MINEBEA Financial Review Tsugio Yamamoto President and - - PDF document

MINEBEA Financial Review

Tsugio Yamamoto President and Representative Director November 10, 2000

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\ mill llio ions / /$thousands ($1= $1=\ 106. 106.84) Plan Result Achiev evem emen ent Net S Sales ¥139, 139,000 ¥14 142, 2,124 124 2. 2.25% 25% ($1, $1,301, 301,011 ) ($1, $1,33 330, 0,251 251 ) Operat ating I Income me ¥15,000 ¥17,177 177 14. 14.51% 51% ($140 $140,397 97 ) ($16 $160, 0,773 773 ) Ordinary I Income me ¥10,000 ¥12,987 987 29. 29.87% 87% ($93, $93,598 ) ($12 $121, 1,556 556 ) Net I Income me ¥6,000 00 ¥7,084 084 18. 18.07% 07% ($56, $56,159 ) ($66 $66,305 305 ) FY 2 2000 H 000 Half Y Year ar Consolid idated F Financia ial H l Highlights Plan an an and R Result

Minebea's performance for the first half of the fiscal year ended on September 30, 2000 is shown

• above. Net sales exceeded the projection by 2.25%, while operating income topped the projection

by 14.51%, ordinary income soared 29.87% above the projection, and net income rose as high as 18.07% above the target.

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Operating Margin

8.00 9.00 10.00 11.00 12.00 13.00 14.00

Sep-98 Mar-99 Sep-99 Mar-00 Sep-00

Plan Results %

The ratio of operating income to net sales improved by 1.2% to 12.1% compared with 10.9% in the preceding year.

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Mill illio ions o

• f Yen

Se Sep-99 99 Sep-00 00 Machiner ery Net et S Sales 64,515 → 60, 60,953 C Compon

• nen

ents Opera erating M Margin *17.2% → 19 19.7% Elec ectron

• nic D

Device ces Net et S Sales 73,324 → 75, 75,472 a and C Compon

• nen

ents Opera erating M Margin *5 *5.6% → 6. 6.2% 2% Cons nsume umer and and Net S Sales 5,325 325 → 5, 5,699 Oth Others Op Operating M Marg rgin *7.5% → 9. 9.3% 3% Total Net S Sales 143,164 164 → 142, 142,124 Operating Mar Margin *10. 10.9% 9% → 12 12.1% * R Result i in F Fiscal al Y Year E Ended 31 Mar 31 March 2000 h 2000 Perform

• rmance B

e By P Product C Category ry

<Machinery Components> Net sales decreased by 3.562 billion Yen compared with the same period of the previous year. This is mainly because the high value of the yen decreased overseas net sales when converted into Japanese currency. Increased production of bearings favorably affected operating income, and the ratio of operating income to net sales rose 2.5% to 19.7% over the average ratio of

• perating income to net sales recorded in the preceding year.

<Electronic Devices and Components> Net sales, though negatively affected by the appreciation of the yen, increased by 2.148 billion Yen compared with the same period of the previous year. In addition, the ratio of operating income to net sales improved 0.6% over the average ratio of operating income to net sales during the preceding year The reasons for the improved ratio of operating income to net sales for electronic devices and components are that the Spindle Motor Division has turned profitable since June, that the profit ratio of electronic devices such as FDD heads improved, and that we have managed to maintain the average unit selling prices of such products as keyboards and speakers.

4

Net Sales by Region

56,918 30,396 57,029 40,181 16,808 38,883 16,967 28,106 10,000 20,000 30,000 40,000 50,000 60,000 Japan Asia North/South America Europe Sep-99 Sep-00

Millions of Yen

<Southeast Asia> Net sales in this region went up by 1.298 billion Yen from the level in the corresponding period of the previous year. Also, the ratio of operating income to net sales rose more than 2% from the level posted in the same period of the preceding year. We anticipate production shift by our customers to Southeast Asia will continue in the future. Since we have the largest production base in the center of the Southeast Asian market including Thailand, our competitive edge will be enhanced in proportion to an increase of sales in this region <Japan> Because many of Minebea's customers in Japan shifted their production to overseas, sales in Japan from these customers declined. However, through sales efforts Minebea achieved increased net sales in Japan compared with the same period of the preceding year. The ratio of operating income to net sales in Japan during the first half of the current fiscal year was below 10% at 9.98%. Minebea's ratio of operating income to net sales is somewhere around 10% in Japan.

5

Operating Income Ratio by Region

10.08 23.36 3.54 3.24 9.98 25.39 1.97 4.36 0.00 5.00 10.00 15.00 20.00 25.00 30.00 Japan Asia North/South America Europe Sep-99 Sep-00 %

<United States> Net sales declined by about 2.2 billion Yen from the level during the same period of the preceding year, and the ratio of operating income to net sales came down to about 2%. This is mainly attributable to the low demand from the aerospace industry and the high value of the yen that decreased the amount of net sales when converted into yen. Demand from the aerospace industry is gradually picking up since August this year. <Europe> Affected by the appreciation of the yen, net sales decreased by 0.159 billion Yen from the level in the corresponding period of the preceding year. However, net sales in the local currency

• increased. Our business is growing especially in Eastern Europe. The latest data show that sales

in Eastern Europe account for about 15% of the total sales in Europe.

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Netherlands 18% Germany 18% England 11% Italy 9% France 8%

Eastern Europe 15%

Others 21%

Sales Share of Europe

• Results of Sep-00 -

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\ milli illions/$thousands ds ($1= $1=\ 10 106. 6.84) 84) 1st 1st H Half (R (Result) 2n 2nd H Half (P (Plan) Re Revi vise sed Pl Plan Orig igin inal Pl Plan Net Sa Sales 142, 42,124 124 151 151,000 000 29 293, 3,124 124 290, 290,000 ($1, $1,330, 30,250 250 ) ($1, $1,413 413,328 328 ) ($2, $2,743 743,579 579 ) ($2,714, 714,339 ) Operat ating I Income me 17, 17,177 177 18 18,000 000 35 35,177 177 33, 33,000 ($160, 60,773 773 ) ($168 $168,476 476 ) ($32 $329, 9,249 249 ) ($308, $308,873 ) Ordinary I Income me 12, 12,987 987 14 14,000 000 26 26,987 987 24, 24,000 ($121, 21,556 556 ) ($131 $131,037 037 ) ($25 $252, 2,593 593 ) ($224, $224,635 ) Net I Income me 7, 7,084 084 8,000 000 15 15,084 084 15, 15,000 ($66, 66,305 305 ) ($74 $74,878 878 ) ($14 $141, 1,183 183 ) ($140, $140,397 ) FY 2 2000 000 Con Consolida

• lidated F

ed Financia ial Hig l Highlig lights

Minebea was able to achieve the first-half results well above its projections. However, for the second-half projections, the Company presently sees no need for upward adjustments and will maintain the figures as originally planned. Net income, however, is projected to be less by 1.0 billion Yen than what was announced at the presentation of the business results for the previous business term. This is because Minebea estimates an expense of about 1.0 billion Yen in connection with the termination of its exclusive distributorship agreement with Keiaisha NMB Co., Ltd. effective the end of December 2000 that was made public on June 30, 2000.

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Reduction of Interest-bearing Debt

192,710 188,900 181,425 168,278 162,999 160,536

100,000 120,000 140,000 160,000 180,000 200,000

Mar-00 Sep-00 Mar-01

Gross Amount Net Amount

Millions of Ye n

During the first half of the current year, increased production of bearings and other products raised inventories by about 5.0 Yen billion over the level at the end of the preceding term. In addition, capital investment was implemented much earlier than planned. Despite these factors, Minebea was able to reduce the net balance of its interest-bearing debt to 162.999 billion Yen at the end of this September, down 5.279 billion Yen from the level at the end of the previous year.

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Outline of e of I Incen centive Wa e Warra rrant Pu Purp rpos

• se :

e : To ra To raise t e the s e sense of e of commi commitment of

• f

mi midd ddle ma managemen ment memb members ers t to a achiev eve e the t e three- ree-year ma managemen ment pl plan. Gr Grante antees : : Abo bout 9 ut 980 80 dir directors and m s and middle ddle man managemen ment memb members ers w worl rldwide. e. Exercise se P Pric ice : e : ¥ 1, 1,35 350 Exercise se P Period : : May 2 ay 20, 20 2004 04 ～ Se Septe ptembe ber 30, 30, 2000 Nu Number er of

• f s

shares es i issued ed by ex exer erci cise of

• f w

warra rrants : : 2, 2,96 960 tho 0 thousan sand shar shares (0. (0.7% o

• f issue

issued

Minebea introduced an incentive system based on stock option plan on November 1, 2000. Minebea has decided to grant stock options to its assistant section managers and those members in higher positions as well as officers and directors, and also to selected officers and directors and certain executive members of Minebea's overseas subsidiaries. The total number of optionees is expected to be about 980. Minebea has thus shaped a wide-ranging stock option plan. This is because Minebea considers it indispensable to raise the sense of commitment of all these middle management members in order to endeavor toward the fulfillment of the three-year management plan on an across-the-board basis.

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Production Quantity of Ball Bearing

40,000 60,000 80,000 100,000 120,000 140,000 160,000

Apr- 99 May-99 Ju n-9 9 Ju l-9 9 Aug-99 Se p- 99 Oct-99 Nov-9 9 Dec- 99 J an -00 Feb-0 0 M ar- 00 Apr-00 M ay-0 0 J un- 00 J ul- 00 Au g-0 0 Sep-00

Sales Quantity: thousand pcs

<Bearings> In the three-year plan, production for the current year is projected to be 0.133 billion pieces per month on the average. With our plan to increase production capacity to 0.15 billion pieces per month within this year, we projected more production in the second half. However, the first-half results show that Minebea has already achieved the monthly average production of 0.135 billion pieces. Equipment installation being in progress as scheduled in accordance with the planned increase of production to 0.15 billion pieces per month, Minebea thinks that the total production throughout the current year will be well over 1.6 billion pieces.

11 Fan Fan M Moto tor Pr Prod

• ducti

tion Qua Quanti tity ty 5～６mi million per n per month month ⇒ 10 m millio illion pe per m r month Constr Construc ucti tion of a

• f a N

New P Plant Co Construction o

• f a

a Ne New P Plant in in S Shanghai w will b ill be co comple leted d in in J July ly 20

• 2001. T

This n is new p plant is m is main inly ly fo for p r production o

• f fa

fan m motors a rs and pa d part rtia ially lly fo for b r ball ll be bear arin ing p g parts s such as as r rubbe bber s seals als. (T (Total in invest stment a amount w will b ill be 4 4.8 b 8 bill illio ion y yen) Ne New Ap Appl plica icatio ions ・Chi Chip-c

• cool
• oling fa

fans w ns with hea th heat si sinks nks ・Larg rge-size sized fa d fans a ns and fa d fan t n trays fo s for r tel telecommun mmunicati tion

• ns eq

equi uipment

<Fan Motors> Demand is presently soaring for chip-cooling fans with heat sinks and large fans and fan trays for telecommunications equipment. As a result, monthly production of fan motors has far exceeded 5-million units level. Minebea has decided to construct a new facility next to its fan motor production facility in

• Shanghai. The new building is scheduled for completion in July 2001. The new facility will house

equipment for increased production of fan motors. Also, the Company will move the production lines for bearing rubber seals and for jigs & tools from other facilities to the new building, and will make additional investments in these production lines. The total investment amount will be about 4.8 billion Yen. This means Minebea will advance the timing of capital investment that is scheduled for the next business year and the year after next under the three-year plan. When the new facility comes into operation, Minebea's fan motor production capacity will increase to 10 million units per month.

12 HDD Sp DD Spindle e Moto tor Spin indle dle Mo Motor fo r for 2 r 2.5-in inch ch HD HDD ・Or Orders f for 2.5- 2.5-inch ch H HDD s DD spindle e motor motors h have been ve been re rece ceiv ived f from a all o ll of 4 4 m major r HD HDD m manufacture rers. rs. Pr Prod

• ducti

tion Qua Quanti tity ty ・Monthl nthly p produc uction q

• n quanti

tity ty w will r reach to h to 3.5 m 5 mill illio ion u units in in D Dec-00. Profit it & L & Loss S ss Situatio ion ・HD HDD spin spindle m dle motor b r busine siness ha ss has s gone int ne into t the b e black k since Ju Jun-00. 00. Fl Fluid Dyn Dynamic mic B Beari aring ( g (FDB DB) an and HDD Sp DD Spindle e Moto tor wi with th FDB FDB ・Mass p production

• n wi

will ll s star art i t in N Nov~ v~Dec Dec-00 as 00 as s scheduled.

<HDD Spindle Motors> With regard to spindle motors for 2.5-inch HDDs, we have secured orders from four leading 2.5- inch HDD manufacturers. All these motors use RO bearings. As a result, Minebea's overall spindle motor production is expected to reach 3.5 million units per month at the end of this year. In terms of profit and loss, this product division has turned profitable since June this year. This is

• ne of the factors that contributed to the improved ratio of operating income to net sales for

electronic devices and components. Preparations for mass-production of HDD spindle motors with fluid dynamic bearings are progressing smoothly. We expect to be able to launch mass-production of this product within November as originally planned, or in December at the latest.

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Ro Rotary tary Co Components fo ts for Auto r Automotive ve U Use

• Mov
• vemen

ement -

• VR Re

Resolv lver with with R/ R/D Co D Converte ters ・Tie up up with with Ana Analog De Devic vices, s, Inc Inc., a wo a world le lead ading ing Ameri erican R R/D converte converter ma r manu nufacturer. cturer. ・Sh Ship ipment o nt of sam sample les wi s will st ll star art in N t in Nov- v-00. 00. DC B Brushles ess M Motor f r for E r Elect ectric Pow Power S r Steeri eering S System em De Delphi hi Auto tomotive tive Syste System anno announce unced

• n Se

Sep. 29, 20 2000 th 00 that it at its EP s EPS sys S system with o with our DC br brush ushless m ss moto tor wo woul uld be d be lo loade aded o

• n

Vo Volk lksw swage agen L LUPO.

<Rotary Components for Automotive Applications> Here are two topics to introduce to you with regard to this product category. One is about Minebea's business tie-up with Analog Devices, Inc. concerning RD converters for VR resolvers. To control motors requires sensing the rotation angle and the revolutions per minute of the motor

• shaft. Among many types of rotation angle/r.p.m. sensors is a VR resover with RD converter.

A VR resolver with RD converter is presently expensive. Through the tie-up with Analog Devices, Inc., we aim to mass-produce this type of sensors at a lower cost and offer them at an affordable

• price. Target applications of this sensors include motors for electric power steering systems,

which are already in production at Minebea's manufacturing facilities in Thailand, engine motors for hybrid vehicles and electric vehicles, and also motors for horizontally adjusting the optical axis

• f a vehicle's headlights. Automobile manufacturers and automotive component makers both at

home and abroad are showing a keen interest. The other is that electric power steering systems using Minebea-made motors will be at work on Volkswagen vehicles. Electric power steering systems with Minebea-made motors have to date been used in the Fiat

• Punto. On September 29, 2000, Delphi Automotive Systems announced that Volkswagen

decided to use these power steering systems in its Lupo. Thinking about Minebea's well-timed move in anticipation of potential demand in the future such as launching VR resolvers with RD converters, and an achievement that enables Minebea to get a head start on its competitors such as production of motors for electric power steering systems that has been used in a mass-produced vehicle, these aggressive and timely strategic moves will no doubt contribute considerably to the Company's future growth in the automotive rotary component market. Minebea's strategies for rotary components for automotive applications are as follows:

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Ro Rotary tary Co Components fo ts for Auto r Automotive ve U Use

• Strate

trategy - gy -

• 1. To p

To prod

• duce s

e small rot rotary ry comp compon

• nen

ents on

• nly.
• 2. To p

To prod

• duce a

e all comp compon

• nen

ents i in forei reign cou countri ries es, , mainly in T inly in Thailand nd.

• 3. Prop

Propos

• sal-ori

rien ented s sales. (Focus o us on high- high-value alue-added product ucts)

1) To aim at the manufacture of small rotary components such as brushless DC motor and VR resolver with RD converter where Minebea can make the most use of its own know-how and technologies. 2) To manufacture all of its products overseas including primarily Thailand in order to add higher price competitiveness. 3) To adopt proposal-oriented sales strategy and concentrate on high-value-added products with regard to motors for automotive applications and VR resolvers with RD converters. Conclusion Minebea has had a very promising start in the business results for the first six months of the three-year plan. Given the accomplished first-half operating income of 17 billion Yen, Minebea would see no major difficulty in achieving the target operating income for the second half at ¥18 billion. In the second half of the current business term, Minebea intends to do the groundwork for accomplishing management targets for the next year and to implement measures for further strengthening Minebea's financial position.