Financial Results for the Nine Months Ended December 31, 2005 January 31, 2006 OMRON Corporation Contents 1. Executive Summary 2. Results for the Nine Months Ended December 31, 2005 3. Forecast for the Year Ending March 31, 2006 4. Supplementary explanation Notes: 1. The financial statements are prepared in accordance with U.S. GAAP. 2. Includes 143 consolidated subsidiaries and 15 affiliated companies accounted for by the equity method. 3. Projections of results and future developments are based on information available to the Company at the present time, as well as certain assumptions judged by the Company to be reasonable. Various factors could cause actual results to differ materially from these projections. Major factors influencing Omron's actual results include, but are not limited to, (i) the economic conditions surrounding the Company's businesses in Japan and overseas, (ii) demand trends for the Company's products and services, (iii) the ability of the Omron Group to develop new technologies and new products, (iv) major changes in the fund-raising environment, (v) tie-ups or cooperative relationships with other companies, and (vi) movements in currency exchange rates and stock markets. 2 Main Business Areas Business Business Name Abbrev. Business Description Industrial Industrial Automation Automation Business IAB Manufacture and sale of control systems , equipment and components for factory automation, etc. Electronic Electronic Components Components Business ECB Manufacture and sale of electronic components for home appliances, communications, mobile devices, etc. Automotive Electronics Automotive Electronic Components Business AEC Manufacture and sale of electronic components for automobiles Social Systems Social Systems Business SSB Manufacture, sale and services for public transportation (automated passenger gates, etc.) and traffic and road management systems Healthcare Business HCB Manufacture and sale of medical devices (digital blood pressure monitors, etc.) Others Exploration of new businesses, development businesses not included in above Healthcare Equipment Others Business Development Group/Others 3 Executive Summary 1. Executive Summary 4 Executive Summary Executive Summary The year ending March 31, 2006 is the 2nd year of Stage II (Apr. 2004 to March 2008) of Grand Design 2010 (GD2010) “Achieving a robust profit structure” as a milestone toward the achievement of Stage II targets 9 months Results and Key Points Net sales basically as planned, Operating income showed a slight decrease, NIBT/NIAT both exceeded the original budget and same period previous year Consolidated Net sales Operating income NIBT NIAT Result ¥442.8 billion ¥44.0 billion ¥47.1 billion ¥26.2 billion vs. same period in prev. year 98.5% 96.0% 109.2% 105.4% vs. original budget 99.3% 97.8% (Operating margin 9.9%) 107.0% (NIBT margin 10.6%) 102.6% (1)Net sales: Main factor in decrease 0.7% vs. original budget is due to decrease in Electronic Components Business (ECB) Main factor in decrease 1.5% vs. same period previous year is transfer of ATM business to Joint Venture (¥27.0billion decrease) (2)Operating income: Main factor in decrease 2.2% vs. original budget is product mix (Refer to P.11) Main factor in decrease 4.0% vs. same period previous year is increase in SG&A/R&D expenses for growth and response to hazardous chemical substance regulation (RoHS) (Refer to P.10) (3)NIBT: Main factor in increase 7.0% vs. original budget due to gain on sales of marketable securities (4)Business summary Sales by segment had strong result s except for ECB. As for Operating income, ECB and Automotive Electronic Components Business (AEC) faced difficult conditions. Full-Year Forecasts and Key Points Sales, income both forecast to be in line with the initial budget Expect to achieve 4th consecutive year of sales and income growth. Expect to achieve new record of sales and 3rd consecutive year of new record of income. Net sales Operating income NIBT NIAT Year ending March 31, 2006 ¥625.0 billion ¥65.0 billion ¥63.0 billion ¥36.0 billion vs. same period in prev. year 102.7% 115.8% (Operating margin 10.4%) 119.9% (NIBT margin 10.1%) 119.3% 5 Nine Months ended Dec. 31, 2005 2. Results for the Nine Months Ended December 31, 2005 6 Nine Months ended Dec. 31, 2005 Consolidated Income Statements Net Sales ¥442.8B, Operating Margin 9.9% Net sales basically as planned, Operating income showed a slight decrease, NIBT/NIAT both exceeded the original budget and same period previous year Main factor in net sales decrease was SSB’s transfer of ATM business to Joint Venture （billion yen) Income Statement 9 months ended 12/2004 Actual(1) Net sales Gross profit SG&A expense R&D expense Daikohenjyo' Operating income NIBT NIAT 9 months ended 12/2005 Change from last year Actual(2) 449.6 186.0 105.6 34.6 ---45.8 43.1 24.8 442.8 179.4 111.0 36.3 11.9 44.0 47.1 26.2 107.9 134.2 112.2 137.3 (2)/(1) * 9 months ended 12/2005 Change from Original budget Original budget(3) (2)/(3) 98.5% 96.5% 105.1% 104.9% ---96.0% 109.2% 105.4% 446.0 184.0 111.0 37.0 9.0 45.0 44.0 25.5 +4.3 +3.1 100.0 130.0 Currency Rate US$ EUR 99.3% 97.5% 100.0% 98.1% 132.4% 97.8% 107.0% 102.6% (yen) +12.2 +7.3 ＊ 104.8% including sales of ATM business transferred to Joint Venture in October 2004. 7 Nine Months ended Dec. 31, 2005 Breakdown of Sales by Region and Business Basically in line with budget in Japan and overseas By segment, strong results except for ECB （billion yen) 9 months ended 12/2004 9 months ended 12/2005 Actual(1) 269.5 180.1 449.6 Actual(2) 248.2 194.6 442.8 Change from last year By Region Japan Overseas** Total (2)/(1) 92.1% 108.1% 98.5% 9 months ended 12/2005 O riginal budget(3) 251.3 194.7 446.0 Change from O riginal budge t (2)/(3) 98.7% 99.9% 99.3% **Overseas includes direct exports By Business IAB ECB AEC SSB HCB Ohters Total Actual(1) 187.6 76.1 47.2 * 80.0 38.6 20.1 449.6 Actual(2) 119.0 72.0 55.6 52.2 44.9 19.1 442.8 (2)/(1) 106.1% 94.7% 117.8% 65.3% 116.3% 94.6% 98.5% O riginal budget(3) *Results for the nine months ended 12/2004 include an actual performance of the ATM business 198.5 82.5 52.5 53.0 41.0 18.5 446.0 (2)/(3) 100.2% 87.3% 105.9% 98.6% 109.4% 103.1% 99.3% 8 Nine Months ended Dec. 31, 2005 Breakdown of Operating Income By Segments IAB exceeded exceeded budget budget due due to to expense expense control control IAB ECB faced faced difficult difficult conditions, conditions, AEC AEC continued continued investments investments for for North North America America ECB （billion yen) 9 months ended 12/2004 9 months ended 12/2005 Change from last year By Business Actual(1) Actual(2) (2)/(1) 9 months ended 12/2005 Change from O riginal budge t O riginal budget(3) (2)/(3) IAB 32.2 31.2 96.8% 30.0 104.0% ECB 12.2 8.4 68.6% 11.5 72.9% AEC -0.5 -1.1 -- 1.5 -- 5.0 -2.6 -- -2.5 -- HCB 5.9 6.4 108.5% 6.5 99.0% Others 3.4 1.5 43.3% 1.5 98.0% -12.4 -11.7 -- -12.5 -- 11.9 -- 9.0 132.4% 44.0 96.0% 45.0 97.8% SSB HQ Cost/Elimination Daikohenjyo Total ＊ -45.8 *Results for the year ended 12/2004 include an actual performance of ATM business 9 Nine Months ended Dec. 31, 2005 Breakdown of Changes in Operating Income (VS. same period previous year) Operating income income decreased decreased due due to to increase increase in in SG&A SG&A and and R&D R&D expenses expenses for for Operating growth and and response response to to RoSH RoSH regulation regulation growth (transfer of ATM Business) Exchange Profit Substitutional potion of （billion yen) pension Product mix (excluding ATM Business) +0.8 -4.0 -6.7 +8.5 Sales increase (excluding ATM Business and exchange profit) Increase in SG&A expenses -8.2 Increase in R&D expenses -4.1 45.8 Change in gross profit +2.6b +11.9 44.0 Change in SG&A expenses, R&D expenses -12.3 Change in operating income -1.8 12/2004 12/2005 10 Nine Months ended Dec. 31, 2005 Breakdown of Changes in Operating Income (VS. original budget) In spite spite of of return return of of substitutional substitutional portion portion of of pension pension fund fund increasing, increasing, In Operating income income decreased decreased due due to to decrease decrease sales sales volume volume and and price price down down Operating Exchange Profit （billion yen) Product mix Sales decrease -1.3 Substitutional potion of pension +2.2 -5.5 Increase in Increase in SG&A R&D expenses expenses -0.0 +0.7 45.0 Change in gross profit -4.6b +2.9 Change in SG&A expenses, R&D expenses +0.7 44.0 Change in operating income -1.0 12/2005 (original budget) 12/2005 (results) 11 Nine Months ended Dec. 31, 2005 Segment Information IAB (Industrial Automation Business) Manufacture and sale of control systems and equipment for factory automation and production machinery Smart Sensor Sensing Devices (Photoelectric/Proximity Sensors, AOI, etc.) Control Devices (Programmable Logic Controllers, Relays, Timers, etc.) Safety Devices (Safety sensors, Safety switches, etc.) Net sales: sales: ¥199.0b； ¥199.0b； Operating margin: margin: 15.7% 15.7% Net ；； Operating Basicallyin inline linewith with budget budget in in Japan, Japan,U.S. U.S. remained remained strong, strong, Basically Programmable Logic Controller Greater China China isis on on aa gradual gradual recovery recovery trend trend Greater （billion yen) 9 months ended 12/2004 Actual(1) IAB 9 months ended 12/2005 Actual(2) Change from last year (2)/(1) 9 months Change from ended Original 12/2005 budget Original budget(3) (2)/(3) Japan 97.3 99.6 102.3% 100.5 99.1% Overseas 90.2 99.4 110.2% 98.0 101.4% 15.2 18.1 118.7% 15.6 115.8% Europe 48.5 50.4 103.9% 51.8 97.3% Asia 7.6 9.1 119.0% 8.7 104.7% China 15.8 18.2 115.5% 18.7 97.3% Exports 3.1 3.6 116.9% 3.2 113.3% 187.6 199.0 106.1% 198.5 100.2% 32.2 31.2 96.8% 30.0 104.0% North America Total Operating income AOI (Automated Optical Inspection System) 12 Nine Months ended Dec. 31, 2005 Segment Information ECB (Electronic Components Business) Manufacture and sale of electronic components for home appliances, communications, mobile phones, amusement components, OA ZD Connector Relays, Switches, Connectors, Sensors, Micro Lens Arrays, Customized ICs, IC Coins, Optical Communications Devices, etc. Net sales: sales: ¥72.0b； ¥72.0b； Operating margin: margin: 11.6% 11.6% Net ；； Operating Japan and and overseas overseas business business were were weakened; weakened; LCD LCD Backlight Backlight Japan and Amusement Amusement business business faced faced difficult difficult conditions conditions and Relay, Switch （billion yen) 9 months ended 12/2004 Actual(1) ECB 9 months ended 12/2005 Actual(2) Change from last year (2)/(1) 9 months Change from ended Original 12/2005 budget Original budget(3) (2)/(3) Japan 39.5 34.9 88.4% 40.5 86.2% Overseas 36.5 37.1 101.5% 42.0 88.3% 7.3 7.2 97.9% 7.4 97.2% Europe 8.8 9.1 103.2% 9.7 93.7% Asia 4.2 4.5 108.5% 4.7 96.3% China 8.6 10.2 117.8% 12.3 82.8% Exports 7.6 6.1 80.7% 7.9 77.2% Total 76.1 72.0 94.7% 82.5 87.3% Operating income 12.2 8.4 68.6% 11.5 72.9% North America B-MLA 13 Nine Months ended Dec. 31, 2005 Segment Information AEC (Automotive Electronic Components Business) Automotive Relay Manufacture and sale of automotive electronic components Automotive Relays, Sensors, Laser Radars, Power Window Switches, Keyless Entry Systems, ECU, etc. Net sales: sales: ¥55.6b； ¥55.6b； 6.0% increase increase vs. vs. original original budget, budget, but but Operating Operating Net ；； 6.0% income was was negative negative due due to to increasing increasing cost cost for for production production process process income improvement in in North North America America improvement Keyless Entry System （billion yen) 9 months ended 12/2004 Actual(1) AEC 9 months ended 12/2005 Actual(2) Change from last year 9 months Change from ended Original 12/2005 budget Original budget(3) (2)/(3) (2)/(1) Japan 19.4 20.1 103.4% 20.5 97.8% Overseas 27.8 35.5 127.8% 32.0 111.0% 15.3 20.2 132.0% 17.6 114.6% Europe 3.8 4.5 119.8% 4.8 93.6% Asia 8.6 10.9 126.0% 9.6 113.1% China 0.0 0.0 0.0% 0.0 0.0% Exports 0.1 0.0 0.0% 0.0 0.0% Total 47.2 55.6 117.8% 52.5 105.9% Operating income -0.5 -1.1 -- 1.5 -- North America Automotive Laser Radar 14 Nine Months ended Dec. 31, 2005 Segment Information SSB (Social Systems Business) Manufacture and sale of equipment/modules, and provision of solutions and services in the fields of public transportation and traffic/road management Automatic Gate Public Transportation : Passenger Gates, Ticket Vending machines, etc. Traffic/Road Management, Signal Controllers, Road Management Systems, etc. Net sales： sales： ¥52.2b Net ：：¥52.2b Net sales/Operating sales/Operating income income basically basically as as planned planned Net Ticket Vending Machine （billion yen) 9 months ended 12/2004 Actual(1) SSB Japan 9 months ended 12/2005 Actual(2) Change from last year 9 months Change from ended Original 12/2005 budget Original budget(3) (2)/(3) (2)/(1) 75.2 51.5 68.5% 51.3 100.4% 4.8 0.7 14.9% 1.7 42.5% 0.1 0.1 71.4% 0.8 17.5% Europe 0.4 0.0 0.0% 0.0 0.0% Asia 0.0 0.0 0.0% 0.0 0.0% China 0.0 0.0 0.0% 0.0 0.0% Exports 4.3 0.6 13.6% 0.9 64.6% 80.0 52.2 65.3% 53.0 98.6% 5.0 -2.6 -- -2.5 -- Overseas North America Total Operating income Traffic/Road Management System *Results for the 9 months ended 12/2004 include an actual performance of the ATM business. Net sales: ¥27b Operating income: ¥4b 98% YOY excluding ATM business in previous year 15 Segment Information HCB (Healthcare Business) Nine Months ended Dec. 31, 2005 Manufacture and sale of home and professional healthcare equipment Blood Pressure Monitor Digital Blood Pressure Monitors, Digital Thermometers, Pedometers, Body Composition Analyzers (Body-fat Analyzers), Electronic Pulse Massagers, Massage Chairs, etc. Net sales： sales： ¥44.9b； Operating margin： margin： 14.3% Net ：：¥44.9b； ；； Operating ：：14.3% Mainfactor factorin inincluding including sales sales isis merger mergerof of Main CMT(COLINMedical Medical Technologies) Technologies) in inthis this July July CMT(COLIN Body Composition Analyzer （billion yen) 9 months ended 12/2004 Actual(1) HCB 9 months ended 12/2005 Actual(2) Change from last year (2)/(1) 9 months Change from ended Original 12/2005 budget Original budget(3) (2)/(3) Japan 18.3 23.2 127.2% 20.0 116.2% Overseas 20.3 21.6 106.4% 21.0 103.0% 11.1 11.0 98.8% 11.0 99.8% Europe 6.2 7.2 115.2% 6.3 113.8% Asia 1.1 1.2 116.5% 1.1 112.8% China 1.9 2.1 112.1% 2.4 87.3% Exports 0.1 0.1 241.7% 0.2 72.5% 38.6 44.9 116.3% 41.0 109.4% 5.9 6.4 108.5% 6.5 99.0% North America Total Operating income Portable Electrocardiograph 16 Nine Months ended Dec. 31, 2005 Consolidated Balance Sheet Return of of aa substitutional substitutional portion portion of of pension pension fund fund resulted resulted in in substantial substantial decrease decrease Return in accrued accrued retirement retirement benefit benefit for for employees employees and and increase increase in in Shareholders’ Shareholders’ equity equity in Capital ratio ratio (Shareholders’ (Shareholders’ equity equity // Total Total assets) assets) :: 52.2% 52.2% to to 65.1% 65.1% Capital (billion yen) Consolidated B/S Total Assets Cash and cash equivalents Notes and accounts receivable, trade Inventories Other current assets Other assets Total Liabilities Bank Loans / Current portion of L/T debt Notes and accounts payable, trade Other liabilities Shareholders' Equity As of 12/31/2004 573.3 68.8 111.3 78.6 24.8 289.8 266.5 29.3 73.2 164.0 306.8 As of 3/31/2005 585.4 80.6 121.7 68.6 25.1 289.4 279.6 24.8 75.9 178.9 305.8 As of 12/31/2005 557.1 49.7 112.8 81.8 23.8 289.0 194.2 16.2 69.3 108.7 362.9 17 Nine Months ended Dec. 31, 2005 Consolidated Statements of Cash Flows Increased cash-out cash-out by by ¥3.8b ¥3.8b for for the the 99 months months vs. vs. same same period period in in prev. prev. year year Increased due to to investment investment for for future future growth growth and and acquisitions acquisitions due (billion yen) Consolidated Statements of C/F Net cash provided by operating activities 9 months ended 12/2004 9 months ended 12/2005 (reference) Year ended 3/2005 36.4 24.8 61.1 Net cash used in investing activities -27.5 Free cash flow Net cash used in financing activities Effect of exchange rate changes Net increase (decrease) Cash and cash equivalents at end of the period 8.9 -36.0 0.9 -26.2 68.8 -31.3 -6.5 -26.3 1.9 -30.9 49.7 -36.1 25.0 -40.7 1.2 -14.4 80.6 18 3. Forecast for the year Ending March 31, 2006 19 Year Ending March 31, 2006 Full-year Forecast of Consolidated Statements of Operations Original forecast ofのSales Profit is not revised 売上高、 、利益の 見通しは しは、 当初計画通り り 売上高 利益 見通and しは、 当初計画通 Statements of Income (billion yen) Year ended 3/2005 Year ending 3/2006 Change from last year Actual(1) Forecasts(2) (2)/(1) Year ending 3/2006 Original budget(3) Change from Original budget (2)/(3) Net Sales 608.6 625.0 102.7% 625.0 100.0% Gross Profit 249.8 256.0 102.5% 256.0 100.0% SG&A expenses 144.2 150.0 104.0% 150.0 100.0% R&D expenses 49.4 50.0 101.1% 50.0 100.0% Operating income 56.1 65.0 115.8% 65.0 100.0% NIBT 52.5 63.0 119.9% 63.0 100.0% NIAT 30.2 36.0 119.3% 36.0 100.0% 20 4. Supplementary explanation 21 Supplementary explanation Specific Factors influencing Operating Income Response to Regulated Chemicals RoHS will be completed by the end of March, 2006. Progress on RoHS is in line with our plan of the 9 months of FY 2005. Cost of response to regulated chemicals FY2004 ¥1.5 billion FY2005 (Forecast) ¥4.3 billion (billion yen) 6.0 5.0 4.3 4.0 3.0 2.0 2.4 1.0 1.5 March, 2005 (result) Dec., 2005 (result for 9 months) March, 2006 (estimate) 22 Progress of Key Strategic Themes (1) Sales Growth in New Tech Fields Supplementary explanation Sales performance in new tech fields is approx. ¥24b in the 9 months of FY2005 Although accelerate our efforts toward the original plan of FY2005, it would be difficult to achieve the original plan of FY2005 (billion yen) 90 Products; 80 70 AEC ：Laser radars for automobiles, etc. ECB : MEMS Sensors, LCD Backlight, etc. IAB : Automated Optical Inspection Machines, etc. Others 60 50 156% 40 160% 28.8 30 20 45.0 Over ¥50b increase Result for 9 months approx.¥24b GD2010 Phase2 target: ¥68b 18.0 18.0 10 0 FY2003 FY2004 FY2005 FY2007 (Actual) (Forecast) (Target) 23 Progress of Key Strategic Themes (2) Sales Growth in Greater China Supplementary explanation Sales performance inの Grater China isに approx. in 9 months FY2005 ２００７年度 ２００７年度の 目標達成に 目標達成 向け、USD300m さらに成長率 さらに成長率を を高ofめる 年度 成長率 Continued to be in a difficult situation to achieve the original plan of FY2005 ２００６年 ２００６年３月期は 月期は中華圏での 中華圏での売上 での売上ＵＳ＄ 売上ＵＳ＄５５１ ＵＳ＄５５１Ｍ ５５１Ｍを計画 (MUSD) 1,400 1330 1,200 1,000 Over ¥100b (=USD 1b) increase 800 551 600 +34% 412 400 200 325 246 201 +27%- Result for 9 months approx. USD300m +32% +22% FY01 FY02 FY03 FY04 (Actual) FY05(Plan) FY07(Target) 24