accelerating the introduction of new products and the development of new businesses As a result we forecast an increase in consolidated net sales of 93 year on year to yen1080 billion a 2845 surge in operating income to yen80 billion and a yen6686 mil-
lion hike in net income to yen30 billion for fiscal 2012
SHAREHOLDER RETURNWe plan to distribute a full-year cash dividend of yen6 per share in the fiscal 2012 period The Topcon Group aims for a payout ratio of 20 or higher and makes it a basic policy to return profits to shareholders through the distribution of dividends linked to the Grouprsquos earnings performance Although we posted extraordinary losses in fiscal 2011 and a net loss for two consecutive years we plan to return to a profit-making structure going forward thanks to sweeping implementation of downsizing of unprofitable businesses In light of that outlook and from the perspective of sus-taining a stable dividend despite posting a net loss we maintained the full-year dividend of yen4 per share from the previous fiscal year From fiscal 2012 onward we will make a rapid return to posting a net income aiming for a payout ratio of 20 with a full-year dividend of yen6 increasing to yen12 and then yen18
Q4 What are your results outlook and shareholder-return policy for fiscal 2012
A4 We intend to complete implementation of our overall cost reduction measures and return to a
profit-making structure while also raising our dividend payout
DIVIDENDS PER SHARE PAYOUT RATIO
(Billions of yen)
RESOURCE LOADING PLAN
Items FY2011 FY2012
Capital Expenditure 34 34
(Depreciation) (31) (40)
RampD 87 97
(Ratio of RampD Expenditures to Net Sales) (88) (90)
Investment amp Loan 06 30
25
15
10
5
25
15
10
5
0 0123 133 (plan) 143 (plan) 153 (plan)
Dividends per share (left) Payout ratio (right)
20 20
(Yen) ()
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
14
From Reform to EnhancementSpecial Feature 1MID-TERM BUSINESSPLAN
Financial Targets (Consolidated) (Millions of yen)
The Topcon Group will finalize its business restructuring at an early date The goal is to build a corporate structure that can generate profits even amid the currently record-high appreciation of the yen and to shift the companyrsquos priority to growth strategies
With regard to the reduction of fixed costs and cost of goods sold worth yen10000 million which we planned to achieve in the three years to fiscal 2013 ending March 31 2014 we are now forecasting a larger reduction of yen12100 million by the end of fiscal 2012 In addition we were able to quickly complete business restructuring that downsized the former Finetech Business and migrated to a three in-house company structure allowing us to concentrate our business resources in the globally competitive businesses the Smart Infrastructure Company the Positioning Com-pany and the Eye Care Company Therefore in the Mid-Term Business Plan 2014 launched
in fiscal 2012 we expect to achieve a quick recovery and a quick expansion of profits by shifting our priority to growth strategies (Enhancement) as our reform project (Reform) is progressing one year ahead of schedule Our management targets are set at net sales of yen130000 million operating income of yen16500 million and net income of yen8000 million in fiscal 2014 By achieving these targets we aim to return to the profit level of fiscal 2006 which came before the Lehman shock In addition we plan to distribute a full-year cash dividend of yen18 per share in fiscal 2014 in line with the dividend payout policy based on a consolidated payout ratio of 20
Net Sales
Operating Income
(Operating Income Ratio)
Ordinary Income
Net Income (loss)
ROE
ROIC
A Full-year Cash Dividend (yen)
Consolidated Payout Ratio
98834
2080
(21)
467
(3686)
(106)
16
4
mdash
108000
8000
(74)
6800
3000
88
68
6
19
120000
12500
(104)
11000
6000
168
111
12
19
130000
16500
(127)
15000
8000
201
153
18
21
20123Consolidated 20133 20143
Mid-TermBusinessPlan2014
20153
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
15
Group-Wide Strategies
Further Reform
Shifting Our Priority to Growth Strategies
Launch of New ProductsBy fiscal 2014 we will boost the number of new product launches group-wide to 58 mod-
els (compared to a total of 22 models over the past three years) We plan to launch 41 new models from the Smart Infrastructure Company and the Positioning Company (15 models in the same past period) and 17 models from the Eye Care Company (7 models in the same past period)
Strengthening New BusinessesWe regard 3D measurement machine control precision agriculture and treatment device
ophthalmic IT as our new businesses and we are aim-ing for growth ranging from 130 to 280 for the three companies In addition we are anticipating a contribution of yen7000 million to operating income from increases in sales of the new businesses in fiscal 2014
Integration of Plant LocationsNumberofdomesticplants5gt3
With regard to products for low-end needs including not only positioning products but also eye-care products some of the products that have been manufactured in Japan will now be made in China Furthermore we plan to consolidate our five domestic plant locations into three locations
Optimizing Workforce SizeReductionof35fromtheendofMarch2010
We reduced the domestic group workforce by 25 (2529 to 1885 employees) over two years from the end of March 2010 to the end of March 2012 We are planning a further reduction of 235 employees (1885 to 1650 em-ployees) over three years to the end of March 2015 for a total 35 reduction from the end of March 2010
Building a Competitive Cost Structure Versus PeersSGampAtosalesratio36gt31
By reducing personnel expenses and indirect expenses the SGampA to sales ratio was reduced to 36 in fiscal 2011 We are planning to further reduce the ratio to 31 in fiscal 2014 lower than any of our competitorsrsquo ratios at present
Introduction of the Global BusinessManagement System
By introducing ERP (enterprise resource planning) we aim to speed up decision-making on a global basis and to improve our asset efficiency
1
2
3
4
1 2
Number of New Model Launches
FY2009ndashFY2011 FY2012ndashFY2014 (Result) (Forecast)
Disruptive Innovation 2 models 7 models
Worldrsquos No1 8 models 23 models
Worldrsquos First 4 models 10 models
Reduction of COGS 5 models 12 models
Products for Emerging Markets 2 models 4 models
Enhancement of Sales Capability 1 model 2 models
Total 22 models 58 models
Growth Forecast of New Businesses Growth Rate
FY2010- FY2011-
Company New Business FY2011 FY2014
Field
(Result) (Forecast)
Smart Infrastructure 3D measurement mdash 280
Machine Control 120 130
Positioning Precision Agriculture 160 190
Eye Care Treatment Devicebull
IT 120 170
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
16
Smart Infrastructure CompanyTargeting Emerging Countries withJapanese CraftsmanshipIn emerging markets infrastructure improvement projectsonthescaleofyen100trillionarestartingupThe Smart Infrastructure Company aims to expand surveying and mobile 3D measurement businesses by exerting Japanese craftsmanship in this growing marketandexpectsnetsalesofyen32000million(anav-erageannualgrowthrateof18overthreeyears)andoperatingincomeofyen4000million(anaverageannualgrowthrateof60overthreeyears)infiscal2014
Surveying BusinessBy developing and introducing high-quality low-priced total stations differentiating ourselves with a new service (TSshield) and expanding and enhancing our distributor network we seek to capture more than 30 of the market in emerging countries where infra-structure investment is surging
Mobile 3D Measurement BusinessAmid the increasing need for high-precision mea-surement using 3D data we intend to expand our business mainly in emerging countries with mobile mapping systems which combine GNSS (GPS+GLONASS) technology for highly precise measurement of absolute position with cutting-edge image processing technology as well as with 3D la-ser scanners capable of providing highly precise point cloud data
Business Growth Strategies by SegmentSpeeding Up Management and Accelerating Growth Strategy
As of June 27 2012 we have changed our organizational structure from the former two business units to three in-house companies This transition provides each company with enhanced authority by giving Presidents of the compa-nies more discretionary and other powers enabling swift decision-making and speedier management In the new structure the former Positioning Business Unit is split into the Smart Infrastructure Company and the Positioning Company The Positioning Company is formed by upgrading our US subsidiary Topcon Positioning Systems (TPS) which belonged to the former Positioning Business Unit to an in-house company The company aims to expand business by concentrating on the new businesses centered on GPS which include GPS machine control and precision agricul-ture businesses The Smart Infrastructure Company aims for growth of our core operations such as total stations 3D laser scanners and 3D measurement As populations worldwide continue to age the Eye Care Company is expanding its business domain to include the fields of preventive medicinephysical checkups and treat-ment in addition to the field of examination and diagnosis in an effort to strengthen a stable revenue base
In addition the Corporate Strategy Division will be newly established as an organization to exercise cross-sectional control over the three in-house companies
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
17
Positioning CompanyRealizing rapid growth in new and expanded markets for precision GPSIn developed countries there are growing demands for higher productivity and efficiency in the con-struction and agricultural industries The Positioning Company targetsnetsalesofyen43000Million (anaverageannualgrowthrateof9overthreeyears)andoperating incomeofyen5000million (anaver-ageannualgrowthrateof114overthreeyears)infiscal2014byfocusingonthesenewmarketsandexpanding machine control and precision agriculture business with its cutting-edge GPS technology
Eye Care CompanyGenerating Stable Profits on a Worldwide BasisAs ophthalmic diseases increase worldwide with the ongoing aging of the population we are expanding our business domain to include the fields of preven-tive medicinephysical checkups and treatment in addition to the conventional field of examination and diagnosis Through this effort we expect to achieve net salesofyen40000million (anaverageannualgrowthrateof7overthreeyears)andoperatingincomeofyen6000million(anaverageannualgrowthrateof50overthreeyears)infiscal2014
Machine Control BusinessThe Positioning Company will continue to develop OEM partnerships due to the demand for its ad-vanced 3D machine control systems These systems which use either GPS or total station guidance greatly enhance the productivity and quality of work performed by earthmoving equipment
Precision Agriculture BusinessWith the increased demand for efficiency in grow-ing agricultural products especially in developed countries ldquoPrecision Agriculturerdquo enables very high efficiency in applying the proper amount of fertilizer water and agrichemical to specific areas of need The Positioning Company will focus its keen knowledge of GPS machine control onto agricultural applications and will continue to build agricultural OEM alliances and after-market distribution
Preventive MedicinePhysical CheckupsExaminationWe seek to expand the market and further cultivate the ex-isting market by introducing low-priced models of 3D OCT for use at private clinics optometrists and the market for physical checkups At the same time we intend to launch high-end models engineered for high resolution and high penetration for research institutions in an effort to bolster our product lineup
ExaminationDiagnosticsWe aim to strengthen competitiveness and maintain profitabil-ity by achieving a 40 reduction in the cost of goods through the relocation to China of our manufacturing of equipment mainly for eyeglasses shops in addition to standardizing plat-forms for existing core products as we seek to gain market share by launching models for emerging countries
TreatmentWe will strive to expand the business of ophthalmic laser photocoagulator PASCAL which is capable of multi-spot laser irradiation in a short time through the introduction of new products featuring the worldrsquos No1 and new tech-nologies We will also focus on creating synergy effect through collaboration between retinal imaging devices and treatment instruments
Total Solution ProviderWe will provide total solutions in the ophthalmic field from examination diagnosis and treatment devices to unified data management and diagnosis support taking advantage of our advanced IT technology
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
Sales Plans of Each Company(Millions of yen)
120000
40000
60000
80000
20000
0
100000
20123 20143 (Plan)20133 (Plan) 20153 (Plan)
FY2011 Actual ResultOperating Income Ratio
50
FY2014 Mid-Term PlanOperating Income Ratio
125
197
Surveying
3DMeasurement
Others
320
Smart Infrastructure Company Positioning CompanyEye Care Company
Breakdown of Sales Growth by Smart Infrastructure Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
15
FY2014 Mid-Term PlanOperating Income Ratio
116
330
MCITConstruction
PrecisionAgriculture
Others
430
Breakdown of Sales Growth by Positioning Company(Billions of yen)
FY2011 Actual ResultOperating Income Ratio
54
FY2014 Mid-Term PlanOperating Income Ratio
150
326
Preventive Checkup
Examination Diagnostic
OthersIT
Treatment
400
Breakdown of Sales Growth by Eye Care Company(Billions of yen)
Strengthen the cost competitiveness with high-quality Japanese craftsmanship
Launch worldrsquos No1 products by integra-tion of technology
Launch worldrsquos No1 products
Launch worldrsquos No1 products
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
18
3D OCT is in a Growth StageThe worldrsquos only three-dimensional fundus imaging system combining a retinal camera with OCT
WHAT IS 3D OCTTopconrsquos 3D OCT combines color fundus photography which is the gold standard of ophthalmic care with new optical coherence tomography (OCT) technology to capture a cross-sectional image of the fundus using light interfer-ence phenomenon The 3D OCT system enables three-dimensional observation of the fundus by capturing image of both the surface and internal condition of the fundus The 3D OCT system provides one-step gathering of a large part of the information needed for diagnosis Diagnosis of fundus disorders has generally been conducted through observation and measuring of cross-sectional images Three-dimensional observation and measurement using the 3D OCT systems considerably diminishes the possibility of overlooking a lesion area In recent years the three major ophthalmic diseasesmdash glaucoma age-related macular degeneration and diabetic retinopathymdashhave become the leading causes of blind-ness in advanced countries due to the aging societies and unhealthy lifestyles The 3D OCT systems are essential equipment for the early detection and treatment of eye diseases as they aid in determining the course of treat-ment verifying the treatment efficacy and conducting follow-up observation
FIRST TO THE WORLD MARKETIn June 2006 Topcon released the 3D OCT-1000 the worldrsquos first instrument that simultaneously captures a cross-sectional fundus image and color fundus photo-graph Topconrsquos technology combining accurate color fundus images which describes detail of fundus surface and OCT-generated cross-sectional images has been ac-claimed as revolutionary for the diagnosis of glaucoma and age-related macular degeneration and in its debut year received the Nikkei Excellent Products Award (Award of Excellence) The Companyrsquos patent strategy has estab-lished the Company as the worldrsquos sole supplier of OCT systems combining OCT and color fundus images The Company continued advancing the retinal camera and OCT concept of the original 3D OCT-1000 to develop the 3D OCT-2000 which it began selling in October 2009 The 3D OCT2000 provides markedly improved image quality with the incorporation of a high-resolution digital camera and OCT noise reduction technology and realizes simple and intuitive operation through the touch-screen operation and fully automated photo capture
Special Feature 2TOPCONrsquoS TECHNOLOGICAL PROWESS
3DOpticalCoherenceTomography3DOCT-1000Three-dimensional OCT fundus image taken by a 3D OCT
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
19
GROWING PRESENCE IN EYE CLINICS AS WELL AS LARGE HOSPITALSAs use of the 3D OCT-2000 spread around the world we incorporated various improvements based on feedback received from ophthalmologists In January 2010 we ac-celerated the OCT scanning speed by roughly double shortening the image capture time and reducing the burden on the patient The 3D OCT-2000 was then upgraded to eliminate the need for a separate computer for data analysis with the release of a stand-alone model with capabilities ranging from recording patient data to photographing and printing reports and an FA model with the additional capability of fluorescein angiography (FA) imaging1 The improved cost performance and space saving from combining three functions in a single unit accelerated de-mand for the series from ophthalmology clinics The high-performance model 3D OCT-2000 FA plus was introduced the next year in January 2011 with the added capability of minimally invasive examination using fundus autofluo-rescence (FAF) imaging2
Strengthening the basic functions for 3D OCT diagnosis and improving the cost performance has promoted wide-spread use of 3D OCT equipment in ophthalmology clinics as well as in university hospitals and large hospitals
1 Fluorescein angiography (FA) imaging is an examination method for ob-serving and photographing the retina by injecting fluorescent pigment into the bloodstream
2 Fundus autofluorescence (FAF) imaging is a minimally invasive exami-nation method for observing the fundus autofluorescence emitted by the eye tissue
TECHNICAL ADVANCES AND A BROADER RANGE OF APPLICATIONSThe 3D OCT-2000 series is widely lauded and maintains leading market shares around the world and we aim to continue expanding sales by filling out our product lineups for emerging countries and optometrists We have also continued our OCT research to advance the technology further and introduced the Deep Range Imaging (DRI) OCT-1 capable of capturing cross-sectional images of previously unviewable deep tissue for the high-end of the market in April 2012 The DRI OCT-1 utilizes a new built-in OCT light source with superior tissue penetration capability that achieves the worldrsquos fastest scanning speed and enables high-res-olution images of the choroid and even sclera at the deep range of retina which have been difficult to visualize us-ing OCT The new light source also reduces interference from cataracts and other media which previously reduced OCT image quality These functions are expected for ex-panding and the use of OCT to help to find the cause and treatment of high myopia choroidal disorders OCT technology is groundbreaking for being patient-friendly because it is noninvasive and for its ability to provide micrometer level imaging of the internal struc-ture of the eye Topcon will continue emphasizing the strengths of its unique technologies and responding to user needs to create even higher performance easy-to-use products We will also continue filling out our product lineup and moving forward with technological advances for our 3D fundus imaging systems to support the quality of life of people around the world by en-abling them to receive the most advanced eye care
Increases in the Three Major Diseases that Lead to Blindness
350
300
250
200
150
100
50
0
(Millions)
2013201220112010 2014 2015
Glaucoma Age-related macular degeneration Diabetic retinopathy
71696765 72 74
142138134131145 149
91898785
9395
(Lefttoright)3DOCT-2000FAplus3DOCT-2000FA3DOCT-2000
DRI OCT-1OCT Color Red-free FA and FAF images acquirable
3D OCT-2000 FA plus
OCT (Anterior) Color Red-free FA FAF
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
20
Fields
bullSurveying
bullMobile3D Measurement
bullConstructionandcivil engineering
bullPrecision Agriculture
Fields
bullPreventative Medical Checkups
bullExamination
bullDiagnosis
bullTreatment
Fields
bullSemiconductors
bullFPDs
bullOpticalDevices
bullObservationandAnalysis
AT A GLANCE(For the year ended March 31 2012)
Positioning Business
Eye Care Business
Finetech Business
Major Products
bullTotalstations(MotorizedRo-botic Total Stations Imaging Stations)
bull3Dlaserscanners
bullMobileMappingSystem
bullOpticalsurveyinginstruments
bullConstructionlaserinstru-ments
bullGNSSreceivers
bullMachinecontrolsystems
bullPrecisionagriculturesystems
Market Conditions
bullHugeimpactfromthestrongyen
bullRatherflatmarketsinadvancedcountries
bullEmergingmarketsgenerallygrewbutgrowth rates slowed
bullSteadygrowthinthemachinecontrolprecision agriculture and measurement markets
bullNearlyflatmarketforsurveying
Major Products
bull3Dopticalcoherence tomography systems
bullRetinalcameras
bullOphthalmicdigitalimagefilingsystems
bullAutorefractometers Auto kerato-refractometers
bullSlitlamps
bullComputerizedtonometers
bullLensedgers
bullLensmeters
bullOphthalmiclaser photocoagulators
Major Products
bullSemiconductorequipment
bullSubstrateequipment
bullFPDequipment
bullElectronmicroscopes
bull3Dimagemeasurements
bullOpticalunits
Market Conditions
bullHugeimpactfromthestrongyen
bullSlowedcapitalinvestmentinmajorSouthernEuropean countries
bullMarketsinAmericasshowsignsofrecoveryafter hitting bottom
bullInJapanoptometricmarketshitbottomfor ophthalmic market a wait-and-see attitude prevails over a revision of medical reimbursements
bullInAsiaChineseandIndianmarketsshowedstable growth
bullCurbedcapitalinvestmentintheophthalmicfield resulting in fewer bid projects
bullSluggishcapitalinvestmentintheoptometricmarket leading to competition in low-priced and differentiated products
Market Conditions
bullAcceleratedoligopolizationaccompanyingthe consolidation of semiconductor and FPD manufacturers
bullSluggishperformanceofLCDTVbusinesson a global basis
bullExpandingsmartphoneandtabletdevicemarkets
bullIncreasingdemandforecodevices
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
As of June 27 2012 we have changed our organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company Above scope is covered by both companies
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
533
330
137
60000
40000
20000
0 083 093 103 113 123
6000
2000
4000
0
-2000
-4000
-6000 083 093 103 113 123
40000
30000
10000
20000
0 083 093 103 113 123
6000
4000
2000
0 083 093 103 113 123
25000
20000
10000
15000
5000
0 083 093 103 113 123
2000
0
1000
-2000
-1000
-3000
-4000 083 093 103 113 123
21
StrengthStrategies
Strengths We are utilizing in various areas precise 3D position data ac-quired by combining the optical tech-nologies developed since our found-ing and cutting-edge technologies that include GPS positioning lasers and image processing
Strategies We are cultivating signifi-cantly growing markets in emerging countries while working to expand our business into new fields ranging from surveying to machine control 3D mea-surement and precision agriculture
StrengthStrategies
Strengths We will provide total healthcare solutions through our ex-panded product lineup ranging from examination and diagnostic systems (hardware) which take advantage of optomechatronic technology to im-age processing software
Strategies We are broadening our business domain which covers the examination and diagnostic equip-ment fields our core operations to include preventative medical check-ups and treatment Furthermore we are developing products in affordable price ranges and cultivating markets in emerging countries
As of April 1 2012 we have discontinued the Finetech Business Unit Operations of four potentially profitable business catego-ries (substrate projection steppers hybrid electron microscopes luminance meters and eco-device inspection systems) are trans-ferred to Topcon Technohouse Corporation (a wholly owned subsidiary) and restarted under the new business structure
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Net Sales(Millions of yen)
Sales Composition Ratio()
Operating Income(Millions of yen)
Operating Income(Millions of yen)
Operating Income(Millions of yen)
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
22
POSITIONING As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Positioning Business Unit was split into the Smart Infrastructure Company and the Positioning Company
Our optical technology founded on our long years of experience is combined with state-of-the-art GPS laser machine control and image-processing technologies to provide the world with innovative positioning products
2 In-house Company StructureAs of June 27 2012 the former Positioning Business Unit has been reorganized into a structure of two in-house companies the Smart Infrastructure Company which operates the sur-veying business and the mobile 3D measurement business and the Positioning Company which engages in the machine control business and the precision agriculture business
Performance Outlook(SmartInfrastructureCompanyPositioningCompany)Smart Infrastructure CompanyFor fiscal 2012 ending March 31 2013 we forecast net sales of yen25000 million (up 272 year on year) and oper-ating income of yen2500 million (up 1564 year on year) in the Smart Infrastructure Company With regard to business conditions we anticipate demand for infrastructure improvement in emerging coun-tries in addition to demand related to reconstruction in Japan Given these conditions we will strive to strengthen sales structures in emerging countries namely India and countries in the Middle East and Africa As for product strategy we are planning to introduce total stations with global cost competitiveness realized by Japanese crafts-manship that is founded on technology and knowledge from production fields In addition we aim to differentiate ourselves from competitors by mounting the worldrsquos first TSshield in total stations
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results(formerPositioningBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Positioning Business Unit came to yen52656 million up 21 year on year despite the effects of the strong yen Operating income totaled yen1482 million (up yen1352 million year on year) owing to increased net sales in addition to improved profitability accompanying the reductions in fixed costs and other factors Looking at business conditions by region growth slowed in emerging countries while the markets in indus-trialized countries remained flat or maintained a moderate recovery partly due to the impact of the sovereign debt crisis in Europe In Japan however sales of total stations increased in the latter half of the fiscal year due to demand related to recon-struction after the earthquake In the United States sales of machine control systems and precision agriculture products expanded Meanwhile the surveying field showed a slug-gish pace of growth amid intensifying competition due to an adverse effect of the appreciation of the yen
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
23
Smart Infrastructure CompanyWith the rapid growth of infrastructure improve-ment in emerging countries we aim to expand the core businesses of surveying and mobile 3D measurement
Positioning CompanyContinue to rapidly expand existing markets and develop new markets for automated construction machine control and precision agriculture by ap-plying innovative GPS technology
Executive OfficerPresidentSmart Infrastructure Company
Shigeyuki Sawaguchi
Senior Managing Executive OfficerPresident Positioning Company
Raymond OrsquoConnor
Positioning CompanyPositioning Company forecasts net sales of yen37000 million (up 121 year on year) and operating income of yen2500 million (up 3921 year on year) in FY2012 There is a possibility that our business environment will stall due to sovereign risk in Europe but our US economy expectation is gradual upward momentum Meanwhile we will drive growth of ldquoAutomated Constructionrdquo and ldquoPrecision Agriculturerdquo with GPS as the core technology In
ldquoAutomated Constructionrdquo we will expand OEM opportuni-ties with major heavy machinery manufacturers as well as aggressively market our innovative systems to the large after market segment for further rapid growth In ldquoPrecision Agriculturerdquo we will also expand the business through OEM partnerships and alliances as well as building after market distribution and sales by continuing to develop the most innovative products
Launched total stations equipped with TSshield a cloud-based support system (January 2012)
TSshield is a cloud-based system which automatically transmits and accumulates op-erational status and trouble reports in a dedicated server by using a newly developed multifunctional communication module It remotely monitors our customersrsquo total sta-tions which allows us to provide appropriate operational information and quick support service TSshield was first mounted in the reflectorless total station ES series and then in the OS series that features a CE device and in the robotic total station PS series earning a solid reputations (The ES and OS series are sold worldwide except in Japan The TSshield is also equipped for the CX series FX series and SX series total stations under the Sokkia brand)
Net Sales and Operating Income(Millions of yen)
50000
20000
30000
10000
0
5000
2000
3000
40000 4000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
Net Sales and Operating Income(Millions of yen)
60000
20000
30000
40000
10000
0
6000
2000
3000
4000
50000 5000
1000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
24
EYE CARE As of June 27 2012 we have changed our
organizational structure to three in-house companies As a result the former Eye Care Business Unit became the Eye Care Company
The vision of Topcon Eye Care Company is to support the satisfaction and happiness of people by connecting visions of people in society (healthy and fulfilling lives) visions of healthcare professionals (provision of advanced and effective medical care) and visions of eyeglasses shops (provision of eyeglasses that satisfy customersrsquo needs)
dustrialized countries to curb capital investment following Lehman shock resulted in fewer bid projects In addition capital investment stagnated and a price-reduction trend intensified in the optometric market
Performance Outlook (EyeCareCompany)For fiscal 2012 ending March 31 2013 we forecast net sales of yen35000 million (up 74 year on year) and opera-tion income of yen3000 million (up 699 year on year) As for the regional business conditions Europe has the sovereign risk factor and there is a concern that major Southern European countries may see decline in demand in addition to reductions of healthcare budgets Therefore we are paying close attention to the possible impact of such risks on other major countries For the US market we forecast a trend of moderate recovery in both medical and optometric fields Demand remains strong in markets in emerging coun-tries primarily in China and India and growth is expected for diagnostic examination and treatment devices
FY2011 FINANCIAL RESULTS AND PERFORMANCE OUTLOOK
FY2011 Financial Results (formerEyeCareBusinessUnit)In fiscal 2011 ended March 31 2012 net sales in the for-mer Eye Care Business Unit came to yen32598 million up 53 year on year despite the effects of the strong yen Operating income totaled yen1766 million (up yen1459 million year on year) owing to increased net sales in addition to improved profitability accompanying the reduction of fixed costs and other factors Looking at sales conditions by region sales in emerg-ing countries primarily in China and India remained strong thanks to the economic growth there Sales in Europe also remained strong even though capital investment slowed due to the sovereign risks Although there were moves to curb capital investment sales in Japan remained firm as a result of the increased demand in the ophthalmic field and the bottoming out of demand in the optometric market In the ophthalmic market a growing trend mainly in in-
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
25
We will provide optimal total solutions in the oph-thalmic field through the expansion of our business domain to include the fields of preventive medicine and physical checkups and treatment in addition to our conventional field of examination and diagnosis
Director Senior Managing Executive OfficerPresident Eye Care Company
Hiroshi Fukuzawa
As for the Japanese market a growth in sales of OCTs and retinal cameras is expected thanks to the revision of medical reimbursements in April which allows national health insurance (NHI) points to be applied to fundus auto-fluorescence imaging Given this situation we aim to further expand sales of our growing 3D OCT products as a part of our market strategy for fiscal 2012 We are going to cover the entire range of market needs from high-end to affordable models by introducing the DRI OCT-1 a high-performance 3D OCT capable of photographing deep cross sections of the ocu-lar fundus that cannot be photographed by conventional models to the high-end market targeting university hos-pitals and research institutions At the same time we will be launching affordable new products for the market for private medical clinics and optometrists In the treatment field we are stepping up our develop-ment efforts in order to provide products that are less invasive and friendly to patients and doctors by increasing the availability of pattern scan lasers
Launch of the DRI OCT-1 a 3D optical coherence tomography device featuring the worldrsquos fast-est scanning speed capable of photographing cross sections of deep layers (April 4 2012)
Topcon launched the DRI OCT-1 the worldrsquos first 3D optical coherence tomography (OCT) device for imaging the posterior segment of the eye
By using a measurement light source with an outstanding tissue penetration property it is ca-pable of photographing high definition images of not only the retina but also other tissues located deeper in the ocular fundus in the region of the choroid coat and the sclera which in the past could not be clearly photographed with ease The fastest scanning speed in the world (roughly twice as fast as our existing models) realizes instantaneous imaging which can reduce the burden on patients And because the light source reduces the effects of cataract and vitreous opac-ity fundus cross-sectional images of patients having these conditions which used to be very difficult to obtain are now easily obtained With these benefits we expect that DRI OCT-1 will be used for research of excessive myopia and choroid diseases in addition to cases tradi-tionally studied by OCT devices
Net Sales and Operating Income(Millions of yen)
50000
20000
40000
30000
10000
0
10000
4000
8000
6000
2000
020123 20143 (Plan)20133 (Plan) 20153 (Plan)
Net Sales (left) Operating Income (right)
WorldrsquosNo1
For the ophthalmic treatment field we will strengthen our product lineup through various efforts including sales partnerships with other companies in an effort to meet the medical equipment needs as a total solution provider for ophthalmology
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
26
HISTORY OFTOPCON
Topcon was established in 1932 based on the surveying instruments division of K Hattori ampCoLtd(currentlySeikoHoldingsCorporation)The Company changed its name from Tokyo Optical Co Ltd to Topcon Corporation in1989Today theCompanycontinues itsactivitiesasageneral precision optical manufacturer mainly of surveying instruments and ophthalmic medical instruments
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
Founding and Business Base Establishment Phase Development Phase Growth Phase Mature Phase Transformation Phase
1932Establishment of Tokyo Optical Co LtdEstablished based on the surveying instruments division of K Hattori amp Co Ltd after acquiring the lens manufacturing facilities of Katsuma Kogaku Kikai Co Ltd at the request of the Japanese Ministry of War
1945Concentrated mostly on the production of binoculars which were largely exported to the United States paving the way for the dominance of the US market by Japanese binoculars Moreover the production of surveying instruments contributed to the reconstruction and development of Japan in the post-war era
1951Released Japanrsquos first Refractometer RM-1
1970Established Topcon Europe NV (currently Topcon Europe BV) in the Netherlands
Then established Topcon Instrument Corporation of America (currently Topcon Medical Systems Inc) in the United States
1979Established Topcon Singapore Pte Ltd in Singapore
1985Made a yen38 million public stock offering the largest amount for the company at the time in order to strengthen its managerial foundation by means of a capital increase at the market price
1986Established Topcon Optical (HK) Ltd its first overseas local manufacturing base in Hong Kong
1989Changed corporate name to Topcon Corporation
1994Entered the Machine Control (MC) BusinessEstablished Topcon Laser Systems Inc (currently Topcon Positioning Systems Inc) and acquired a laser equipment manufacturer in the United States to enter the machine control field
2000Entered the GPS-related BusinessAcquired Javad Positioning Systems Inc in the United States and began developing precision GPS receivers and related system products while merging the GPS-related business with conventional surveying instruments
2001Established Topcon Positioning Systems Inc and Topcon Medical Systems Inc in the United States as part of a plan to improve overseas business
1947TOHKOH Transit 3inch half
1951RefractometerRM-1
Enter the optical industry as a first step
Leverage technologicalexpertise to launch a series of hit products
Undertake full-scale globalization
Lay the groundwork for the current core businesses
Reform the business structure in the aftermath of the Lehman Shock
1960Became an affiliate of Tokyo Shibaura Electric Co Ltd (currently Toshiba Corporation)
1963Released Topcon RE Super the worldrsquos first single-lens reflex camera with a TTL full-aperture metering system
1981Enjoyed increased profit from strong sales of the extremely popular refractometer RM-100 and the electric distance meter DM-C2
1991Entered the electron beam business
2004Improved Production in ChinaEstablished Topcon (Beijing) Opto-Electronics Corp a surveying instruments manufacturing company to further accelerate the surveying instruments business in China
2008Pursued Business Merger with Sokkia Conducted a takeover bid for shares of SokkiaCo Ltd and made it a subsidiary to enhance competitiveness of the Positioning Business in the global market
2010Established Topcon Medical Laser Systems Inc by acquiring the retina and glaucoma business of OptiMedica (USA) and entered the therapeutic laser market
2011Established the ldquoTOPCON WAYrdquo
2012Discontinued the Finetech Business Unit as of April 1 and changedorganizational structure into three in-house companies as of June 27
1932~ 1963~ 1985~ 1994~ 2008~
1979Electric Distance Meter DM-C2
1979Non-Mydriatic Retinal CameraTRC-NW
1985Total Station GTS-3
1988Digital Image Filing System IMAGEnet
1986Wafer Surface Particle Measuring System WM-3
1966Universal Measuring Microscope TUM
2003Proximity Aligner for LCD Color Filters TME-1750S
2006GNSS Receiver GR-3
20063D Optical Coherence Tomography 3D OCT-1000
20083D Laser Scanner GLS-1000
2010Ophthalmic Laser Photocoagulator PASCAL
2010Robotic Total StationQS
19983D Machine Control System3D-MC LPS
1963Topcon RE Super
27
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Medical Laser Systems Inc
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
P
P
P
E
E
S
S
P
28
GLOBAL NETWORK
Topcon boasts an effective development and manufacturing network that utilizes outstanding human and other resources worldwide to grasp the needs of various customers throughout the world to which we promptly respond In addition Topcon is globally expanding its sales centers and conducts sales and provides services based on the needs of each par-ticular locale
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
Topcon Positioning Systems (Australia) Pty Ltd
S
North AmericaTopcon Positioning Systems IncUSA
Topcon Medical Systems IncUSA
Topcon Medical Laser Systems IncUSA
TPS Columbus OfficeUSA
TPS Kansas OfficeUSA
TPS Calgary OfficeCanada
Topcon Canada IncCanada
EuropeAfricaTopcon Europe Positioning BVThe Netherlands
Topcon Europe Medical BVThe Netherlands
Topcon Deutschland GmbHGermany
Ibs GmbH Lasertechnik Vermessungs- und BaugerateGermany
Topcon SARLFrance
Topcon Espantildea SASpain
Topcon Positioning Spain SLSpain
Topcon Positioning Canarias SLSpain
Topcon Positioning Portugal LDAPortugal
Topcon Scandinavia ABSweden
Topcon (Great Britain) LtdUK
Topcon Polska Sp ZooPoland
Tierra SpAItaly
Topcon InfoMobility SrlItaly
GEOTOP srlItaly
Sokkia NVBelgium
DynaRoad OyFinland
Topcon Technology CenterRussia
KEE Technologies Africa (Pty) LtdSouth Africa
AsiaOceaniaMiddle EastTopcon Singapore Positioning Sales Pte LtdSingapore
Topcon Singapore Medical Pte LtdSingapore
Sokkia Singapore Positioning Sales Pte LtdSingapore
Topcon Instruments (Malaysia) Sdn BhdMalaysia
Topcon Instruments (Thailand) Co LtdThailand
Topcon Sokkia India Pvt LtdIndia
Sokkia Korea Co LtdKorea
Topcon Optical (HK) LtdChina
Topcon (Beijing) Opto-Electronics Development CorporationChina
Topcon Optical (Dongguan) Technology LtdChina
Topcon HK(BD) LtdBangladesh
Topcon Precision Agriculture Pty LtdAustralia
Topcon Positioning Systems (Australia) Pty LtdAustralia
Topcon Positioning Middle East and Africa FZEUAE
Topcon Corporation Dubai OfficeUAE
Topcon Corporation Beirut OfficeLebanon
JapanTopcon Co Ltd
Sokkia Topcon Co Ltd
Topcon Sokkia Positioning Japan Co Ltd
Topcon Medical Japan Co Ltd
Topcon Technohouse Corporation
Sapporo Topcon Sales Co Ltd
Topcon Yamagata Co Ltd
Optonexus Co Ltd
Fukushima Sokkia Co Ltd
P
S
E
Research amp Development
Manufacture
Sales amp Marketing
Smart Infrastructure Company
Positioning Company
Eye Care Company
Others
Tierra SpATopcon InfoMobility SrlTelematics-related development
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon HK(BD) LtdBangladesh factory make parts for DPPC products and optical engine for pico-projector
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
Topcon Medical Systems IncManufactures eye care products and develops network solutions for the image filing systems IMAGEnet EMR and EyeRoute (a web-based network system)
Topcon Positioning Systems IncDevelops and manufactures GNSSinstruments machine control systems and supporting software solutions Software for surveying and mapping is developed at its Ohio and Calgary offices
Topcon Medical Laser Systems IncDevelops and manufactures laserphotocoagulation systems for treatment of the eye
P E
E
PP
P
P
P E
P E
P S E
S E
P EP E
P EP
P E
P E E
E
S
S E
S E
S E
S E
S
S E
E
P
Topcon Precision Agriculture Pty LtdDevelops and manufactures precisionagriculture products as well as undertakesMC software development
P
E
P
Topcon Europe Medical BVDevelops and manufactures differentiated products targeted for Europe also engages in development of the eye care system
Topcon (Beijing) Opto-ElectronicsDevelopment CorporationTopcon Optical (Dongguan) Technology LtdDevelops and manufactures Smart Infrastructure and Eye Care products in Beijing Dongguan factory make parts for Topcon Smart Infrastructure and Eye Care products
Topcon CorporationTopconrsquos headquarters comprehensively oversees the development and manufacturing of all business sectors Sokkia Topcon manufactures total stations Topcon Yamagata manufactures Eye Care products Fukushima Sokkia manufactures Smart Infrastructure-related parts for the Topcon group
E
P
E
P E
P
P E
E
P
P
P
P E
P
E
P
P
P
P
P
P
P
S
E
E
S
E
S
ES
S E
S
S
S E
ES
S E
P
P
PS E
E
S
S E
S E
S
P
P
P
EP
P
P
P
E
E
S
S
P
Topcon Technology CenterDevelops GNSS receivers antennas radios and software
29
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
Appointment and termination
Appointment and termination
Appointment and termination
Appointment and termination Appointment and termination
Report
ReportReport
Report
Approval forappointment and termination
Agenda placement and report on important matters
Audit
Report
Audit
Audit
Internal auditing
Directions
Directions
Operating Divisions and Group Companies
General Meeting of Stockholders
Board of DirectorsDirectors 6
Accounting Auditor
Approval for
Audit
Board of AuditorsCorporate Auditors 4
(External 2)
Executive Officers 14 (Manages daily activities)
Agenda placement and
Executive Officers Meeting (Discusses important matters)
Representative Director
Corporate Audit Div(Internal auditing)
CORPORATE GOVERNANCE STRUCTURE (As of June 27 2012)
30
CORPORATE GOVERNANCE
Topcon pursues sustained growth in its corporate value and a greater de-gree of soundness and transparency of its management The Company achieves this by enhancing its corporate governance which includes not only thorough implementation of compliance but also doing business in good faith with respect for corporate ethics in addition to strengthening risk management
CORPORATE GOVERNANCETopcon utilizes an executive officer system for the execu-tion of daily business operations The Company separates the supervisory function of the directors and the Board of Directors from the business execution function of the ex-ecutive officers to maintain a system enabling a timely and appropriate response to rapid changes in the business en-vironment The Board of Directors convenes monthly (and as otherwise necessary) to deliberate basic management policies items required by laws and regulations or articles of incorporation and important matters concerning other management issues Through these actions and the re-ports it receives the Board fortifies supervisory functions Directors auditors and executive officers attend Executive Officers Meetings which are held weekly in principle to discuss a wide range of topics as well as analyze the busi-ness environment deliberate medium-term business plans budgets and other items share business execution status reports and other information deliberate important deci-sionmaking items for the Company and ensure thorough compliance (legal compliance) activities thereby ensuring the fairness and transparency of management decisions Moreover the Company maintains a Corporate Audit Division an internal auditing organization directly overseen by the President to ensure legal appropriate and effective business executionNote The term ldquoexecutive officerrdquo (Shikkouyakuin) used in this section is
generally called ldquooperating officerrdquo in English and differs from execu-tive officer (Shikkouyaku) defined by the Japanese Companies Act
EXTERNAL CORPORATE AUDITORSThe Company has two external corporate auditors Audits conducted by external corporate auditors play an important role in the independent monitoring of Company management Given the importance of this management oversight function corporate auditors must have a solid working knowledge of Company operations and be inde-pendent of management influence One of the corporate officers is an independent officer that is required to report to the Tokyo Stock Exchange Inc The Topcon Board of Auditors (including external cor-porate auditors) works to maintain a close cooperative relationship with the Corporate Audit Division and account-ing auditors regularly sharing information and coordinating audit plans and implementation prior to audits to improve audit efficiency and practicability Mr Chikahiro Yokota is a Company external corporate auditor who also serves as an advisor for Toshiba Corpora-tion which is a major shareholder in Topcon (no operational responsibilities) Mr Yokota conducts fair and impartial audits for the Company Company sales to Toshiba Cor-poration account for only a small percentage of overall Company net sales and do not represent a significant is-sue of reliance
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
31
RISK COMPLIANCE Topcon has established Basic Rules on Risk Compliance and has created a risk management structure which includes the designation of crisis management representatives to enable a timely and appropriate response for each risk situa-tion that arises for the Company and its subsidiaries In addition to the ordinary organizational channels the Company has also introduced the Internal Reporting Sys-tem to enable direct notification of risk-related information from the person who identified the risk which contrib-utes to the quick discovery of risk information and a rapid and appropriate response to the risk incident as well as helping to raise awareness of risk management among directors and employees at the Company and its subsidiar-ies The Internal Reporting System is administered by the Corporate Audit Division The Company has established the Basic Regulation on Personal Information Protection concerning protection of private information and the Basic Regulation on Information Security regarding confidential information and associated regulations thereof and seeks to keep employees of the Company and subsidiaries fully informed of these regula-tions Such regulations provide for the protection of the information itself while also enabling a timely and appro-priate response in the event that risk arises related to the information
Message from External Corporate AuditorIn carrying out my duties as Corporate Auditor I pay particular attention to whether Topconrsquos management acts in compliance with the TOPCON WAY which should be considered the guideline for business conduct and compli-ance As expected of an external and independent corporate auditor I endeavor to ensure that management decision-making is fair and equitable in view of the interests of the general shareholders and ultimately of the Company Since as-suming the post in June 2011 I have been attending meetings of the Board of Directors and Board of Auditors among other important meetings in addition to visiting subsidiaries including those overseas interviewing the President and conducting hearings with personnel in charge of each division as well as other officers and employees Throughout this process I ask questions and state my opinion I hope this will contribute to putting the TOPCON WAY into practice and to the growth of corporate value Before assuming the post of Corporate Audi-tor I had almost no connection with Topcon and although I have sometimes been confused by the in-house lingo I regard this as a sign of my differing per-spective and I hope to use it to advantage in my activities as Corporate Auditor
Corporate Auditor
Tatsuya Kuroyanagi
April 1979 Joined Mitsubishi Corporation
March 1999 PresidentMillenniaVenturePartnersCo Ltd
May 2007 Executive Director RHJ International
August 2009 Senior Adviser Kadota amp Co Inc
June 2011 Corporate Auditor (to present)
DIRECTORS ANDCORPORATE AUDITORS COMPENSATIONTopcon directors and corporate auditors compensation consists of a monthly salary (basic pay plus additional com-pensation) and bonuses Monthly salary is based on standards at each classification of directors and bonuses are based on standards calculated by multiplying the basic monthly salary by a constant coeffi-cient (number of months evaluated based on performance) Based on these standards directors compensation is deter-mined by approval of the Board of Directors and corporate auditors compensation is determined by the negotiation among corporate auditors Total compensation of directors and corporate auditors for the fiscal year ended March 2012 was as shown below
Compensation Total Compensation by Position Number of Classification (Millions of yen) (Millions of yen) Individuals Basic Compensation
Directors (excluding external directors) 77 77 9
Corporate Auditors (excluding external 25 25 2 corporate auditors) External Officers 8 8 3
Notes 1 As of March 31 2012 the Company had 6 directors 2 corporate auditors and 2 external corporate auditors
2 In addition to the compensation presented above 33 million yen in compensation (including bonuses) was paid to directors who also served as Company employees
3 Directors compensation is limited to a maximum 150 million yen annually (not including em-ployee compensation for directors who also serve as employees) as established in a resolution by the Ordinary General Meeting of Shareholders for the 103rd Fiscal Period held June 27 1996
4 Corporate auditors compensation is limited to a maximum 56 million yen annually as estab-lished in a resolution by the Ordinary General Meeting of Shareholders for the 111th Fiscal Period held June 29 2004
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
32
CSR
BASIC POLICY FOR CSRTopcon defines the basic policies for carrying out CSR ac-tivities that conform to the UN Global Compact in which Topcon has participated since October 2007
1 Topcon will locate CSR activities in the center of business and work on it intentionally in order to build share and implement the sense of values and standards suitable for global enterprise
2 Topcon will to the extent of our influence support and implement the rules and regulations that are globally approved regarding Human Rights Labor Standards Environment andor Anti-Corruption as declared in the Global Compact
3 Topcon will make a social contribution voluntarily and actively through developments production sales and services of useful products
4 Topcon will promote an environmental manage-ment through the creation of environmentally-conscious business process and through providing environmentally-conscious products and services
5 Topcon will strive to establish CSR activities in every officer and employeersquos daily work and to infiltrate and establish them within global Topcon Group companies
6 Topcon will acquire understanding and confidence of all the stakeholders of Topcon Group companies by providing with information actively
STRUCTURE FOR PROMOTING CSRTopconrsquos CSR activities are conducted in line with the poli-cies decided by the Topcon CSR Committee headed by an executive officer in charge of CSR and are implemented globally throughout the Topcon Group with the collabora-tion of CSR-related business divisions and committees which include the Risk Compliance Committee the Busi-ness Continuity Planning (BCP) Committee and the Quality amp Safety (QS) Committee
Environment Qualityassurance
Customersatisfaction
Humanrights andemployee
satisfaction
Socialcontribution
Topcon CSR Committee
Risk-ComplianceCommittee
GlobalEnvironmentConference
QSCommittee
CSActivities
Employmentof Persons with
Disabilities
SocialContributions
Activities
Observinglaws and
regulations
Secretariat(Div in charge of CSR)
Linkage
Committee members (Heads of each division)
Chairman of Topcon CSR Committee(Executive Officers in charge of CSR)
President
STRUCTURE FOR PROMOTING CSR (As of June 27 2012)
EnvironmentalProtectionCommittee
ExportControl
Programs
InformationSecurity
Committee
BCPCommittee
WelfareCommittee
Safety andHealth
Committee
GenderEqual
Society
Companyrsquos Committees
The Topcon Group promotes the CSR activities based on the TOPCON WAYtheGrouprsquoshighestcommonvaluesanditsCodeofBusinessCon-duct These are also in compliance with the ten principles of the United Nations Global Compact The Grouprsquos common policies and the organi-zation structure are established to support these CSR activities
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
33
Legend in the ldquoSelf-Assessmentrdquo column () means ldquothe target is 100 metrdquo means ldquothe target is partly not met or there is room for
improvementrdquo and times means ldquothe target is not metrdquo
nFor more detailed information on the Grouprsquos CSR activities please refer to the Topcon Group CSR Report httpglobaltopconcomcsr
The measures and targets of our CSRThe TOPCON CSR Committee reviews and evaluates our own activities year-by-year and sets goals and plans for the
nextyearFiscal2011sawavarietyofactivitiesincludingaprevalenceoftheTOPCONWAYareviewoftheBusiness
ContinuityPlan(BCP)whichfocusedonacontinuingsupplyorthemeasurestoreducethein-housesmokingrate
Items Key Goals and Plans for FY2011 Key Achievements in FY2011 Key Goals and Plans for FY2012
CorporateGovernance
bullDisseminating the Corporate Governance Principles and the ldquoTOPCON WAYrdquo
bullHolding seminars on the Corporate Governance Principles and CSR
bullPenetration within the company through the training to managersbullEducation was carried out according to planbullHeld a training session to the executives
bullDisseminating the Corporate Governance PrinciplesbullHolding seminars on the Corporate Governance Principles and CSR
education program
bullDisseminating the reference leaflet on TOPCON Code of Business Conductacross the TOPCON Group bullPosted on the Risk-Compliance Bulletin Board to keep everyone informed
bullDisseminating the leaflet on TOPCON Code of Business Conduct within the TOPCON Group
RiskCompliance
bullReviewing the BCP (Continued)bullDrawing up and implementing the BCP based on expected
summertime power shortage
bullReviewing the BCP for continued product supply (ensure the stock or alternative production bases etc)
bullDrawing up and implementing the BCP based on expected summertime power shortage
bullReviewing the BCP according to the changes in social conditions
bullCompliance with the statutory employment rate for persons with disabilities (18)
bullReviewing the content of and continuing Risk-Compliance seminars
bullEmployment rate of persons with disabilities 147 (falling short)bullReviewed the contents and updated the educational contentbullHeld a risk-compliance seminar to salespersons
bullImprovement of employment rate for persons with disabilitiesbullReviewing the contents and continuing the Risk-Compliance
seminarsbullEstablishing a SNS (Social Networking Service) guideline
bullHolding topic-by-topic compliance seminars (Continued) bullHeld the seminars according to plan bullHeld the seminars according to plan
Responsibilitiesto Customers
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullConducted the TechnologyQuality innovation project to shorten development times and improve quality
bullDeveloping and releasing new products through promotion of TM-1 activities (Continued)
bullImproving the total quality assurance system across group companies (Continued)
bullPromoting awareness of prioritizing the quality through the TechnologyQuality Month or other quality forums
bullImproving the total quality assurance system across group companies (Continued)
bullImproving pre-verification capabilities in upper stream and prevention of quality problems (Continued)
bullConducted TechnologyQuality innovation project to strengthen the pre-verifi cation and the design review
bullImproving pre-verification capabilities in upper stream and preventing quality problems (Continued)
bullPromoting prompt feedback of customer information (Continued)bullSpeeding up the feedback of quality information from call centers and group
companiesbullPromoting prompt feedback of customer information (Continued)
Responsibilities to Business Partners
bullFurther extending applications of the RoHS compliance assurance system to overseas suppliers(4 suppliers)
bullConducted as planned 4 suppliers (2 companies in 2011A and 2011B each) bullFurther extending applications of the RoHS compliance assurance
system to overseas suppliers (8 suppliers)
Responsibilities to Employees
bullMeasures for reducing metabolic syndrome cases (special health maintenance guidance in-house plans) bullConducted measures for reducing metabolic syndrome cases as planned
bullMeasures for reducing metabolic syndrome cases(Continued)
bullContinuing no-smoking programs (Target smoking rate=28) bullTarget smoking rate = 277 (Target achieved) bullContinuing no-smoking programs
bullStrengthening cooperation in safety and health matters with group companies and improving management levels bullDisseminating the important items related to health and safety
bullStrengthening cooperation in safety and health matters with group companies and improving management levels (Continued)
bullContinual improvement of the personnel system bullChange working hours because of introduction of daylight saving time bullContinual improvement of the personnel system
Responsibilitiesto Internationaland LocalCommunities
bullProviding environmentally conscious and resource-saving products and products and services useful for improving medical care health care and life in general (Continued)
bullProvided products that would help address social issues (reconstruction of the areas affected by the Great East Japan Earthquake population aging resource depletion)
Continued
bullInternational volunteer assistance bullConducted as planned Continued
bullAssisting of medical and academic institutes (product donation and sponsor seminars) (Continued) bullConducted as planned Continued
EnforcingEnvironmentManagement System
bullContinuing environmental auditing Environmental auditing 11 companies Integrating and extending ISO certification
bullIncreased the number of companies to be audited Environmental auditing 1 overseas group company Integrating and extending ISO certification Plan review
times bullReview the audited and implementation of the audit
Providing EnvironmentallyConscious Products andServices
bullProviding environmentally conscious products Over 64 of sales
bullProvided environmentally conscious products 754 of sales (Target achieved) bullFurther improvement of the sales ratio
EstablishingEnvironmentallyConscienceBusiness Processes
bullImplementation of measures against global warming (Reduction in CO2 emissions)
55 reduction from the previous year (to comply with Tokyo metropolitan ordinance)
bull242 reduction from the previous year (to comply with Tokyo metropolitan ordinance) (Target achieved)
Continued
bullEffective use of resources Continuing zero-emission efforts (Less than the previous year) bullContinuing zero-emission efforts (Increase in emissions05) Continued
bullManagement of chemical substances Strengthening central management(Using less chemical substances
than the previous year)bullUse of organic solvents 122 reduction (2584 kg) Continued
Promoting EnvironmentalCommunication
bullStrengthening of cooperation with administration and local residents
bullStrengthened cooperation with administration and local residents assisted with public projects and cooperated with civic groups bullStrengthening of cooperation with administration and local residents
(Continued)
Responsibilities to Stockholders and Investors
bullProviding information to stockholders and investorsbullMaintaining external evaluations and increasing analyst coverage
bullImprovement in Web contentbullDecrease in analyst coverage (5 to 4 firms) bullProviding information to stockholders and investors (Continued)
bullMaintaining external evaluations and analyst coverage
Communication
bullIssuing TOPCON GROUP CSR Report (Continued) bullIssued TOPCON GROUP CSR Report
bullIssuing TOPCON GROUP CSR Report (Continued)
bullIssuing group media of CSR (CSR INFO-LINK) (Continued) bullContinued publication bullIssuing the CSR information (CSR INFO-LINK) (Continued)
bullParticipating in the GC-JN working group (CSR Report etc)bullParticipated in the GC-JN working group CSR Report in-house GC-JN
working group etcbullParticipating in the GC-JN working group (a sectional meeting to
spread the GC internally)
bullPosting corporate information on the website in a timely fashion (Continued)
bullPosted corporate information in a timely fashionbullPosting corporate information on the website in a timely fashion
(Continued)
bullSocial contribution activities in collaboration with NPOs (Continued) bullCooperated with NPOs specialized in social contributions and labor issues bullSocial contribution activities in collaboration with NPOs (Continued)
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
34
DIRECTORS
President
Norio Uchida
Director Senior Managing Executive Officer
Hiroshi Fukuzawa
Takayuki Ogawa
Director Managing Executive Officer
Satoshi Hirano
Director Executive Officer
Hiroshi Koizumi
Shinji Iwasaki
CORPORATE AUDITORS
Full-time Auditor
Mamoru Takahashi
Ikuo Kobayashi
External Auditor
ChikahiroYokota
Tatsuya Kuroyanagi
EXECUTIVE OFFICERS
Senior Managing Executive Officer
Raymond OConnor
Executive Officer
Shuji Ichimaru
Makoto Iwasaki
Masayuki Momiuchi
Shigeyuki Sawaguchi
Haruhiko Kobayashi
Kanji Ikegaya
Hiroyuki Nakamura
YasufumiFukuma
Shinji Iwasaki Satoshi Hirano Hiroshi Fukuzawa Norio Uchida Takayuki Ogawa Hiroshi Koizumi
DIRECTORS CORPORATE AUDITORS AND EXECUTIVE OFFICERS
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
35
FINANCIALSECTION
CONTENTS
ConsolidatedTen-yearSummary
36ConsolidatedStatements ofComprehensiveIncome
45
ConsolidatedStatements ofIncome
44
Fiscal 2011ManagementrsquosDiscussion andAnalysis
38ConsolidatedStatements ofChanges inNet Assets
45
ConsolidatedBalance Sheets
42ConsolidatedStatements ofCash Flows
46
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
36
CONSOLIDATED TEN-YEAR SUMMARYTopcon Corporation and Consolidated Subsidiaries
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 67406 28226 23958 15221 43607 41573 25833 23100 2732 1196 556 2761 2528 mdash 5173 7236 8899 (1663) (3964)
yen 30137 80258 29809
yen 143 603 32908
41 08 77 647 07 18 31 237 04 376 080 988 249 264 400 1388 77
yen 71480 30518 24365 16596 46589 44272 27207 23040 4167 3184 2303 3290 2487 mdash 5356 3096 6090 (2994) (9122)
yen 31077 74704 19998
yen 632 2501 34893
58 32 75 652 30 75 51 253 18 416 092 644 100 299 484 1810 82
yen 96631 36652 26145 33832 66895 63514 33116 25967 7149 6267 4278 3402 2619 mdash 5956 4357 7809 (3452) 1352
yen 35413 83758 18927
yen 930 4803 39609
74 44 62 692 54 129 86 194 23 423 122 534 104 398 661 1874 109
yen 102799 47804 31864 23129 72262 58915 43883 30818 13065 11503 6781 2753 2813 268 7713 2431 6869 (4437) (8276)
yen 47780 89379 12350
yen 2200 7344 51585
127 66 75 703 78 163 143 300 43 535 119 258 204 376 670 2051 85
20033 20043 20053 20063
Notes 1 For the sake of convenience the US$ is converted at a rate of yen8219US$ as of March 31 2012 2 On April 1 2006 shares were split into 2 shares per 1 common share and the per share data prior to 2005 has been modified incorporating the
values after the split 3 Depreciation and amortization excludes the amortization of goodwill
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
37
Operating results Net Sales Positioning Business Eye Care Business Finetech Business Overseas Cost of sales Gross profit Selling general and administrative expenses Operating income (loss) Ordinary income (loss) Net income (loss) Capital expenditures Depreciation and amortization Amortization of goodwill RampD expenditures Free cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities
Financial position Shareholdersrsquo equity Total assets Interest-bearing liabilities
Per share data (yen $) Stock price (end of term) Earnings per share (EPS) Net assets per share (BPS)
Management indicators Operating income ratio () Net income ratio () Ratio of RampD expenditures to net sales () Overseas net sales ratio () Return on assets (ROA) () Return on equity (ROE) () Return on invested capital (ROIC) () Price earnings ratio (PER) (times) Price book-value ratio (PBR) (times) Equity ratio () Total assets turnover ratio (timesyear) DE ratio () Dividend payout ratio () Fixed assets turnover ratio (timesyear) Inventory turnover ratio (timesyear) Current ratio () Interest coverage ratio (times)
yen 110490 53631 38464 18394 80575 59650 50839 35563 15276 14233 8549 3012 3018 268 9424 1019 6708 (5689) (1123)
yen 54689 99859 14068
yen 1800 9230 59045
138 77 85 729 90 167 148 195 30 548 117 257 217 358 613 1817 97
yen 110818 50928 39828 20061 81027 61948 48869 37894 10975 9205 7736 2893 3478 268 10178 (16185) 6904 (23090) 23761
yen 56082 139362 43329
yen 785 8352 60549
99 70 92 731 65 140 73 94 13 402 093 773 192 271 478 1460 63
yen 112666 58031 33503 21131 83684 73661 39004 45949 (6944) (9326) (9992) 2620 4619 1828 11589 (6991) (1267) (5724) 5667
yen 39801 119702 49706
yen 382 (10789) 42972
(62) (89) 103 743 (77) (208) (52) mdash 09 332 087 1249 mdash 238 463 1974 mdash
yen 94862 49350 31561 13950 69138 54636 40226 38821 1405 545 133 2109 4531 1846 9609 1112 3755 (2643) 1468
yen 40490 125539 51501
yen 517 144 43717
15 01 101 729 01 03 11 3580 12 323 077 1272 2770 218 419 1774 29
yen 102470 51559 30946 19964 74210 61408 41061 39261 1799 608 (1288) 4499 3689 1596 10275 (7903) (934) (6969) 4761
yen 36908 124816 55300
yen 440 (1391) 39850
18 (13) 100 724 (10) (33) 13 mdash 11 296 082 1498 mdash 239 428 1571 mdash
yen 98834 52656 32598 13579 73949 60716 38118 36037 2080 467 (3686) 3443 3115 1660 8707 (3575) 47 (3622) (3467)
yen 32667 120777 58882
yen 550 (3980) 35271
21 (37) 88 748 (30) (106) 16 mdash 16 270 080 1803 mdash 230 423 1412 mdash
$ 1202513 640670 396621 165221 899739 738731 463782 438465 25316 5685 (44851) 41890 37902 20200 105947 (43500) 572 (44073) (42184)
$ 397457 1469490 716420
$ 6691 (0484) 4291
20073 20083 20093 20103 20113 20123 20123
Millions of yenThousands ofUS dollars
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
MARKET ENVIRONMENTThe economic environment in fiscal 2011 ended March 31 2012 included a gradual recovery trend in United States business conditions while fiscal instability created harsh business conditions in Europe While growth in China and other emerging economies is slowing they continue to expand at high rates Business conditions in Japan moved in a general recovery as economic activity began to recover after the Great East Japan Earthquake even amid the uncertain factors including the European economic slowdown and strong yen In these economic conditions the Topcon Group determined to use the current period of change as a go lden oppor tun i t y fo r l eve rag ing the G rouprsquos comprehensive strengths and taking on new challenges toward ldquoprofitable and sustainable growthrdquo Following the slogan ldquoReform amp Enhancementrdquo we are quickly establishing a stable revenue base and sound financial position to create a stronger corporate structure that is resilient to the external business environment In add i t ion we have determined that fu r ther strengthening our earning power and improving our financial position is essential given the expectations of continuing deterioration in the business environment including a persisting strong yen and an increasingly uncertain global economic outlook To this end we have vastly downsized the Finetech Business and implemented a voluntary retirement program
CONSOLIDATED RESULTSIn fiscal 2011 although the strong yen affected the results compared to the previous year net sales were solid for the Positioning Business particularly in the United States and Japan and for the Eye Care Business centered on Europe However net sales declined for the Finetech Business due
mainly to the sluggish market conditions and the business downsizing The result was a 35 year-on-year decrease in net sales to yen98834 million Despite the decline in net sales the lower fixed costs and reduced cost of goods sold following the companywide business restructuring helped boost operating income by yen280 million to yen2080 million while ordinary income declined by yen141 million to yen467 million The Company posted a net loss of yen3686 million (an increase of yen2397 million from the net loss in the previous fiscal year) due largely to losses associated with the Finetech Business downsizing and with the voluntary retirement program
SEGMENT INFORMATIONIn the Positioning Business net sales rose 21 year on year to yen52656 million as the business growth in the US and Japan more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1482 million an increase of yen1352 million over the previous fiscal year In the Eye Care Business net sales rose 53 year on year to yen32598 million as business growth in the European market more than offset the impact of the strong yen The improved earnings accompanying the rise in net sales and reduced fixed costs helped boost operating income to yen1766 million an increase of yen1459 million over the previous fiscal year In the Finetech Business net sales declined 320 year on year to yen13579 million largely owing to stagnant semiconductor and FPD market conditions and the business downsizing The drop in net sales led to operating income declining by yen2531 million from the previous fiscal year to an operating loss of yen1168 million
FISCAL 2011 MANAGEMENTrsquoS DISCUSSION AND ANALYSIS
38
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
NET SALES
120000
100000
80000
60000
40000
20000
0
(Millions of yen)
103093083 113 123
OPERATING INCOME
15000
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
NET INCOME
10000
5000
0
-5000
-10000
(Millions of yen)
103093083 113 123
TOTAL ASSETS
150000
120000
90000
60000
30000
0
(Millions of yen)
103093083 113 123
NET ASSETS
60000
50000
40000
30000
20000
10000
0
(Millions of yen)
103093083 113 123
FREE CASH FLOWS
5000
0
-5000
-10000
-15000
-20000
(Millions of yen)
103093083 113 123
FINANCIAL POSITIONAssetsAs of March 31 2012 total assets stood at yen120777 million a decline of yen4039 million from a year earlier1 Current assets Current assets amounted to yen78207
million a decline of yen3363 million from the previous f iscal year-end due pr imari ly to a decrease in inventories accompanying the downsizing of the Finetech Business
2 Noncurrent assets Noncurrent assets amounted to yen42569 million a decrease of yen675 million from the previous fiscal year-end due mainly to the sales of investment securities
LiabilitiesAs of March 31 2012 total liabilities amounted to yen87713 million an increase of yen135 million from a year earlier1 Current liabilities Current liabilities amounted to
yen55375 million up yen3465 million from the previous fiscal year-end due primarily to an increase in short-term loans payable
2 Noncurrent liabilities Noncurrent liabilities amounted to yen32337 million down yen3330 million from the end of the previous fiscal year due mainly to a repayment of long-term loans payable and decreased provision for retirement benefits
Net AssetsAs of March 31 2012 total net assets amounted to yen33064 million a decline of yen4174 million from the previous fiscal year-end due primarily to a decrease in retained earnings arising from the net loss for the fiscal year under review
Cash FlowsCash and cash equivalents (hereafter referred to as ldquonet cashrdquo) at the fiscal year-end stood at yen13606 million a decrease of yen163 million from the end of the previous fiscal year The decline was primarily due to a decrease in net cash resulting from purchase of property plant and equipment and intangible assets which exceeded factors increasing net cash including increases in long-term and short-term loans payable
Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities amounted to yen47 million compared to yen934 million used in operating activities in the previous fiscal year The increase was primarily due to proceeds from a yen4608 million loss before income taxes and minority interests after adjusting a yen4809 million loss on withdrawal from business
Net Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities totaled yen3622 million compared to yen6969 million used in investing activities in the previous fiscal year The primary elements were yen2198 million for purchase of property plant and equipment and yen2229 million for purchase of intangible assets
Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities amounted to yen3467 million compared to net cash of yen4761 million provided by financing activities in the previous fiscal year The increase was primarily attributable to a yen3500 million increase in long-term loans payable
39
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
Capital ExpendituresTotal capital expenditures for the Topcon Group amounted to yen3443 million in fiscal 2011 By business segment total capital expenditures were yen1992 million for the Positioning Business yen946 million for the Eye Care Business and yen505 million for the Finetech Business Expenditures objectives were primarily to introduce ERP advance research and development enhance production systems improve operating efficiency and renew molds and other items
Dividend PolicyWe place priority on dividend payments to return profit to shareholders Our basic policy regarding the distribution of profits to shareholders is to steadily increase the dividend payment amount in line with the growth in consolidated earnings Regarding dividend payments we make payments twice yearly in principle as an interim dividend and year-end dividend Our Articles of Incorporation allow for the payment of dividends by resolution of the Board of Directors without requiring the resolution of the General Meeting of Shareholders and provide for a record date for the year-end dividend of March 31 and for the interim dividend of September 30 each year as well as allowing for the payment of dividends with the record date to be determined In fiscal 2011 management determined to maintain a consistent dividend payment despite booking a consolidate net loss stemming from extraordinary losses caused by factors including the downsizing of the Finetech Business The Company distributed an interim dividend payment of yen2 per share (compared with the yen2 per share interim dividend payment in fiscal 2010) and year-end dividend payment of yen2 per share (compared with the yen2 per share year-end dividend payment in fiscal 2010) for a full-year dividend of yen4 per share (compared with a full-year dividend payment of yen4 per share in fiscal 2010)
BUSINESS RISKSBusiness risks related to business conditions financial status and other factors that may potentially have significant influence on investor decisions include the following
1 Economic Conditions Affecting Product DemandThe Topcon Group conducts business in three segments the Positioning Business the Eye Care Business and the Finetech Business Demand for the Grouprsquos products is influenced by the trends in each of the markets in which the segments conduct business (the construction ophthalmic and semiconductor markets etc) A significant fluctuation in one or more of these markets may thus impact the business results and financial position of the Group The Group maintains a high ratio of overseas sales selling products in Japan as well as around the world including the United States Europe China and other Asian countries Therefore economic conditions in these countries may also impact the business results and financial position of the Group
2 Overseas Business Development The Group conducts a wide range of business activities overseas including exporting products and undertaking local production at overseas sites Accordingly a deterioration in overseas political or economic conditions foreign trade or foreign currency restrictions revisions to laws and regulations or taxation systems worsening public security or the occurrence of terrorist actions war or natural disasters may obstruct business activities overseas and impact the business results and financial position of the Group
3 Intensifying Competition (Price and Non-price Competition)
Competitors supplying products that are similar to the Grouprsquos products are present in each business segment The Group strives to achieve early introduction of new products to the market develop new technologies reduce costs and other activities to create a competitive advantage for the Group However delayed development of new products protracted development of new technologies sharp rises in raw material costs and other factors may weaken the Grouprsquos growth potential or profitability and thus may impact the business results and financial position of the Group
4 Fluctuations in Interest Rates Foreign Exchange Rates or Other Conditions in Financial Markets
The Group maintains a high ratio of overseas sales in its total consolidated sales Since this presents exposure to foreign exchange rate fluctuation risk the Group uses
40
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
CAPITAL EXPENDITURES
5000
4000
3000
2000
1000
0
(Millions of yen)
103093083 113 123
forward exchange contracts to maintain an appropriate level of foreign exchange hedging within the scope of actual demand Despite these precautions severe fluctuations in foreign exchange markets may impact the business results and financial position of the Group The Group also borrows funds from financial institutions which presents exposure to interest rate fluctuation risk Changes in financial market conditions could lead to sharp rises in interest rates Such fluctuations could raise the level of the Grouprsquos interest rate payments which may impact the business results and financial position of the Group
5 Fund ProcurementThe Group procures the necessary funds by taking out loans from financial institutions The Grouprsquos debt-to-equity ratio amounted to 18 times at the end of the consolidated fiscal year under review Deteriorating conditions in the financial markets or in the Grouprsquos operating performance could prevent the Group from continuing existing loans or taking out new loans Such conditions may impact the financial status and operating performance of the Group The Group also enters into syndicated loan contracts with financial institutions that require the Group to commit to a financial covenant In the event that the Group should fail to meet any conditions of the covenant and fail to obtain agreement from a significant number of lenders that they will not exercise the right of forfeiture of the benefit of time then the Group would forfeit the benefit of time with respect to all of the obligations associated with the syndicated loan contracts Such an event may impact the business results and financial position of the Group
Syndicated loan financial covenants (summary) 1 At the end of each fiscal year the net asset amount minus the foreign
currency translation adjustment recorded in the consolidated balance sheets must be higher than 75 of the net asset amounts recorded in the consolidated balance sheets for fiscal year 2009
2 At the end of each fiscal year the consolidated statements of income must not show an operating loss for two consecutive terms
6 New Business StrategiesThe Group diligently considers initiatives for new businesses for the future growth of the Group However new businesses necessarily present various uncertainties Failing to develop such businesses according to plan may impact the business results and financial position of the Group
7 Fixed AssetsThe Group maintains property plant and equipment and intangible assets such as goodwill assumed with corporate acquisitions Decreases in the asset value of these noncurrent assets due to declining profitability
falling market prices and other factors could lead to impairment losses or loss on sale at the time of sale Such conditions may impact the financial status and operating performance of the Group
8 Procurement of Materials and Other ItemsThe manufacturing activities of the Group in some cases require the use of special materials for which suppliers are very limited or for which it would be difficult to change suppliers Delays or disruptions in supply of such materials could lead to a rise in purchase costs and production delays which may impact the business results and financial position of the Group
9 Product Quality IssuesThe Group puts every effort into quality control to maintain an optimal quality according to the features of its products However it is virtually impossible to eliminate the possibility that unforeseen conditions could cause quality issues that result in a product recall litigation or other action Such an event may impact the business results and financial position of the Group
10 Intellectual Property RightsThe Group utilizes a wide range of intellectual property rights in its research and recognizes these rights are the property of the Group or are being used under a legal licensing agreement However the possibility exists that a third party may file an infringement litigation concerning intellectual property rights against the Group In the event a dispute over intellectual property rights occurs it may impact the business results and financial position of the Group
11 Laws and RegulationsSome of the products that the Group manufactures for the Eye Care Business are medical devices subject to the Pharmaceuticals Affairs Act in Japan and laws and regulations concerning medical devices in the various countries in which the Group conducts business Changes in regulations may impact the business results and financial position of the Group
12 Natural Disasters and AccidentsUnforeseen natural disasters or man-made disasters including earthquakes acts of terrorism wars and epidemics that occur in regions where the Group conducts business can cause human casualty property damage suspension of business activities to the Group Such an event may impact the business results and financial position of the Group
41
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
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RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
42
CONSOLIDATED BALANCE SHEETSTopcon Corporation and Consolidated SubsidiariesAs of March 31 2011 and 2012
20113 20123 20123
Assets
Current assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property plant and equipment
Building and structures net
Machinery equipment and vehicles net
Land
Construction in progress
Other net
Total property plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets
yen 13927
35542
12759
7187
5198
4519
3823
(1387)
81571
5516
2741
2957
185
2053
13455
11261
5934
17196
4686
1452
3836
2745
(127)
12593
43245
yen 124816
yen 13775
35871
11744
4215
5638
4784
3920
(1743)
78207
5632
2040
2894
170
2111
12850
10048
8296
18344
3005
1327
4561
2566
(85)
11374
42569
yen 120777
$ 167608
436448
142899
51288
68606
58214
47700
(21217)
951548
68528
24831
35217
2076
25691
156345
122261
100937
223198
36568
16151
55498
31222
(1043)
138397
517941
$ 1469490
Millions of yen
Note We prepare and present our consolidated financial statements based on the Japanese yen In addition we indicate US dollar amounts based on an exchange rate of yen8219US$ as of March 31 2012 for our readersrsquo convenience It should be added that this conversion rate does not indicate that the yen-denominated figures presented in these consolidated financial statements can be converted at the same rate
Thousands ofUS dollars
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
43
20113 20123 20123
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for product warranties
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directorsrsquo retirement benefits
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholdersrsquo equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholdersrsquo equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
yen 13536
28223
5283
1194
708
2963
51910
27077
353
6937
59
1239
35667
87577
10297
14711
16799
(56)
41751
(299)
2
(4545)
(4843)
329
37238
yen 124816
yen 12206
33625
4996
627
827
3091
55375
25256
3
5802
30
1243
32337
87713
10297
14711
12717
(56)
37669
(246)
(0)
(4755)
(5002)
397
33064
yen 120777
$ 148518
409121
60789
7640
10062
37619
673752
307298
39
70604
376
15129
393448
1067200
125294
178990
154731
(692)
458324
(2994)
(11)
(57861)
(60867)
4831
402289
$ 1469490
Millions of yenThousands ofUS dollars
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
44
CONSOLIDATED STATEMENTS OF INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net sales
Cost of sales
Gross Profit
Selling general amp administrative expenses
Operating Income
Non-operating income
Interest income
Dividends income
Equity in earning of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of subsidiaries and affiliatesrsquo stocks
Gain on sales of land
Total extraordinary income
Extraordinary loss
Loss on business withdrawal
Special retirement expenses
Loss on sales of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on liquidation of subsidiaries and affiliates
Loss on transfer of business
Loss on valuation of investment securities
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Total extraordinary losses
Loss before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Loss before minority interests
Minority interests in income
Net loss
yen 102470
61408
41061
39261
1799
68
54
59
628
810
1207
mdash
431
362
2001
608
mdash
mdash
mdash
mdash
mdash
69
mdash
198
281
43
28
621
(12)
1013
96
1109
(1122)
166
yen (1288)
yen 98834
60716
38118
36037
2080
74
37
mdash
458
571
1194
130
397
462
2185
467
605
325
931
4809
701
282
158
55
mdash
mdash
mdash
6007
(4608)
613
(1540)
(927)
(3681)
5
yen (3686)
$ 1202513
738731
463782
438465
25316
910
461
mdash
5581
6953
14538
1584
4836
5626
26584
5685
7369
3962
11332
58521
8532
3442
1926
670
mdash
mdash
mdash
73093
(56076)
7459
(18746)
(11287)
(44788)
63
$ (44851)
Millions of yenThousands ofUS dollars
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
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This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Millions of yen
Loss before minority interests
Other comprehensive income Valuation difference on available-for-sales securities Deferred gains or losses on hedges Foreign currency translation adjustments Comprehensive income of affiliates accounted for by the equity method attributable to the CompanyTotal other comprehensive income Comprehensive incomeComprehensive income attributable to Shareholders of the Company Minority shareholders
yen (1122)
(589) 8 (1117)
0 (1698) (2820)
(3207) 387
yen (3681)
53 (3) (186)
(15) (151) (3832)
(3846) 13
$ (44788)
651 (44) (2266)
(188) (1847) (46635)
(46794) 158
Thousands ofUS dollars
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
Millions of yen
Thousands of US dollars
Balance at the beginning of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Balance at the end of fiscal 2011
Changes of items during the period
Dividends from surplus
Net loss
Purchase of treasury stock
Other
Net change of items other than shareholdersrsquo equity
Total changes of items during the period
Balance at the end of fiscal 2012
Capitalstock
Capitalstock
Shareholdersrsquo equity
Shareholdersrsquo equity
Accumulated other comprehensive income
Accumulated other comprehensive income
Capitalsurplus
Capitalsurplus
Retainedearnings
Retainedearnings
Treasurystock
Treasurystock
Totalshareholdersrsquo
equity
Totalshareholdersrsquo
equity
Valuationdifference on available-for-
sale securities
Valuationdifference on available-for-
sale securities
Deferredgains or
losses on hedges
Deferredgains or
losses on hedges
Foreigncurrency
translation adjustment
Foreigncurrency
translation adjustment
Total accumu-lated other
comprehensive income
Total accumu-lated other
comprehensive income
Minorityinterests
Minorityinterests
Totalnet assets
Totalnet assets
yen 10297
mdash
yen 10297
yen 10297
yen 14711
mdash
yen 14711
yen 14711
yen 18461
(370)
(1288)
(3)
(1662)
yen 16799
(370)
(3686)
(24)
(4081)
yen 12717
yen (56)
(0)
(0)
yen (56)
(0)
(0)
yen (56)
yen 43414
(370)
(1288)
(0)
(3)
(1662)
yen 41751
(370)
(3686)
(0)
(24)
(4081)
yen 37669
yen 289
(589)
(589)
yen (299)
53
53
yen (246)
yen (5)
8
8
yen 2
(3)
(3)
yen (0)
yen (3207)
(1338)
(1338)
yen (4545)
(209)
(209)
yen (4755)
yen (2923)
(1919)
(1919)
yen (4843)
(159)
(159)
yen (5002)
yen 1198
(868)
(868)
yen 329
67
67
yen 397
yen 41689
(370)
(1288)
(0)
(3)
(2787)
(4450)
yen 37238
(370)
(3686)
(0)
(24)
(92)
(4174)
yen 33064
$ 125294
$ 125294
$ 178990
$ 178990
$ 204394
(4507)
(44851)
(303)
(49663)
$ 154731
$ (689)
(2)
(2)
$ (692)
$ 507989
(4507)
(44851)
(2)
(303)
(49665)
$ 458324
$ (3646)
651
651
$ (2994)
$ 32
(44)
(44)
$ (11)
$ (55310)
(2550)
(2550)
$ (57861)
$ (58924)
(1942)
(1942)
$ (60867)
$ 4013
817
817
$ 4831
$ 453078
(4507)
(44851)
(2)
(303)
(1124)
(50789)
$ 402289
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
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2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
46
CONSOLIDATED STATEMENTS OF CASH FLOWSTopcon Corporation and Consolidated SubsidiariesFor the fiscal years ended March 31 2011 and 2012
20113 20123 20123
Net cash provided by (used in) operating activities Loss before income taxes and minority interests Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Loss on retirement of property plant and equipment Loss (gain) on sales of property plant and equipment Loss (gain) on valuation of investment securities Loss (gain) on sales of investment securities Equity in (earnings) losses of affiliates Loss on withdrawal from business Extra retirement payment Increase (decrease) in provision for retirement benefits
Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accrued expenses Other net Subtotal Interest and dividends income received Interest expenses paid Payments for extra retirement payments Income taxes paid Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property plant and equipment Proceeds from sales of property plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of investments in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in subsidiaries Proceeds from transfer of business Payments for transfer of business Payments of long-term loans receivable Collection of long-term loans receivable Other net Net cash provided by (used in) investing activitiesNet cash provided by (used in) financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sales and leaseback Repayments of finance lease obligations Purchase of treasury stock Cash dividends paid Proceeds from stock insurance to minority shareholders Cash dividends paid to minority shareholders Net cash provided by (used in) financing activitiesEffect of exchange rate change on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period
yen (12) 3689 1596 (54) (122) 1207 173 (32) 44 20 (59) mdash mdash (125) (1973) (3741) (135) 1769 (420) (993) 832 176 (1221) mdash (721) (934)
(192) 192 (1899) 134 (857) (2) 206
mdash (159) 1016 (5141) (15) 20 (271) (6969)
4109 15000 (13615) mdash (177) (0) (370) mdash (184) 4761 (296) (3439) 17209 yen 13770
yen (4608) 3115 1660 81 (112) 1194 191 (270) 27 (223) 130 4809 701 (1134) (882) (815) 417 (987) (141) (223) 2929 145 (1184) (701) (1142) 47
(304) 289 (2198) 600 (2229) (496) (950)
(47) (15) mdash mdash (0) 13 (184) (3622)
3978 3500 (3738) 301 (149) (0) (370) 5 (59) 3467 (55) (163) 13770 yen 13606
$ (56076) 37902 20200 993 (1370) 14538 2332 (3296) 337 (2722) 1584 58521 8532 (13801) (10735) (9927) 5083 (12012) (1718) (2721) 35642 1776 (14414) (8532) (13899) 572
(3702) 3521 (26751) 7306 (27124) (6037) (11569)
(583) (183) mdash mdash (6) 166 (2248) (44073)
48403 42584 (45481) 3663 (1813) (2) (4507) 65 (727) 42184 (676) (1992) 167541 $ 165549
Millions of yenThousands ofUS dollars
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
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This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
Number ofShares Issued and
Outstanding
92688342
Treasury Stocks
007
Individuals and Others
1822
FinancialInstitutions
1699
DomesticCompanies
3767
Foreign Investors
2686
Securities Firms
016
(Thousands)
(Yen)
Trading Volume
Share Price
201003 201103 201203
8000
6400
4800
3200
1600
0
800
650
500
350
200
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
47
CORPORATE PROFILE AND STOCK INFORMATION(As of March 31 2012)
CORPORATE PROFILE
Corporate Name TOPCON CORPORATION
Headquarters 75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Established September 1 1932
Paid in Capital yen10297 million
Business Outline Smart Infrastructure (Surveying instruments 3D measurement
Mobile mapping system) Positioning (GPS Machine control system Precision
agriculture) Eye Care (Ophthalmic instruments Optometric
instruments)
Topcon Group 11 (Domestic) 52 (Overseas)
Employees 4359 (Consolidated) 1002 (Non-consolidated)
Number of Authorized Shares 160000000
Number of Shares Issued and Outstanding 92688342
Number of Shareholders 16875
Stock Exchange Listings Tokyo Stock Exchange
Securities Code 7732
Number of Shares per unit 100
Transfer Agent for Sumitomo Mitsui Trust Bank Limitedcommon stock 1- 4 -1 Marunouchi Chiyoda-ku Tokyo Japan
Ordinary General Meeting Juneof Shareholders
MAJOR SHAREHOLDERS (As of March 31 2012)
Number of shares held are rounded down to the hundred and percentage of shares held are rounded down to the second decimal places
Number of shares Percentage of Shareholder held (Hundreds) total shares issued ()
Toshiba Corporation 325668 3513
TAIYO FUND LP 151493 1634
State Street Bank and Trust Company 44093 475
The Dai-ichi Life Insurance Co Ltd 40380 435
The Master Trust Bank of Japan Ltd 20160
217 (Trust Account)
TAIYO BLUE PARTNERS LP 15339 165
Sumitomo Mitsui Banking Corporation 14644 158
The Bank of Tokyo-Mitsubishi UFJ Ltd 14007 151
Mitsui Sumitomo Insurance Co Ltd 12038 129
Japan Trustee Services Bank Ltd (Trust Account) 11947 128
BREAKDOWN BY TYPE OF SHAREHOLDERS
SHARE PRICE AND TRADING VOLUME
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
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2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
48
JAPANESE AND OVERSEAS GROUP COMPANIES(As of March 31 2012)
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
JAPANSokkia Topcon Co Ltd Kanagawa Production of smart infrastructure equipment 400 million 10000
Topcon Sokkia Positioning Tokyo Sales of smart infrastructure equipment 269 million 10000
Japan Co Ltd
Topcon Medical Japan Co Ltd Tokyo Sales of eye care equipment 100 million 10000
Topcon Technohouse Corporation Tokyo Sales of other equipment 55 million 10000
Sapporo Topcon Sales Co Ltd Hokkaido Sales of smart infrastructure equipment 20 million 4000
Topcon Yamagata Co Ltd Yamagata Production of smart infrastructure eye care and other equipment 371 million 10000
Optonexus Co Ltd Fukushima Production of smart infrastructure eye care and other equipment 263 million 10000
Fukushima Sokkia Co Ltd Fukushima Production of smart infrastructure equipment 200 million 10000
Topcon Service Co Ltd Tokyo After sales services for smart infrastructure
and eye care equipment 57 million 10000
Topcon GS Corporation Tokyo Overall services (product sales cleaning security facilities
maintenance etc) for Topcon Group companies 20 million 10000
NORTH AMERICA
Topcon America Corporation New Jersey USA Holding company of Topcon Positioning Systems Inc
and Topcon Medical Systems Inc etc USD 85000 thousand 10000
Topcon Positioning Systems Inc California USA Development production and sales of
positioning equipment USD 58905 thousand 10000
Topcon Medical Systems Inc New Jersey USA Development production and sales of
eye care equipment USD 16094 thousand 10000
Topcon Medical Laser Systems Inc California USA Development production and sales
of eye care equipment USD 10000 thousand 10000
Sokkia Corporation Kansas USA Sales of positioning equipment USD 15979 thousand 10000
Topcon Canada Inc Quebec Canada Sales of eye care equipment CAD 3872 thousand 10000
EUROPEAFRICA
Topcon Europe BV
Capelle The Netherlands Holding company of Topcon Europe Positioning BV
and Topcon Europe Medical BV etc EUR 5437 thousand 10000
Topcon Europe Positioning BV Capelle The Netherlands Sales of positioning equipment EUR 18 thousand 10000
Topcon Europe Medical BV Capelle The Netherlands Development and sales of eye care equipment EUR 18 thousand 10000
Topcon Deutschland GmbH Willich Germany Sales of positioning and eye care equipment EUR 2812 thousand 10000
Ibs GmbH Lasertechnik Hamburg Germany Sales of positioning equipment
EUR 25 thousand 10000
Vermessungs- und Baugerate
Topcon SARL Clichy Cedex France Sales of positioning and eye care equipment EUR 1372 thousand 10000
Topcon Espantildea SA Barcelona Spain Sales of eye care equipment EUR 961 thousand 10000
Topcon Positioning Iberia SL
Madrid Spain Holding company of Topcon Positioning Spain SL
and Topcon Positioning Canarias SL etc USD 0 thousand 10000
Topcon Positioning Spain SL Madrid Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Canarias SL Santa Cruz de Tenerife Spain Sales of positioning equipment USD 0 thousand 10000
Topcon Positioning Portugal LDA Lavos Portugal Sales of positioning equipment USD 0 thousand 10000
Topcon Scandinavia AB Molndal Sweden Sales of positioning and eye care equipment SEK 5250 thousand 10000
Topcon (Great Britain) Ltd Newbury UK Sales of positioning and eye care equipment GBP 2500 thousand 10000
Figures of less than one unit are rounded down
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
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2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
49
CapitalInvestment Percentage of CountryRegion Core Businesses in Capital Voting Rights
Topcon Polska Sp Zoo Warszawska Poland Sales of eye care equipment PLN 1330 thousand 10000
Tierra SpA Torino Italy Development production and sales of
positioning equipment USD 2 thousand 5010
Topcon InfoMobility Srl Modena Italy Development production and sales of
positioning equipment EUR 60 thousand 4800
GEOTOP srl Ancona Italy Sales of positioning equipment EUR 46 thousand 3500
Sokkia BV Capelle The Netherlands Sales of positioning equipment EUR 10373 thousand 10000
Sokkia NV Brussels Belgium Sales of positioning equipment EUR 198 thousand 10000
DynaRoad Oy Helsinki Finland Development and sales of positioning equipment EUR 14 thousand 5000
KEE Technologies Africa (Pty) Ltd Johannesburg South Africa Sales of positioning equipment ZAR 9 thousand 10000
ASIAOCEANIAMIDDLE EASTTopcon Singapore Holdings
Alexandra Terrace Singapore Holding company of Topcon Singapore Positioning
Pte Ltd Pte Ltd and Topcon Singapore Medical Pte Ltd USD 1121 thousand 10000
Topcon Singapore Positioning Holding company of Topcon Singapore Positioning
Pte Ltd Alexandra Terrace Singapore Sales Pte Ltd and Sokkia Singapore Positioning USD 3000 thousand 10000
Sales Pte Ltd
Topcon Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Singapore Medical Pte Ltd Alexandra Terrace Singapore Sales of eye care equipment USD 4000 thousand 10000
Sokkia Singapore Positioning Alexandra Terrace Singapore Sales of smart infrastructure equipment USD 1000 thousand 10000
Sales Pte Ltd
Topcon Instruments (Malaysia) Kuala Lumpur Malaysia
Sales of smart infrastructure Sdn Bhd and eye care equipment
MYR 6600 thousand 10000
Topcon Instruments (Thailand) Bangkok Thailand
Sales of smart infrastructure THB 19000 thousand 4900
Co Ltd and eye care equipment
Topcon Sokkia India Pvt Ltd Noida India Sales of smart infrastructure equipment INR 7500 thousand 10000
Sokkia Korea Co Ltd Seoul Korea Sales of smart infrastructure equipment KRW 2041700 thousand 10000
Topcon Optical (HK) Ltd Hong Kong China Sales of smart infrastructure eye care and
other equipment HKD 24251 thousand 10000
Topcon (Beijing) Opto-Electronics Beijing China
Development production and sales of Development Corporation smart infrastructure and eye care equipment
CNY 33108 thousand 7500
Topcon Optical (Dongguan) Dongguan China
Production and sales of smart infrastructure Technology Ltd eye care and other equipment
USD 12000 thousand 9000
Topcon HK (BD) Ltd Chittagong Bangladesh Production of other equipment HKD 5265 thousand 9000
TPS Australia Holdings Pty Ltd South Australia Australia Holding company of Topcon Precision Agriculture Pty Ltd
and Topcon Positioning Systems (Australia) Pty Ltd USD 10901 thousand 10000
Topcon Precision Agriculture South Australia Australia
Development production and sales of Pty Ltd positioning equipment
USD 10901 thousand 10000
Topcon Positioning Systems Queensland Australia
Development production and sales of (Australia) Pty Ltd positioning equipment
USD 0 thousand 10000
Topcon Positioning Middle East Dubai UAE Sales of smart infrastructure equipment USD 1089 thousand 10000
and Africa FZE
TOP
CO
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OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan
TOP
CO
N C
OR
PO
RA
TIO
N A
NN
UA
L RE
PO
RT
2012
This report was printed with attention to minimizing environmental impact by using ink manufactured from vegetable oil
TOPCON CORPORATION75-1 Hasunuma-cho Itabashi-ku Tokyo 174-8580 Japan
Corporate Communication Dept IR AffairsTEL +81-3-3558-2532 FAX +81-3-3558-9141URL httpwwwtopconcojp
Printed in Japan