Consolidated Financial Results

Transcription

1 May 12, 2011 Consolidated Financial Results Fiscal Year ending March 31, 2011 April 1, 2010 March 31, 2011 Konica Minolta Holdings, Inc. Stock exchange listings: Tokyo, Osaka (First Sections) Local securities code number: 4902 URL: Listed company name: Konica Minolta Holdings, Inc. Representative: Masatoshi Matsuzaki, President and CEO Inquiries: Yuji Suzuki, General Manager, Corporate Communications & Branding Division Telephone number: (81) Scheduled date for Ordinary General Meeting of Shareholders: June 22, 2011 Scheduled date for dividends payment: May 30, 2011 Scheduled date for submission of securities report: June 23, 2011 Availability of supplementary information: Organization of financial result briefing: Yes Yes (for institutional investors) (Units of less than 1 million yen have been omitted.) 1. Overview of performance (From April 1, 2010 to March 31, 2011) (1) Business performance Percentage figures represent the change from the same period of the previous year. Fiscal years ended March 31 Net sales Operating income Ordinary income Net income , % 40, % 33, % 25, % , % 43, % 40, % 16, % Note: Comprehensive income Fiscal year ended March 31, 2011: 16,267 million (8.4%) Fiscal year ended March 31, 2010: 15,007 million ( - %) Fiscal years ended March 31 Net income per share Net income per share (after full dilution) yen yen yen yen Fiscal years ended March 31 Net income to shareholders equity Ordinary income to total asset Operating income to net sales % 3.9 % 5.1 % % 4.6 % 5.5 % Note: Equity in profit (loss) of unconsolidated subsidiaries and affiliates: Fiscal year ended March 31, 2011: 112 million Fiscal year ended March 31, 2010: 81 million 1

2 (2) Financial position As of March 31 Total assets Net assets Equity ratio (%) Net assets per share , , % yen , , % yen Note: Shareholders equity As of March 31, 2011: 427,647 million As of March 31, 2010: 419,535 million (3) Cash flows Cash and cash Fiscal years ended Operating activities Investing activities Financing activities equivalents balance March 31 at the end of period ,957 (44,738) (12,928) 175, ,377 (40,457) (43,803) 164, Dividends per share [Yen] Dividends per share Fiscal years ended March 31 1Q 2Q 3Q Year-end Total annual (forecast) Fiscal years ended March 31 Total dividends (annual) [millions of yen] Dividend pay-out ratio (consolidated) [%] Net asset-to-dividend ratio (consolidated) [%] , , (forecast) 39.8 Note: The forecast annual dividend is stated above, but the forecast dividend at the ends of quarters and the forecast year-end dividend have yet to be determined. 2

3 3. Consolidated results forecast for fiscal year ending March 31, 2012 (From April 1, 2011 to March 31, 2012) Percentage figures for the full year represent the change from the previous fiscal year, while percentage figures for the six months period represent the change from the same period of the previous year. Net sales Operating income Ordinary income Net income Net income per % % % % share Six months Full-year 810, , , , yen Note: We are not forecasting results for the first half of the fiscal year. 4. Other (1) Changes in status of material subsidiaries during the fiscal year under review (Changes to specified subsidiaries accompanying the additional consolidation or removal from consolidation of companies): None (2) Changes to consolidated financial statement principles, preparation processes, disclosure methods, etc. (Description of changes to important items fundamental to financial statement preparation) a. Changes accompanying amendment of accounting principles: Yes b. Changes other than a. : Yes Note: Please refer to (6) Basis of presenting consolidated financial statements and (7) Changes of important items regarding the basis of presenting consolidated financial statements in the section 4. CONSOLIDATED FINANCIAL STATEMENTS on page 28 for details. (3) Number of outstanding shares(common stock) a. Outstanding shares at period-end(including treasury stock) As of March 31, 2011: 531,664,337 shares As of March 31, 2010: 531,664,337 shares b. Treasury stock at period-end As of March 31, 2011: As of March 31, 2010: 1,436,447 shares 1,464,883 shares c. Average number of outstanding shares Fiscal years ended March 31, 2011: Fiscal years ended March 31, 2010: 530,222,585 shares 530,260,641 shares 3

4 [Reference] Non-consolidated financial results 1. Overview of performance (From April 1, 2010 to March 31, 2011) (1) Business performance Percentage figures represent the change from the same period of the previous year. Fiscal years ended March 31 Operating revenue Operating income Ordinary income Net income , % 887 -% 1,297 -% 21,018 -% , % (9,768) % (8,775) % (4,586) % Fiscal years ended March 31 Net income per share Net income per share (after full dilution) yen yen 2010 (8.65) yen - yen Note: Net income per share (after full dilution) of fiscal year ended March 31, 2010 is not written, as the Group recorded a net loss. (2) Financial position As of March 31 Total assets Net assets Equity ratio (%) Net assets per share , , % yen , , % yen Note: Shareholders equity As of March 31, 2011: 268,241 million As of March 31, 2010: 255,188 million Implementation of Audit Procedures This Consolidated Financial Results is exempt from audit procedures under the Financial Instruments and Exchange Act. Audit procedures for the financial statements are being performed when the Consolidated Financial Results are announced. Explanation of Appropriate Use of Performance Projections and Other Special Items (Note on forward-looking statements) This document contains projections of performance and other projections that were made based on information currently available and certain assumptions judged to be reasonable. There is a possibility that diverse factors may cause actual performance, etc., to differ materially from the projections. Please see the 3. Outlook for the Fiscal Year Ending March 31, 2012 in the section 1. OPERATING RESULTS on page 11 for more information on points to be remembered in connection with the use of projections. (How to obtain supplementary information and information on a financial results briefing) The Group will hold a financial results briefing for institutional investors on Thursday, May 12, Descriptions at the briefing and presentation slides to be used at the briefing will be posted on the website of the Group immediately after the briefing. 4

5 >>> INDEX <<< 1. CONSOLIDATED OPERATING RESULTS 6 (1) Business Performance Analysis 6 (2) Financial Position 12 (3) Basic policy regarding profit distribution, dividends for the fiscal year under review, and 14 projected dividends for the current fiscal year 2. GROUP OVERVIEW MANAGEMENT POLICY 16 (1) Basic management policy 16 (2) Medium-to long-term management strategies and pending issues CONSOLIDATED FINANCIAL STATEMENTS 19 (1) Consolidated Balance Sheets 19 (2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income 21 Consolidated Statements of Income 21 Consolidated Statements of Comprehensive Income 22 (3) Consolidated Statements of Changes in Net Assets 23 (4) Consolidated Statements of Cash Flow 26 (5) Notes Regarding Going Concern Assumptions 28 (6) Basis of presenting consolidated financial statements 28 (7) Changes of important items regarding the basis of presenting consolidated financial statements 32 (8) Important notes in the basis of presenting consolidated financial statements 33 Consolidated balance sheets items 33 Consolidated statements of income items 33 Consolidated statements of comprehensive income 34 Consolidated statements of changes in shareholder s equity items 34 Segment Information 35 Tax-effect accounting 43 Financial instruments 45 Securities 51 Retirement Benefit Plan 53 Per Share Information 55 Important Subsequent Events 56 Omission of Disclosure 56 5

6 1. OPERATING RESULTS (1)Business Performance Analysis 1. Overview of Performance Net sales Gross profit Operating income Ordinary income Income before income taxes and minority interests Net income [Billions of yen] Fiscal year ended March Increase (Decrease) (26.5) (9.9) (3.9) (7.6) (7.9) % -2.7% -9.0% -18.8% -22.1% 53.0% Net income per share [yen] % Capital expenditure Depreciation R & D expenses (6.0) % -9.9% 6.0% Free cash flow (49.7) -68.2% Number of employees [persons] 35,204 36,048 (844) -2.3% Exchange rates [yen] US dollar Euro (7.14) (18.04) -7.7% -13.8% Looking at economic circumstances in Japan and overseas, economies in both the United States and Europe continued to recover moderately, despite uncertain factors, reflecting governments successful pump-priming measures and monetary policies. Asian economies continued to expand steadily overall, led by China and India. The Japanese economy recovered moderately in the first half thanks to the effect of economic measures, but the pace of the recovery slowed in the second half as the effect of economic measures came to a halt, and exports weakened. The unprecedented earthquake that hit the Pacific coast of the Tohoku region and other regions in March 2011 wrought enormous economic damage, disrupting supply chains that depended on production bases in the devastated areas and prompting concerns over electric power shortages. Seeing to use the major change in the business environment triggered by the global financial crisis in the autumn of 2008 was an opportunity to achieve stronger growth for the Konica Minolta Group, the Group adopted its Management Policy <09-10> in April The Group viewed this consolidated fiscal year, the second year of the Management Policy, as a return to growth and pursued an aggressive management approach that aims to achieve growth five to ten years from now. Specifically, the Group set, and focused on meeting, important challenges: (1) enhancing and expanding current businesses, (2) strengthening operations in Asian markets, and (3) accelerating establishment of new businesses. To enhance and expand current businesses, the Company launched new products in the bizhub series of MFPs (multi-functional peripherals), and established a global system for OPS (Optimized Print Services) in the Business Technologies Business. In the production printing field, the Company launched a new brand, the bizhub PRESS series, to increase sales in the digital printing market. Meanwhile, the Company integrated the graphic imaging section associated with commercial and digital printing, which were included in Medical & Graphic Imaging Business, into the Business Technologies Business and took steps to strengthen 6

7 its sales force in the businesses in Japan and overseas by concluding a cross distribution agreement with Eastman Kodak (based in the United States). In the Optics Business, the Company sought to expand TAC film for LCD polarizer and glass substrates for HDDs operations and increased production capabilities. In strengthening operations in Asian markets, the Company aimed to expand sales in the Chinese market, which continued to enjoy dynamic growth, launching new products and bolstering its sales force of dealers in the Business Technologies Business. In the Indian market, the companies set up sales subsidiaries in the Business Technologies Business and the Healthcare Business to expand sales of Konica Minolta products and services. Looking at the results of major businesses, in the Business Technologies Business, sales volumes of MFPs exceeded the results of the previous consolidated fiscal year, led by sales of new color and monochrome MFPs, as demand recovered moderately. The Company sought to stimulate demand in the digital printing market, launching new production printing products. As a result of the expansion of the range of products and the establishment of the OPS system, business for major global accounts increased steadily. For example, the Company concluded a contract with Allianz (based in Germany), a major international financial group, to manage the operation of the group s office machinery worldwide. However, since overseas sales account for over 80% of total sales in the Business Technologies Business, the business was very susceptible to the strong yen throughout this consolidated fiscal year. In the Optics Business, sales of glass substrates for HDDs and pickup lenses for Blu-ray Discs TM were weak overall, influenced by prolonged production adjustments that began at customers in the summer of In contrast, sales of TAC films, which ended production adjustments early, were solid. In the Healthcare Business, sales of digital medical input equipment rose from a year ago, but fell short of offsetting a decline in sales of film products. As a result, Konica Minolta s consolidated net sales for the fiscal year under review amounted to billion, a decrease of 3.3% year on year. Although the Group cut costs and expenses, operating income declined 9.0%, to 40.0 billion, reflecting a decline in profits associated with the decrease in sales and the effect of exchange rates. The yen had been very strong against the US dollar and euro since the beginning of the fiscal year under review. The adverse effect of exchange rates on net sales was 53.1 billion, and without it net sales rose 3.3% year on year. The effect on operating income was 20.9 billion. Without it, operating income increased 38.6%. Ordinary income slipped 18.8%, to 33.1 billion, reflecting a foreign exchange loss associated with the strong yen. After posting business structure improvement expenses and a loss on valuation of investment securities as extraordinary losses, income before income taxes and minority interests fell 22.1%, to 28.1 billion. With the application of tax effect accounting associated with the liquidation of a subsidiary of Photo Imaging Business, net income rose 53.0%, to 25.8 billion. The amount of damage caused, primarily in the Business Technologies Business and the Healthcare Business, by the Tohoku-Pacific earthquake that struck eastern Japan on March 11, 2011 was about 0.4 billion, which was posted as an extraordinary loss. 7

8 2. Overview by Segment Business Technologies Net sales - external Operating income Optics Net sales - external Operating income Healthcare Net sales - external Operating income Fiscal year ended March 31 [Billions of yen] Increase (Decrease) (1.1) (1.5) (6.9) (1.5) (19.3) (1.2) -0.2% -3.9% -5.1% -11.0% -18.6% -88.3% Business Technologies Business Office field: As demand for MFPs for offices gradually continued to recover in the Japanese market and major overseas markets, sales of the color MFPs and monochrome MFPs of the bizhub series, which focused on facilitating customers efforts to reduce TCO (total cost of ownership; denoting total costs for implementation, use, and maintenance of MFPs), were solid in the US market and major markets in Europe. As a result, sales volumes for the consolidated fiscal year under review rose from the previous year. The bizhub 184/164 series, which was launched as monochrome MFPs for emerging countries only, contributed to the expansion of market share, especially in the Chinese market. Production print field: The Company began marketing three new color products, bizhub PRESS C8000/C7000/C6000, in addition to the existing bizhub PRO series and started to develop a digital commercial printing field in earnest. With many inquiries for those new products in the US and European markets, sales volumes of color and monochrome machines rose from a year ago. Overall, our Business Technologies Business sought to boost sales of new products having enhanced market competitiveness in the office and the production printing fields in line with our genre-top strategy. It also started to provide Optimized Print Services (OPS), needs for which are rising in the market, on a global scale. To strengthen its IT services capability, the Company established an alliance with Getronics N.V. (headquartered in the Netherlands) in Europe in November It acquired All Covered Inc. of the United States in December As a result, net sales of the Business Technologies Business to outside customers stood at billion, on a par with the year-ago level. Operating income came to 37.4 billion, down 3.9% year on year. Excluding the adverse effects of exchange rates of 45.9 billion on sales and 16.7 billion on income, net sales and operating income rose 8.3% and 39.0%, respectively. 8

9 Optics Business Display materials field: Liquid crystal panel production started to recover in October 2010 after production adjustments that began in the summer of With the development of new VA-TAC films for increasing viewing angle (VA-TAC films) and the start of shipments of TAC films for IPS panels in the second half of the fiscal year, sales of VA-TAC films and thin plain TAC films, which are strengths of the Company, were solid. Overall sales volumes of TAC films rose from a year ago. Memory devices field: Sales volumes of pickup lenses for optical disks increased year on year, led by pickup lenses for Blu-ray DiscsTM. Sales volumes of glass substrates for HDDs also rose, led by high-density recording products, including 320GB. However, the growth was not as strong as originally anticipated, given the effects of prolonged production adjustments seen in the personal computer and digital home appliances industries since last summer. Image input/output components field: Sales volumes of lens units for digital cameras and video cameras rose year on year, but volumes for cell phones with cameras fell sharply partly as a result of weak sales of models equipped with products of the Company. Of our mainstay products, sales volumes of plain TAC films and VA-TAC films rose steadily as production adjustments at customers ended relatively early and as the Company took steps to expand sales. Sales volumes of glass substrates for HDDs were also solid. However, sales volumes of pickup lenses for optical disks were sluggish overall, reflecting prolonged production adjustments. Sales of lens units were also weak. As a result, net sales of the Optics Business to outside customers stood at billion, down 5.1% year on year. Operating income was 12.8 billion, declining 11.0%. Healthcare Business In the Healthcare Business, the Company continued to take steps to boost sales of Computed Radiography and Digital Radiography, including REGIUS MODEL 110/210, diagnostic workstations, network devices, and the service solution business to medical facilities in Japan and abroad. As a result, unit sales of digital input equipment in the REGIUS series exceeded the results of the previous fiscal year both in Japan and overseas markets. In contrast, sales of film products continued to decline, given a continued rise in the use of filmless equipment. The fiscal year under review was between seasons for new products, and earnings were influenced by falling prices of existing products and amounts for preliminaries, including development costs, as well as the effects of the appreciation of the yen. As a consequence, net sales to outside customers declined 18.6% year on year, to 84.9 billion. Operating income stood at 0.1 billion, down 88.3% year on year. 9

10 [Reference] Three months Business Performance (From January 1, 2011 to March 31, 2011) Net sales Gross profit Operating income Ordinary income Income before income taxes and minority interests Net income 4Q Mar/ Year-on-Year 4Q Mar/ [Billions of yen] Increase (Decrease) (13.0) (15.8) (11.0) (10.8) (6.6) % -15.0% -48.3% -49.8% -36.0% 90.6% Net income per share [yen] Capital expenditure Depreciation R & D expenses (2.6) (1.1) % -7.5% 12.2% Free cash flow Exchange rates [yen] US dollar Euro (8.36) (13.05) -9.2% -10.4% Three months Business Performance by Segment (From January 1, 2011 to March 31, 2011) Year-on-Year [Billions of yen] Business Technologies Net sales - external Operating income Optics Net sales - external Operating income Healthcare Net sales - external Operating loss 4Q Mar/ (0.4) 4Q Mar/ (0.0) Increase (Decrease) (3.5) (9.4) (3.7) (1.3) (5.4) (0.3) -2.4% -45.1% -10.9% -32.4% -19.5% - 10

11 3. Outlook for the fiscal year ended March 31, 2012 Looking at economic circumstances in Japan and abroad, the global economy is expected to continue to recover moderately, led by emerging economies such as China and India. However, there are concerns about risks such as high crude-oil prices associated with political uncertainty in the Middle East and North Africa and credit insecurity in parts of Europe. We expect there will be strong concern about a downturn in the Japanese economy for some time to come because of the effect of the Tohoku-Pacific earthquake, which wrought enormous damage to supply chains and power supply. In the Business Technologies Business, we expect that demand for production print products will expand moderately in both Japan and overseas markets and that in the office MFPs field, growth will be led by demand in emerging markets, although developed markets appear to be mature. In the Optics Business, there are concerns about the effect of production adjustments that could be prolonged in certain fields including personal computers, but demand for digital consumer electronics, including LCD TVs, is expected to grow overall. In the Healthcare Business, we expect demand for compact Computed Radiography will continue to expand, especially in the clinic market. Given this situation, we expect results for the fiscal year ending March 31, 2012 to be as follows: Since the Group does not have any production sites in areas affected by the Tohoku-Pacific earthquake, there have been no casualties among employees, and its production facilities have not been damaged. The production activities of the Group therefore have not been directly disrupted by the earthquake. However, we have factored in 13.0 billion in net sales and 5.0 billion in operating income as risks associated with possible disruption in the supply chains and limits on power supplies caused by the earthquake that can be calculated at the time of publication of the financial results. We will continue to gather and analyze information on reconstruction and will take appropriate action to minimize the effects of the earthquake on the Group s business activities. This forecast is an estimate on the assumption that the turmoil attributable to the earthquake will end in the middle of the year. However, the situation is changing daily and for this reason we are not announcing here a results forecast for the first half of the fiscal year. We assume exchange rates of 85 yen against the US dollar and 115 yen against the euro. [Billions of yen] March 2012 forecast March 2011 Increase (Decrease) Net sales Operating income Ordinary income Net income (5.8) Note: The above operating performance forecasts are based on future-related suppositions, outlooks, and plans at the time this report was released, and they involve risks and uncertainties. It should be noted that actual results may differ significantly from these forecasts due to various important factors, such as changes in economic conditions, market trends, and currency exchange rates. 11

12 (2) Financial Position 1. Analysis of Financial Position Fiscal year ended March Increase (Decrease) Total assets [Billions of yen] (20.3) Net assets [Billions of yen] Net assets per share [yen] Equity ratio [%] At fiscal year end, total assets amounted to billion, down 20.3 billion compared with the end of the previous fiscal year. Deferred tax assets rose, while notes and accounts receivable-trade declined. Property, plant and equipment and intangible assets fell, reflecting the curbing of capital expenditure and depreciation and amortization. Interest-bearing debt slipped 4.7 billion from the end of the previous fiscal year, to billion with an increase in corporate bonds more than offset by repayments of loans payable. Despite a decrease in foreign currency translation adjustments because of the appreciation of the yen, net assets increased 8.2 billion from the end of the previous fiscal year, to billion, reflecting a rise in retained earnings primarily due to the posting of 25.8 billion in net income. Net assets per share came to , and the shareholders equity ratio rose 2.1 percentage points from the end of the previous fiscal year to 50.6%. 2. Cash Flows March Increase (Decrease) [Billions of yen] Cash flows from operating activities (45.4) Cash flows from investing activities (44.7) (40.4) (4.2) Total (Free cash flow) (49.7) Cash flows from financing activities (12.9) (43.8) 30.8 During the fiscal year under review, net cash provided by operating activities was 67.9 billion, while net cash used in investing activities, mainly associated with capital investment, totaled 44.7 billion. As a result, free cash flow (the sum of operating and investing activities) was an inflow of 23.2 billion. Net cash used in financing activities was 12.9 billion. In addition, the effect of exchange rate changes increased cash and cash equivalents by 0.7 billion. As a result, cash and cash equivalents at the end of the fiscal year under review stood at billion, rising 11.0 billion from the consolidated previous fiscal year-end. Cash flows from operating activities Net cash provided by operating activities reached 67.9 billion ( billion in the previous consolidated fiscal year). Although the Group reported income before income taxes and minority interests of 28.1 billion 12

13 and depreciation of 55.1 billion, these amounts were partly offset by a decrease in reserve for retirement benefits and pension plans of 8.3 billion chiefly due to special contributions of premiums in the first quarter, a decline in working capital of 3.9 billion, income taxes paid of 9.4 billion, and other factors. Cash flows from investing activities Net cash used in investing activities was 44.7 billion ( 40.4 billion in the previous fiscal year). Cash of 37.0 billion was mainly used for investments in molding for new products in the Business Technologies Business and in the acquisition of tangible fixed assets relating to the reinforcement of production capacities in the Optics Business, our strategic business. As a result, free cash flow (the sum of operating and investing activities) was an inflow of 23.2 billion ( 72.9 billion in the previous fiscal year). Cash flows from financing activities Net cash used in financing activities was 12.9 billion (net cash provided of 43.8 billion in the previous fiscal year), mainly reflecting 30.0 billion for new issue of bonds, 35.9 billion for repayments of loans payable and lease obligations, and 7.9 billion in dividend payments,. (Note) Amounts mentioned above do not include consumption taxes. [Cash flow indicators] March Shareholders equity ratio [%] Market price-based shareholders equity ratio [%] Debt redemption period [years] Interest coverage ratio Notes: Shareholders equity ratio: Shareholders equity / Total assets Market price-based shareholders equity ratio: Market capitalization / Total assets Debt redemption period: Interest-bearing debt / Cash flow from operating activities Interest coverage ratio: Cash flow from operating activities / Interest payments Market capitalization is calculated as the share price at period-end multiplied by the number of shares outstanding at period-end (excluding treasury stock). Net cash flow from operating activities figures are those stated in the consolidated statements of cash flows. Interest-bearing debt is all liabilities reflected on the consolidated balance sheets that are subject to interest payments. Interest payments are those stated in the consolidated statements of cash flows. Cash flow outlook for the fiscal year ending March 31, 2012 Konica Minolta projects that free cash flow, the net value of cash flows from operating and investing activities, will amount to an inflow of 8.0 billion. 13

14 (3) Basic policy regarding profit distribution, dividends for the fiscal year under review, and projected dividends for the current fiscal year 1. Basic policy regarding profit distribution The policy regarding the payment of dividends from retained earnings, etc. calls for the basic approach of making a comprehensive evaluation of consolidated performance and funding requirements to promote strategic investments in growth fields while seeking to sustain shareholder returns. As for a specific dividend target, the Group is aiming to sustain a dividend payout ratio of 25% or more over the medium to long term. With respect to the acquisition of treasury stock, the Group intends to make appropriate decisions by viewing it as a means of profit distribution while giving due attention to such factors as the Group s financial situation and stock price trends. 2. Dividends for the fiscal year under review and the current fiscal year In the consolidated fiscal year under review (fiscal year ended March 31, 2011), the Group continued to face a challenging situation across its businesses, affected by intensifying market competition, the appreciation of the yen, and production adjustments. However, after posting a tax effect associated with the liquidation of a photo imaging company which was terminating its business, net income achieved the initial forecast. Based on this situation, the Company will distribute a year-end dividend of 7.5 yen per share as planned, which combined with the interim dividend of 7.5 yen per share will bring the total annual dividend to 15.0 yen per share. With respect to dividends for the fiscal year ending March 31, 2012, given that the business environment demands prudence, the Group has yet to determine whether it will distribute interim dividends, but it does plan to distribute an annual dividend of 15.0 yen per share based on the outlook for the current fiscal year described above. *Figures given in the text as billions of yen have been rounded off to the nearest hundred million. 14

15 2. GROUP OVERVIEW The Group comprises the parent company, 89 consolidated subsidiaries, 17 unconsolidated subsidiaries, and 5 affiliates. A chart detailing the business structure follows. Konica Minolta Holdings, Inc. Business Technologies Business: 71 Optics Business: 8 (Consolidated Subsidiaries: 53 Unconsolidated Subsidiaries: 15 Affiliates: 3) (Consolidated Subsidiaries: 8) Production: 10 Production: 6 Konica Minolta Supplies Manufacturing Co., Ltd. Konica Minolta Opto Products Co., Ltd. Toyohashi Precision Products Co., Ltd. Konica Minolta Opto (DALIAN) Co., Ltd. (China) Konica Minolta Business Technologies Manufacturing (HK) Ltd. (Hong Kong) Konica Minolta Business Technologies (DONGGUAN) Konica Minolta Optical Products (SHANGHAI) Co., Ltd. (China) Konica Minolta Glass Tech Malaysia Sdn. Bhd. (Malaysia) Co., Ltd. (China) Other Companies: 2 Konica Minolta Business Technologies (WUXI) Co., Ltd. (China) Konica Minolta Opto, Inc. Other Companies: 5 Sales: 1 Konica Minolta Opto (SHANGHAI) Co., Ltd. (China) Konica Minolta Business Technologies, Inc. Healthcare Business: 13 (Consolidated Subsidiaries: 10, Unconsolidated Subsidiaries: 2, Affiliates: 1) Sales: 60 Konica Minolta Business Solutions Japan Co., Ltd. Production: 2 Konica Minolta Business Solutions U.S.A., Inc. (U.S.A) Konica Minolta Technoproducts Co., Ltd. Konica Minolta Business Solutions Europe GmbH (Germany) Other Companies: 1 Konica Minolta Business Solutions Deutschland GmbH (Germany) Konica Minolta Business Solutions (UK) Ltd. (U.K.) Konica Minolta Medical & Graphic, Inc. Konica Minolta Business Solutions France S.A.S. (France) Konica Minolta Business Solutions Australia Pty. Ltd. Sales: 10 (Australia) Konica Minolta Health Care Co., Ltd. Konica Minolta Business Solutions (CHINA) Co., Ltd. Konica Minolta Medical Imaging U.S.A., Inc. (U.S.A.) (China) Konica Minolta Medical & Graphic (SHANGHAI) Co., Ltd. (China) Other Companies: 52 Other Companies: 7 Sensing Business: 4 Other Businesses: 15 (Consolidated Subsidiaries: 4) (Consolidated Subsidiaries: 14 Affiliates: 1) Konica Minolta Sensing, Inc. Sales: 3 Konica Minolta Sensing Europe B.V. (Netherlands) Konica Minolta Sensing Americas, Inc. (U.S.A) Konica Minolta Sensing Singapore Pte. Ltd. (Singapore) Konica Minolta Technology Center, Inc. Konica Minolta Business Expert, Inc Konica Minolta IJ Technologies, Inc. Konica Minolta Logistics Co., Ltd. Konica Minolta Sogo Service Co., Ltd. Konica Minolta Engineering Co., Ltd. Konica Minolta Information System Co., Ltd. Konica Minolta Technosearch Corporation Konica Minolta Planetarium Co., Ltd. Other Companies: 6 Notes: Organization chart is as March 31, Only major consolidated subsidiaries are shown. 15

16 3. MANAGEMENT POLICY (1) Basic management policy Management philosophy: The Creation of New Value Management visions: An innovative corporation that continues to create inspiring products and services in the field of imaging A global corporation that leads the market by advanced technologies and reliability Corporate Message: The essentials of imaging (The message represents our wish to be acknowledged as an essential company, by offering essential products, services and solutions to our customers in the world of imaging.) (2) Medium-to long-term management strategies and pending issues Looking at world economic conditions, uncertainties remain, including high crude-oil prices associated with political instability in the Middle East and North Africa and financial insecurity in parts of Europe. Nonetheless, we expect emerging markets, especially China and India, will continue to grow, and the US and European economies should continue to recover moderately. The Japanese economy appears to be tapering off after a round of fiscal stimulus. There are fears that if it takes time to restore the supply chains and electric power supply that were heavily damaged by the unprecedented earthquake in March, the economic downturn will be prolonged and will affect a wider range of fields. In uncertain circumstances, the Group is focusing on sustainable growth and has adopted a medium-term management plan, GPLAN 2013, the keyword of which is growth. Under the plan, in three years from the fiscal year ending March 31, 2012 to the fiscal year ending March 31, 2014, the Group aims to achieve the following goals (the Group s vision): 1) Make Group-wide efforts to expand its scale by achieving growth, taking advantage of business opportunities, and become a company that has persistence and presence even if market circumstances change rapidly; 2) Evolve from a company that merely manufactures and sells products in the global arena to a true global company that will create ideas and act from a global perspective; and 3) As a result, achieve for the Konica Minolta brand higher recognition and wide acclaim in the international community. To overcome uncertain circumstances, including effects of the major earthquake, and achieve these goals, the Group will pursue the following priority challenges. 16

17 < GPLAN 2013: 5 Priority Challenges > 1. Growth Strategy Business Technologies Business: Enhance the color genre-top strategy in the office and the production print fields and expand sales in OPS and emerging markets, including Asia, which have excellent growth opportunities. Optics Business: Maintain the genre-top position and take a major step forward in the manufacture of TAC films and other products in the digital consumer electronics and IT fields, and accelerate business development in new areas such as LED lighting. Healthcare Business: Expand sales of digital medical input equipment and IT services, leveraging full-scale development of new Computed Radiography and Digital Radiography. In addition to achieving growth in those existing businesses and fields peripheral to them, the Group will seek to accelerate growth through strategic alliances and M&A. Meanwhile, aiming for sustainable growth in five to ten years, the Group will strive to develop new fields, taking advantage of technologies in which the Company has strengths, including technologies for organic light emitting diode lighting, organic thin film solar cells, and high-function films. Expiration of the alliance with General Electric The Company formed an alliance with General Electric (headquartered in the United States) in March 2007 and jointly promoted research and development for the commercialization of organic light emitting diode lighting. The Company reviewed the commercialization policy and terminated the agreement in March, the expiration time of the agreement, based on the agreement of both companies. Going forward, the Company will promote research and development and marketing to make organic light emitting diode lighting expected to grow significantly as next-generation lighting a pillar of growth, using the vapor deposition method and the roll-to-roll coating method and taking advantage of material technologies and layered design technologies, areas in which the Company excels. 2 Enhancing Profitability We consider management to increase profits, as well as the execution of growth strategies to achieve growth, as among our most important challenges. To meet these challenges, we will develop products that can generate sufficient profits in growth areas, including emerging markets and new business categories, and will change the business models. We will also strive to enhance cost competitiveness through automation, labor saving, process reform, and technological innovation. 3. Increasing Deployment Capability We will be sure to achieve growth by developing operations promptly in response to trends in growth areas. Meanwhile, we will exploit more business opportunities in our core businesses and in fields peripheral to them through synergies from M&A and alliances. We will also enhance management based on the latest SCM and CRM data. 4. Group Interconnecting Strategy To reinforce our global management base, we will position compliance as a top priority in all business activities and will execute strategies that are even broader and deeper in a range of aspects, including CSR, branding, finance, accounting, technology, and intellectual property. 17

18 5. Becoming a Global Company We will pursue global, optimal management, evolving from a domestic-oriented company to a global company in every aspect. To that end we will recruit and cultivate human talent capable of working in the international arena and will enhance our organizational functions, governance system, work procedures, and communication from a global perspective. < GPLAN 2013: Group s Performance Goal > Ⅰ. Net Sales: 1 trillion yen or more in the fiscal year ending March 31, Ⅱ. Operating Income Ratio: 8% or more in the fiscal year ending March 31, Ⅲ. ROE: 10% or more in the fiscal year ending March 31,

19 4. CONSOLIDATED FINANCIAL STATEMENTS (1) Consolidated Balance Sheets Fisical year ended March 31, 2010 and 2011 March 31, 2010 March 31, 2011 Consolidated balance sheets Assets Current assets Cash and deposits 85,533 87,886 Notes and accounts receivable-trade 177, ,363 Lease receivables and investment assets 13,993 14,327 Short-term investment securities 79,000 87,261 Inventories 98, ,243 Deferred tax assets 19,085 30,393 Accounts receivable-other 7,639 10,536 Other 12,720 12,084 Allowance for doubtful accounts (4,703) (4,220) Total current assets 489, ,876 Noncurrent assets Property, plant and equipment Buildings and structures, net 66,708 69,372 Machinery, equipment and vehicles, net 52,782 51,530 Tools, furniture and fixtures, net 22,026 20,154 Land 34,320 33,777 Lease assets, net Construction in progress 16,901 6,589 Assets for rent, net 11,952 8,788 Total property, plant and equipment 205, ,701 Intangible assets Goodwill 71,936 63,146 Other 27,137 25,225 Total intangible assets 99,074 88,371 Investments and other assets Investment securities 22,029 20,893 Long-term loans receivable Long-term prepaid expenses 3,353 3,030 Deferred tax assets 35,304 30,404 Other 12,375 10,752 Allowance for doubtful accounts (815) (732) Total investments and other assets 72,411 64,504 Total noncurrent assets 376, ,577 Total assets 865, ,453 19

20 March 31, 2010 March 31, 2011 Liabilities Current liabilities Notes and accounts payable-trade 83,118 74,640 Short-term loans payable 58,231 50,018 Current portion of long-term loans payable 27,501 24,516 Accounts payable-other 30,536 31,490 Accrued expenses 24,882 24,282 Income taxes payable 2,488 5,199 Provision for bonuses 11,173 10,911 Provision for directors' bonuses Provision for product warranties 1,869 1,622 Provision for loss on business liquidation 4, Notes payable-facilities Asset retirement obligations - 42 Other 22,086 19,013 Total current liabilities 267, ,480 Noncurrent liabilities Bonds payable 40,000 70,000 Long-term loans payable 71,625 48,033 Deferred tax liabilities for land revaluation 3,733 3,733 Provision for retirement benefits 54,245 44,734 Provision for directors' retirement benefits Asset retirement obligations Other 7,654 6,192 Total noncurrent liabilities 177, ,985 Total liabilities 445, ,465 Net assets Shareholders' equity Capital stock 37,519 37,519 Capital surplus 204, ,140 Retained earnings 193, ,467 Treasury stock (1,743) (1,670) Total shareholders' equity 433, ,457 Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges 33 (94) Foreign currency translation adjustment (14,947) (24,193) Total accumulated other comprehensive income (14,172) (23,809) Subscription rights to shares Minority interests Total net assets 420, ,987 Total liabilities and net assets 865, ,453 20

21 (2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Consolidated Statements of Income Fisical year ended March 31, 2010 and 2011 March 31, 2010 March 31, 2011 Net sales 804, ,953 Cost of sales 439, ,372 Gross profit 364, ,580 Selling, general and administrative expenses 320, ,558 Operating income 43,988 40,022 Non-operating income Interest income 1,749 1,434 Dividends income Equity in earnings of affiliates Other 5,654 3,975 Total non-operating income 7,843 5,895 Non-operating expenses Interest expenses 3,808 3,129 Foreign exchange losses 1,124 3,762 Other 6,079 5,869 Total non-operating expenses 11,013 12,761 Ordinary income 40,818 33,155 Extraordinary income Gain on sales of noncurrent assets Gain on sales of investment securities Gain on sales of subsidiaries and affiliates' stocks - 12 Licence related income Reversal of provision for loss on business liquidation 1,025 2,498 Other extraordinary income of foreign subsidiaries Total extraordinary income 3,593 3,477 Extraordinary loss Loss on sales and retirement of noncurrent assets 2,833 1,983 Loss on sales of investment securities Loss on valuation of investment securities Impairment loss 2,561 1,027 Business structure improvement expenses 2,084 3,394 Loss on adjustment for changes of accounting standard for asset retirement obligations Loss on disaster Total extraordinary losses 8,329 8,521 Income before income taxes and minority interests 36,082 28,111 Income taxes-current 9,306 9,580 Income taxes-deferred 9,806 (7,420) Total income taxes 19,113 2,160 Income before minority interests - 25,951 Minority interests in income Net income 16,931 25,896 21

22 Consolidated Statements of Comprehensive Income Fisical year ended March 31, 2010 and 2011 March 31, 2010 March 31, 2011 Income before minority interests - 25,951 Other comprehensive income Valuation difference on available-for-sale securities - (261) Deferred gains or losses on hedges - (128) Foreign currency translation adjustment - (9,291) Share of other comprehensive income of associates accounted for using equity method - (1) Total other comprehensive income - (9,683) Comprehensive income - 16,267 Comprehensive income attributable to Comprehensive income attributable to owners of the parent - 16,258 Comprehensive income attributable to minority interests

23 (3) Consolidated Statements of Changes in Net Assets Fisical year ended March 31, 2010 and 2011 March 31, 2010 March 31, 2011 Shareholders' equity Capital stock Balance at the end of previous period 37,519 37,519 Changes of items during the period Total changes of items during the period - - Balance at the end of current period 37,519 37,519 Capital surplus Balance at the end of previous period 204, ,140 Changes of items during the period Total changes of items during the period - - Balance at the end of current period 204, ,140 Retained earnings Balance at the end of previous period 185, ,790 Changes of items during the period Dividends from surplus (9,280) (7,953) Net income 16,931 25,896 Disposal of treasury stock (11) (54) Amortization of net retirement benefit obligation in foreign subsidiaries 697 (211) Total changes of items during the period 8,337 17,676 Balance at the end of current period 193, ,467 Treasury stock Balance at the end of previous period (1,662) (1,743) Changes of items during the period Purchase of treasury stock (106) (76) Disposal of treasury stock Total changes of items during the period (81) 72 Balance at the end of current period (1,743) (1,670) 23

24 March 31, 2010 March 31, 2011 Total shareholders' equity Balance at the end of previous period 425, ,707 Changes of items during the period Dividends from surplus (9,280) (7,953) Net income 16,931 25,896 Purchase of treasury stock (106) (76) Disposal of treasury stock Amortization of net retirement benefit obligation in foreign subsidiaries 697 (211) Total changes of items during the period 8,256 17,749 Balance at the end of current period 433, ,457 Accumulated other comprehensive income Valuation difference on available-for-sale securities Balance at the end of previous period (513) 741 Changes of items during the period Net changes of items other than shareholders' equity 1,255 (263) Total changes of items during the period 1,255 (263) Balance at the end of current period

25 March 31, 2010 March 31, 2011 Deferred gains or losses on hedges Balance at the end of previous period Changes of items during the period Net changes of items other than shareholders' equity (164) (128) Total changes of items during the period (164) (128) Balance at the end of current period 33 (94) Foreign currency translation adjustment Balance at the end of previous period (11,755) (14,947) Changes of items during the period Net changes of items other than shareholders' equity (3,192) (9,245) Total changes of items during the period (3,192) (9,245) Balance at the end of current period (14,947) (24,193) Total accumulated other comprehensive income Balance at the end of previous period (12,070) (14,172) Changes of items during the period Net changes of items other than shareholders' equity (2,101) (9,637) Total changes of items during the period (2,101) (9,637) Balance at the end of current period (14,172) (23,809) Subscription rights to shares Balance at the end of previous period Changes of items during the period Net changes of items other than shareholders' equity Total changes of items during the period Balance at the end of current period Minority interests Balance at the end of previous period Changes of items during the period Net changes of items other than shareholders' equity Total changes of items during the period Balance at the end of current period Total net assets Balance at the end of previous period 414, ,775 Changes of items during the period Dividends from surplus (9,280) (7,953) Net income 16,931 25,896 Purchase of treasury stock (106) (76) Disposal of treasury stock Amortization of net retirement benefit obligation in foreign subsidiaries 697 (211) Net changes of items other than shareholders' equity (1,766) (9,536) Total changes of items during the period 6,490 8,212 Balance at the end of current period 420, ,987 25

26 (4) Consolidated Statements of Cash Flow Fisical year ended March 31, 2010 and 2011 March 31, 2010 March 31, 2011 Net cash provided by (used in) operating activities Income before income taxes and minority interests 36,082 28,111 Depreciation and amortization 61,174 55,129 Impairment loss 2,561 1,027 Amortization of goodwill 9,233 8,401 Interest and dividends income (2,107) (1,807) Interest expenses 3,808 3,129 Loss (gain) on sales and retirement of noncurrent assets 1,980 1,526 Loss (gain) on sales and valuation of investment securities Increase (decrease) in provision for bonuses (544) (203) Increase (decrease) in provision for retirement benefits (2,926) (8,358) Increase (decrease) in provision for loss on business liquidation (2,553) (4,688) Decrease (increase) in notes and accounts receivable-trade (10,718) 3,411 Decrease (increase) in inventories 28,688 (7,800) Increase (decrease) in notes and accounts payable-trade (451) 433 Transfer of assets for rent (7,707) (5,324) Decrease (increase) in accounts receivable-other 1,900 (543) Increase (decrease) in accounts payable-other and accrued expenses (6,554) 2,402 Decrease/increase in consumption taxes receivable/payable 3,646 (479) Other, net 889 3,603 Subtotal 116,551 78,650 Interest and dividends income received 2,271 1,808 Interest expenses paid (3,874) (3,098) Income taxes (paid) refund (1,572) (9,402) Net cash provided by (used in) operating activities 113,377 67,957 Net cash provided by (used in) investing activities Purchase of property, plant and equipment (33,687) (37,026) Proceeds from sales of property, plant and equipment 1,663 1,155 Purchase of intangible assets (5,837) (5,808) Proceeds from transfer of business Purchase of investments in subsidiaries resulting in change in scope of consolidation - (2,508) Payments of loans receivable (296) (475) Collection of loans receivable Purchase of investment securities (2,927) (96) Proceeds from sales of investment securities 1, Payments of valuation of other investments (1,207) (1,271) Other, net Net cash provided by (used in) investing activities (40,457) (44,738) 26