Consolidated Results for the Third Quarter Ended December 31, 2009

Q&A summary

Click on the appropriate question to view the answer.

Overall

Q1
Please explain the background to the improved income outlook?
A
Our fixed cost cuts exceeded plan. We originally planned cuts to the tune of 60-70 billion yen over the year, but we are currently looking at cuts of around 100 billion yen. Another reason behind our upward revision of our previous outlook of breakeven in ordinary income is that we are seeing steady growth in sales of products for enterprise.
Q2
Are foreign exchange effects included in the decrease in SGA expenses compared to the previous year?
A
Foreign exchange effects are excluded. However, there is a possibility that foreign exchange may slightly impact a comparison of SGA expenses at overseas subsidiaries.
Q3
You have revised your previous outlook of negative 4.5 billion yen extraordinary income and loss to negative 13 billion yen. Please give some details about this.
A
We are presently implementing structural reforms in our electronic devices businesses in accordance with our medium- to long-range business plan. As part of this, we booked impairments in some businesses at the end of FY2008. This fiscal year in these businesses, we are keeping investments to the minimum level required to maintain operations. We are following the relevant accounting rules and immediately carrying out impairments on these investments.
Q4
Please give me concrete details of and reasons behind the write-down of deferred tax assets.
A
This is an accounting procedure used to adjust accounting processes with policy regarding the payment of taxes.
Considering the taxable income of Seiko Epson Corporation and its wholly-owned domestic subsidiaries, we determined there was a risk of a review of realizable deferred tax assets as a result of the effects on taxable income of impairments and other taxable charges that had previously been booked in financial accounts. Based on our current forecast, we therefore included in taxation charges a write-down of deferred tax assets.
Q5
What will be the balance of deferred tax assets at the end of the period?
A
A small amount.

Information-related equipment

Q6
I see the information-related equipment business has a high operating margin. Is this because of fixed cost cuts or an improvement in printer hardware profitability?
A
Although fixed cost cuts have a bigger impact, we did achieve some successes in improving consumer inkjet printer hardware profitability, which had been an issue. Measures such as standardizing printer platforms and reducing the cost of molds contributed to the improvement of profitability.
Q7
Why was income in the information-related equipment segment over plan?
A
This was partly due to increased sales volumes of inkjet printer hardware and consumables. Compared to the previous year, we reduced fixed costs and improved the profitability of inkjet printer hardware.
Q8
Profitability improved in the printer business compared to the previous year, but were there changes in businesses other than inkjet?
A
Both page printers and business systems improved compared to the previous year.
Q9
What is behind the recovery of POS products and other business systems products? Please give an image of this business going forward.
A
Although the market has still not fully recovered, we are seeing signs of improvement in Europe and North America, while in China tax regulations have driven demand for SIDM printers. We think the market will continue to improve steadily.
Q10
What was behind the big recovery in projectors? Can you also give an idea of how this recovery will proceed and a timeline?
A
There was a dramatic improvement in business projectors, in particular for the education market, as economies experienced the benefits of the stimulus packages implemented by various governments. As a result, we achieved record shipments in the third quarter.
Going forward, we will keep a close eye on the progress of economic stimulus packages. We are also looking toward the education market in developing countries.

Electronic devices

Q11
How does Epson see the crystal market?
A
We believe the market for sensing devices will continue to expand. In addition, the supply situation for tuning fork crystals for timing devices has become tight.
We are not seeing any significant changes in the competitive environment. However, competition in AT crystals has become fierce as Asian competitors become conspicuous. We plan to ramp up cost cuts to make our products even more cost competitive.
Q12
Please tell me about current capacity utilization rates and your thinking about future capacity expansion?
A
At present, we are operating at full capacity. As for future capital expenditure, we are currently in the process of compiling our plan for the next fiscal year.
Q13
What is the latest progress in the transfer of certain assets in the small- and medium-sized display business?
A
Everything is proceeding according to plan.