Performance Briefing 1Q of Fiscal Year March, 2016 TDK Corporation July 31, 2015 Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 -1- ◆Consolidated Results for 1Q of FY March 2016 Tetsuji Yamanishi, Corporate Officer Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 -2- Consolidated Results for 1Q of FY March 2016 Tetsuji Yamanishi Corporate Officer Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 -3- Key points concerning earnings for 1Q of FY March 2016 ◆Operating income increased by 88.5% year on year. We have established a structure whereby profits are generated through synergies among our 3 core business segments (passive components, magnetic application and film application segments). ◆ The passive components segment saw a significant 92.3% year on year increase in operating income, mainly driven by high-frequency components. This marks a record high quarterly operating income. ◆ The film application products segment (rechargeable batteries) saw significant year on year increases in both sales and operating income, owing to the growth in sales to the Chinese and Korean customers in addition to the North American main customer. ◆Operating income from the magnetic application products segment declined, reflecting sluggish HDD head sales. We have revised down the initial forecast for overall HDD market sales volume. (HDD market sales volume: 530 million units → 490 million units) Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 -4- Consolidated Results for 1Q of FY March 2016 (Yen billions) Change FY March 2015 1Q Results FY March 2016 1Q Results 237.5 279.6 42.1 17.7 9.6 18.1 8.5 88.5 Net Sales Operating Income 4.0% Operating Income Margin Income from Continuing Operations before Income Taxes Net Income Earning Per Share (JPY) Ex-rate US$ /JPY EURO /JPY Ex-rate impact to Net sales & Operating Income Copyright© 2015 TDK Corporation. All rights reserved. 6.5% Yen billions % +2.5pt - 10.4 18.9 8.5 81.7 5.8 13.1 7.3 125.9 45.73 103.96 102.17 140.17 121.29 134.15 - - Depreciated by 18.7% Appreciated by 4.3% Net sales：Increased by about 39.3 billion Yen Operating income：Increased by about 6.1 billion Yen 1Q of Fiscal Year March, 2016 July 31, 2015 -5- 1Q Results - Passive Components Segment Net Sales (Yen billions) 147.8 121.9 15/3 ◆Ceramic Capacitors ・Sales increased year on year, particularly to the automobile market, which accounts for around half of total sales. ・Profit margins also improved due to improved productivity. 16/3 Operating Income (OP margin) 15.0 (Yen billions) 10.1% ◆Inductive Devices ・Sales to the ICT market and the automobile market increased year on year. ・Earnings increased due to an improved product portfolio. ◆High-frequency Components ・Sales of discrete products were firm due to production capacity expansion. ・Profits increased significantly year on year. ◆Piezoelectric Material Products ・Both revenues and profits increased year on year, mainly due to strong sales of OIS for camera modules and circuit protection components for automobile market and industrial equipment market. 7.8 6.4% 15/3 Net Sales 147.8 billion yen (up 21.2% year on year) Operating Income 15.0 billion yen (up 92.3% year on year) 16/3 15/3: FY March 2015 Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 -6- 1Q Results - Magnetic Application Products Segment Net Sales (Yen billions) 85.2 79.4 Net Sales 79.4 billion yen (down 6.8% year on year) Operating income 3.8 billion yen (down 47.9% year on year) ◆Recording Devices (HDD Heads) ・The PC market slowed down compared to the previous year, in which demand for replacement of the retiring Windows XP operating system was seen, with the HDD market slowing down as well. As a result, our shipment volume of HDD heads declined significantly. Both sales and profits for this category declined year on year. 15/3 16/3 Operating Income (OP margin) (Yen billions) 7.3 8.6% 3.8 ◆Magnets ・Sales to the automobile and ICT markets (for HDDs) decreased. ◆Power Supplies ・Sales to the industrial equipment market of products such as semiconductor production equipment, FA equipment and measuring equipment remained strong. 4.8% 15/3 16/3 15/3: FY March 2015 Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 -7- 1Q Results - Film Application Products Segment Net Sales 43.2 (Yen billions) Net sales 43.2 billion yen (up 92.0% year on year) Operating income 4.7 billion yen (16 times increases year on year) 22.5 ◆Energy Devices (Rechargeable Batteries) 15/3 16/3 Operating Income (OP margin) ・Both sales and profits increased year on year due to strong sales to major customer in North America, as well as substantial growth in sales to the Chinese and Korean market. (Yen billions) 4.7 10.9% 0.3 1.3% 15/3 16/3 15/3: FY March 2015 Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 -8- Quarterly Results by Segment (Yen billions) 1Q of FY March 2015 (A) 4Q of FY March 2015 (B) 1Q of FY March 2016 (C) YoY Change (C)-(A) Yen billions QoQ Change (C)-(B) % Yen billions % Net Sales Capacitors 36.5 37.6 39.1 2.6 7.1 1.5 4.0 Inductive Devices 35.7 36.4 37.9 2.2 6.2 1.5 4.1 Other Passive Components 49.7 62.8 70.8 21.1 42.5 8.0 12.7 121.9 136.9 147.8 25.9 21.2 10.9 8.0 59.1 26.2 62.6 25.9 54.6 24.8 (4.5) -7.6 (8.0) -12.8 (1.4) -5.3 (1.1) -4.2 85.2 22.5 7.8 237.5 88.5 44.1 10.3 279.9 79.4 43.2 9.2 279.6 (5.8) -6.8 (9.1) -10.3 20.7 92.0 (0.9) -2.0 1.4 17.9 (1.1) -10.7 42.1 17.7 (0.3) -0.1 7.8 8.0 15.0 7.2 92.3 7.0 87.5 7.3 0.3 (0.5) 14.8 (5.2) 6.3 9.4 0.6 24.3 (5.0) 3.8 4.7 0.4 23.9 (5.8) (3.5) -47.9 (2.5) -39.7 4.4 - (4.7) -50.0 0.9 - (0.2) -33.3 9.1 61.5 (0.4) -1.6 - (0.8) - 9.6 19.4 18.1 88.5 (1.3) -6.7 4.0% 6.9% 6.5% +2.5pt - -0.4pt - Passive Components Recording Devices Other Magnetic Application Products Magnetic Application Products Film Application Products Other Total Passive Components Operating Income Magnetic Application Products Film Application Products Other Sub total Corporate and Eliminations Total Operating Income margin Ex- US$/JPY rate EURO/JPY Copyright© 2015 TDK Corporation. All rights reserved. 102.17 140.17 119.21 134.74 1Q of Fiscal Year March, 2016 (0.6) 8.5 121.29 134.15 July 31, 2015 -9- Breakdown of Operating Income Changes 1Q of FY March 2015 9.6 billion yen Operating Income +8.5 billion yen 1Q of FY March 2016 18.1 billion yen (Yen billions) Changes in sales +11.3 Sales price Reduction (13.7) Rationalization, cost reduction +6.6 Benefits from Restructuring +0.7 SG&A expenses increase (2.5) 18.1 Exchange fluctuation (US$=Yen 121.29) +6.1 9.6 Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 10 - Projections for 2Q of FY March 2016 -Image of change in sales Segment 1Q of FY March 2016 2Q Projections (Q on Q Change) Main factor and premise of projections Passive Components 147.8 +3%～+4% Increase in sales of various products for the ICT market and the automobile market Magnetic Application Products 79.4 +4%～+5% Increase in sales of HDD heads on the back of recovery in demand +30%+α Increase in sales of rechargeable batteries for the ICT market (sales growth driven by higher demand for new product to be launched by our primary customer) Film Application Products 43.2 Other 9.2 Total 279.6 +8%～+10% Forex assumptions US$/Yen EURO/Yen 121.29 134.15 Copyright© 2015 TDK Corporation. All rights reserved. 115.00 130.00 1Q of Fiscal Year March, 2016 July 31, 2015 - 11 - FY March 2016 Full Year / Dividend Projections TDK keeps initial projections (announced on April 28) unchanged. (Yen billions） Net sales FY March 2015 Full Year Results YoY Change % Yen billions 1,082.6 1,180.0 97.4 9.0% 72.5 95.0 22.5 31.0% 6.7% 8.1% +1.4pt - 49.4 65.0 15.6 31.6% 392.78 515.92 - - - - Operating income Operating income margin Net income Earning per share (JPY) FY March 2016 Full Year Projections 1st half : 40 2nd half : 50 Annual: 90 1st half : 60 2nd half : 60 Annual : 120 US$/JPY 109.84 115.00 - EURO/JPY 138.88 130.00 - Dividends (JPY) Ex-rate Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 12 - Supplementary Data Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 13 - Quarterly sales and operating income by segment FY March 2015 (Yen billions) 1Q 2Q 3Q Net Sales Capacitors 36.5 37.3 37.5 Inductive Devices 35.7 37.1 38.1 Other Passive Components 49.7 55.5 67.6 121.9 129.9 143.2 Recording Devices 59.1 63.7 75.1 Other Magnetic Application Products 26.2 25.5 25.3 85.2 22.5 7.8 237.5 89.2 37.2 8.5 264.8 100.4 47.4 9.4 300.4 Passive Components 7.8 9.4 11.4 Magnetic Application Products 7.3 8.5 7.7 Film Application Products 0.3 5.2 9.6 (0.5) 0.2 0.2 14.8 23.3 29.0 (5.2) (4.9) (3.8) Passive Components Magnetic Application Products Film Application Products Other Total Operating Income Other Sub-total Corporate and Eliminations Total 9.6 18.3 25.2 Ex-rate US$/JPY 102.17 103.86 114.25 EURO/JPY 140.17 137.77 142.79 Copyright© 2015 TDK Corporation. All rights reserved. FY March 2016 4Q Total 149.0 36.4 147.3 62.8 235.8 136.9 532.0 62.6 260.5 25.9 102.8 88.5 363.3 44.1 151.3 10.3 35.9 279.9 1,082.6 8.0 36.6 6.3 29.7 9.4 24.6 0.6 0.6 24.3 91.4 (5.0) (18.9) 19.4 72.5 119.21 109.84 134.74 138.88 37.6 1Q of Fiscal Year March, 2016 1Q 2Q 3Q 4Q Total 39.1 37.9 70.8 147.8 54.6 24.8 79.4 43.2 9.2 279.6 15.0 3.8 4.7 0.4 23.9 (5.8) 18.1 121.29 134.15 July 31, 2015 - 14 - FY March 2016 Projections and Forex sensitivity Expenses (Yen billions) Capital expenditure 100 R&D 130.0 140 120 Depreciation 102.5 99.7 85.6 80 79.9 68.6 77.4 82.9 80.2 90.0 60 52.6 53.5 12/3 13/3 63.4 70.6 77.0 40 20 0 12/3 13/3 14/3 15/3 12/3 16/3 Projections 133/3 14/3 15/3 16/3 Projections 14/3 15/3 16/3 Projections Forex Sensitivity (impact by 1 (one) yen change) ●US$ : Sales 5.0 billion yen, Operating Income 1.4 billion yen 12/3: FY March 2012 Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 15 - Financial Position and Cash Flows (Yen billions） March End, 2015 June End, 2015 Change 1,404.3 1,467.8 63.5 Total Liability 646.3 683.9 37.6 Stockholders's Equity 738.9 763.9 25.0 12.1 18.0 Total Asset (comprehensive income) (5.9) Stockholders's Equity ratio 52.6% 52.0% -0.6pt Cash and Cash equivalents 286.5 302.3 15.8 Interest-bearing Debt (*1) 268.3 287.0 18.7 18.2 15.3 (2.9) Net Cash (*2) （Yen billions） 1Q of FY March 2015 1Q of FY March 2016 Change Capital Expenditures 20.0 28.7 8.7 Depreciation and amortization 19.7 20.5 0.8 *1: Short-term debt + Current installments of long-term debt + Long-term debt, excluding current installments *2: Cash and Cash equivalents - Interest-bearing Debt Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 16 - Cash Flows (Yen billions) FY March 2015 FY March 2016 Results through 1Q Results through 1Q YoY Change Operating Cash Flow 18.7 26.6 7.9 Investing Cash Flow (18.5) (25.7) (7.2) Free Cash Flow 0.2 0.9 0.7 Financing Cash Flow 1.7 10.5 8.8 Effect of exchange rate chagens on cash and cash equivalents (3.4) 5.7 9.1 282.2 32.9 Cash and Cash Equivalents Copyright© 2015 TDK Corporation. All rights reserved. 249.3 1Q of Fiscal Year March, 2016 July 31, 2015 - 17 - Quarterly sales by applications (1Q of FY March 2015 –1Q of FY March 2016) Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 18 - Passive Components Business quarterly sales by applications (1Q of FY March 2015 –1Q of FY March 2016) Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 19 - 2006/3 : FY March 2006 Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 20 - 2006/3 : FY March 2006 Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 21 - Cautionary Statements with Respect to Forward-Looking Statements This material contains forward-looking statements, including projections, plans, policies, management strategies, targets, schedules, understandings, and evaluations about TDK, or its group companies (TDK Group). These forward-looking statements are based on the current forecasts, estimates, assumptions, plans, beliefs, and evaluations of the TDK Group in light of the information currently available to it, and contain known and unknown risks, uncertainties, and other factors. The TDK Group therefore wishes to caution readers that, being subject to risks, uncertainties, and other factors, the TDK Group’s actual results, performance, achievements, or financial position could be materially different from any future results, performance, achievements, or financial position expressed or implied by these forward-looking statements, and the TDK Group undertakes no obligation to publicly update or revise any forwardlooking statements after the issue of this material except as provided for in laws and ordinances. The electronics markets in which the TDK Group operates are highly susceptible to rapid changes, risks, uncertainties, and other factors that can have significant effects on the TDK Group including, but not limited to, shifts in technology, fluctuations in demand, prices, interest and foreign exchange rates, and changes in economic environments, conditions of competition, laws and regulations. Also, since the purpose of these materials is only to give readers a general outline of business performance, many numerical values are shown in units of a billion yen. Because original values, which are managed in units of a million yen, are rounded off, the totals, differences, etc. shown in these materials may appear inaccurate. If detailed figures are necessary, please refer to our financial statements and supplementary materials. Copyright© 2015 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2016 July 31, 2015 - 22 - Text data including Q&A of performance briefing will be uploaded on following site http://www.global.tdk.com/ir/ir_events/conference/2016/1q_1.htm