Casio Integrated Report 2019

Editing Policy

This report is published to provide information on Casio's medium- to long-term strategies for achieving a sustainable society and its CSR (Corporate Social Responsibility) initiatives. The aim is to enhance communication with stakeholders and improve future Casio initiatives. Figures on pages 12 to 31 are rounded to the nearest 100 million yen.

Integrated Report

Beginning this fiscal year, Casio is publishing this Integrated Report to communicate its medium- to long-term strategies for achieving sustainable growth in conjunction with society.

CSR & Environment Website

Information is published to provide a comprehensive report on Casio's CSR activities and to create a website with excellent searchability. Visit: https://world.casio.com/csr/

Sustainability Report 2019

A downloadable PDF version of the information published on the CSR & Environment Website is available. This PDF allows for batch printing of all information or printing of desired sections.

Notes on Forward-Looking Statements

Earnings estimates and statements that are not objective facts within this Integrated Report are based on judgments made using information available at the time of creation. These statements contain risks and uncertainties. Actual earnings may differ from indicated estimates due to various factors, including economic conditions, market trends, and currency rates.

Casio Corporate Creed: Creativity and Contribution

The Casio corporate philosophy is 'Creativity and Contribution.' This signifies a commitment to benefiting society by maximizing the unique strengths of the Casio Group to create new markets that meet the evolving needs of society. Through 'Creativity for Contribution,' Casio aims to be a corporation that continuously generates new value, a value that seamlessly integrates into the lifestyles of its customers.

[Image description: Calligraphy featuring the Japanese characters for 'Creativity' (創造) and 'Contribution' (貢献).]

Casio History

Casio Computer Co., Ltd. was founded in 1957 by the four Kashio brothers: Tadao, Toshio, Kazuo, and Yukio. Leveraging their individual expertise, they established Casio Computer after successfully developing the world's smallest electronic calculator. Toshio Kashio, the second eldest brother and head of development, believed that invention is the mother of necessity. His philosophy was not to develop products based on existing user demand, but rather to create new demand through the products developed. This development philosophy, driven by advanced digital technology, has led to the introduction of new products and inventions, including calculators, timepieces, and electronic musical instruments. This philosophy continues to guide Casio in creating new value.

[Image description: A black and white photograph of the four Kashio brothers.]

Key historical milestones include:

• 1957: Development of the '14-A', the world's first compact all-electric calculator, offering quiet and high-speed calculations.
• 1961: Introduction of the 'TUC', the world's first compuwriter accounting computer/billing machine, optimizing office and storefront administration.
• 1972: Creation of the personal calculator market with the 'Casio Mini', the first personal calculator, expanding calculator use to households.
• 1974: Drove popularity of digital wristwatches with the 'Casiotron', an electronic digital watch featuring an automated calendar.
• 1976: Launch of the electronic cash register 'Σ-50ER'.

The company experienced business diversification, overseas expansion, and growth in consumer use of calculators, as depicted in a net sales transition chart from 1957 to 1980.

Product Evolution and Business Areas

Casio's product development has spanned various categories:

• Projector Business: Introduced the world's first mercury-free high luminescence projector 'XJ-A145' in 2010. The mobile phone business was sold off in the same year.
• Electronic Dictionary Business: Launched the 'XD-500' electronic dictionary in 1996, featuring full dictionary content. By 2016, total global electronic dictionary shipments exceeded 30 million units.
• Timepiece Business: Disrupted the wristwatch market with the shock-resistant G-SHOCK in 1983. By 2017, G-SHOCK shipments exceeded 100 million units.
• Musical Instrument Business: Introduced the Casiotone 201 in 1980. By 2019, total global electronic musical instrument shipments exceeded 90 million units.
• Educational Computer Business: Developed the world's first graphing scientific calculator 'fx-7000G' in 1986 to aid visual understanding of scientific formulas. By 2019, total global shipments of calculators exceeded 1.6 billion units. The business also includes electronic dictionaries and a new web app initiative.
• System Equipment Business: Introduced the LCD shutter-type page printer 'LCS-2400' in 1985 and the 'ADPS R1' office information processor in 1989.
• Compact Digital Camera Market: Created the market with the 'QA-10' filmless camera in 1995. The company later withdrew from this business in 2018 after selling off device business in 2010.

The period around the 2008 financial crisis saw a contraction in the digital camera market, leading to business selection and concentration.

Business Model

Casio's business model is centered on 'Value Unique to Casio,' which involves maximizing the Group's strengths and linking them with latent market needs to create new customer value. This is achieved through innovation in proprietary technologies and assets, such as G-SHOCK technology and the GAKUHAN business model, combined with unique creativity to identify latent needs within megatrends.

The model is visualized as:

• Social Capital: Encompasses Financial, Manufacturing, Intellectual, Human, Social and Relationship, and Natural Capital.
• Maximizing Strengths: Focuses on 'Diverse and creative technology related to people,' including 'Fusion of functional value and sensory value,' 'Compact and energy-saving,' 'Robustness,' and various technological capabilities like Text, Figures, Time, Sound sources and acoustics, Sound, Emotion, Light sources, Printing, Image processing, Movement, and Sensing algorithm. These strengths are applied to specific brands/models like the G-SHOCK brand and the GAKUHAN business model, targeting specific stakeholder groups like 'Both stakeholders and fans of Casio.'
• Market: Identifies target markets such as the 'Strong and unique market centered on the G-SHOCK brand,' 'Mathematics education markets worldwide,' 'New students matriculating each year,' 'People learning and enjoying music,' 'Educational workplaces looking to improve learning efficiency,' and 'Small franchises looking to improve management efficiency.'

The value creation process involves developing finished products and services that address latent user needs, leading to new experiences and becoming valuable parts of daily lifestyles. Casio aims to foster new markets and provide continuous evolution of the user experience.

Business Domains and Social Value Goals:

• Timepiece Business: Promotes user health through watches and wrist devices, and reduces environmental load by minimizing resource use. (SDGs: Good Health & Well-being, Responsible Consumption & Production, Life on Land)
• Educational Computer Business: Achieves better mathematics education, improves education levels through training, and reduces environmental load. (SDGs: Quality Education, Responsible Consumption & Production, Life on Land)
• Language Education Business, Musical Instruments Business, Projector Business, System Equipment Business: Provide opportunities for broad-based knowledge, develop educational infrastructure, and reduce environmental load. (SDGs: Quality Education, Responsible Consumption & Production, Life on Land)

Business Summary

For the fiscal year ended March 2019, net sales decreased due to the withdrawal from the compact camera business and economic slowdowns, but structural reforms improved the profit structure. Net sales were 298,161 million yen, operating profit was 30,262 million yen, and profit attributable to owners of parent was 22,135 million yen, with earnings per share (EPS) improving to 89.86 yen.

Net Sales Breakdown (Fiscal Year Ended March 2019):

• Consumer Segment: 86.3%
• System Equipment Segment: 11.4%
• Others Segment: 2.3%
• Timepiece Business: 57.6% (within Consumer Segment)

[Chart Description: A pie chart showing the breakdown of Net Sales by segment for the fiscal year ended March 2019. The Consumer Segment represents the largest portion at 86.3%, followed by System Equipment Segment at 11.4%, and Others Segment at 2.3%. The Timepiece Business is highlighted as 57.6%.]

[Chart Description: Three bar charts showing Net Sales, Operating Profit, and Profit Attributable to Owners of Parent (in millions of yen) for the fiscal years ending March 2017, 2018, and 2019. Net Sales show a slight decrease from 321,213 (2017/3) to 298,161 (2019/3). Operating Profit shows a slight increase from 30,636 (2017/3) to 30,262 (2019/3). Profit Attributable to Owners of Parent shows a consistent increase from 18,410 (2017/3) to 22,135 (2019/3).]

Segment Performance

Consumer Segment:

• Major Products: Watches, clocks, electronic dictionaries, calculators, label printers, electronic musical instruments.
• Annual Results: Segment net sales were 257,354 million yen (down 4.3% YoY). Segment profit increased by 9.1% YoY to 38,232 million yen, benefiting from structural improvements despite withdrawal from the compact camera business.
• Timepiece Business: Favorable performance driven by strong sales of metal products like the GMW-B5000. Maintained high profitability despite economic slowdown.
• Educational Computer Business: Stable sales of scientific calculators to students. Profitability secured for electronic dictionaries. Launched a web app business. The Privia PX-S1000 digital piano was well-received.

[Chart Description: Bar charts for Consumer Segment showing Net Sales and Segment Profit (in millions of yen) for 2017/3, 2018/3, and 2019/3. Net Sales decreased from 272,804 to 257,354. Segment Profit increased from 35,028 to 38,232.]

System Equipment Segment:

• Major Products: Handy terminals, electronic cash registers, management support systems, data projectors.
• Annual Results: Net sales were 33,821 million yen (down 11.7% YoY) in FY2019, with operating losses of 910 million yen. This followed improved profitability in FY2018 due to withdrawal from low-profitability businesses, but was impacted by postponed special orders for cash registers in France in FY2019.

[Chart Description: Bar charts for System Equipment Segment showing Net Sales and Segment Profit (Loss) (in millions of yen) for 2017/3, 2018/3, and 2019/3. Net Sales decreased from 39,734 to 33,821. Segment Profit/Loss shifted from a profit of 583 (2017/3) to a loss of -910 (2019/3).]

Others Segment:

• Major Products: Formed parts, molds, and other proprietary businesses.
• Annual Results: Recorded net sales of 6,986 million yen (down 7.9% YoY) and segment profit of 336 million yen (down 41.1% YoY).

[Chart Description: Bar charts for Others Segment showing Net Sales and Segment Profit (in millions of yen) for 2017/3, 2018/3, and 2019/3. Net Sales decreased from 8,675 to 6,986. Segment Profit decreased from 570 to 336.]

Global Expansion

Casio operates globally with head offices, sales companies, and production companies.

Europe:

• Net Sales: Decreased from 53,774 million yen (2017/3) to 50,822 million yen (2019/3).
• Employees: Remained stable, around 700-707 employees from 2017/3 to 2019/3.

Asia, Others:

• Net Sales: Decreased from 124,108 million yen (2017/3) to 114,905 million yen (2019/3).
• Employees: Remained stable, around 7,144-7,474 employees from 2017/3 to 2019/3.

[Chart Description: Bar charts for Europe and Asia, Others regions showing Net Sales and Employees (No. of people) for 2017/3, 2018/3, and 2019/3.]

Employee Composition (2019/3):

• Total Employees: 11,868
• Asia, Others: 7,144 employees (60.2%)
• Japan: 3,758 employees (31.7%)
• Europe: 707 employees (5.9%)
• North America: 259 employees (2.2%)

Ratio of Net Sales (2019/3):

• Total Consolidated Net Sales: 298,161 million yen
• Asia, Others: 114,905 million yen (38.5%)
• Japan: 94,512 million yen (31.7%)
• Europe: 50,822 million yen (17.1%)
• North America: 37,922 million yen (12.7%)

[Chart Description: A pie chart showing Employee Composition by region for 2019/3. Asia, Others accounts for the largest share (60.2%), followed by Japan (31.7%), Europe (5.9%), and North America (2.2%).]

Japan:

• Net Sales: Decreased from 107,067 million yen (2017/3) to 94,512 million yen (2019/3).
• Employees: Decreased from 3,957 (2017/3) to 3,758 (2019/3).

North America:

• Net Sales: Decreased from 41,049 million yen (2017/3) to 37,922 million yen (2019/3).
• Employees: Remained stable, around 252-259 employees from 2017/3 to 2019/3.

[Chart Description: Bar charts for Japan and North America showing Net Sales and Employees (No. of people) for 2017/3, 2018/3, and 2019/3.]

Transitions in Overseas Net Sales and Ratio of Sales:

Overseas net sales have fluctuated, reaching 203,649 million yen in 2019/3. The overseas net sales ratio has generally increased, reaching 68.3% in 2019/3 from 47.9% in 2010/3.

[Chart Description: A bar chart showing Overseas Net Sales (millions of yen) and a line graph showing Overseas Net Sales Ratio (%) from 2010/3 to 2019/3. Overseas net sales show fluctuations but are generally higher in later years. The overseas net sales ratio shows a clear upward trend.]

Financial Highlights

Net Sales / Operating Profit / Operating Margin:

• Net sales decreased from 338,389 million yen (2015/3) to 298,161 million yen (2019/3).
• Operating profit showed fluctuations, ending at 30,262 million yen in 2019/3.
• Operating margin ranged between 9.2% and 12.0% over the period.

Profit Attributable to Owners of Parent / ROE:

• Profit attributable to owners of parent increased from 18,410 million yen (2017/3) to 22,135 million yen (2019/3).
• Return on Equity (ROE) ranged from 7.0% to 15.4% over the period.

Earnings per Share (EPS): EPS increased from 72.67 yen (2017/3) to 89.86 yen (2019/3).

Equity / Equity Ratio: Equity increased from 204,158 million yen (2015/3) to 211,594 million yen (2019/3). The equity ratio remained stable, around 54.5% to 59.2%.

Capital Investment: Capital investment ranged from 5,496 million yen to 7,741 million yen between 2015/3 and 2019/3.

Cash and Cash Equivalents / Interest-bearing Debt: Cash and cash equivalents remained strong, around 110,737 million yen to 134,554 million yen. Interest-bearing debt showed a decreasing trend, from 77,293 million yen to 69,223 million yen.

Cash Dividends per Share / Treasury Acquisition / Total Dividend Payout Ratio: Cash dividends per share increased, and the total dividend payout ratio fluctuated, reaching 63.0% in 2019/3. A special commemorative dividend was issued in FYE 3/2018.

Free Cash Flows: Free cash flows showed variability, with 14,511 million yen recorded in 2019/3.

[Chart Descriptions: Multiple bar and line charts illustrate trends for Net Sales, Operating Profit, Operating Margin, Profit Attributable to Owners of Parent, ROE, EPS, Equity, Equity Ratio, Capital Investment, Cash and Cash Equivalents, Interest-bearing Debt, Cash Dividends per Share, Treasury Acquisition, Total Dividend Payout Ratio, and Free Cash Flows for the fiscal years 2015/3 through 2019/3.]

Nonfinancial Highlights

Number of Board Members / Ratio of Outside Directors: The number of board members remained consistent, with the ratio of outside directors increasing from 18.2% to 20.0% between 2017/6 and 2019/6. Casio transitioned to an Audit & Supervisory Committee structure in June 2019.

Number of Employees / Rate of Female Employees: Total Casio Computer employees were around 2,500-2,900. The rate of female employees increased from 14.5% in 2015/3 to 16.1% in 2019/3.

Number/Rate of Female Executives: The number of female executives increased from 2.6 per 100 in 2015/3 to 2.9 per 100 in 2019/3. The rate of female executives also saw a slight increase.

No. of Persons Taking Childcare Leave / Rate of Return from Childcare Leave: The number of persons taking childcare leave remained relatively stable, with a high rate of return from childcare leave (100% in recent years).

Overtime Hours (average per month): Average monthly overtime hours showed a decreasing trend, from 16.1 hours in 2015/3 to 12.2 hours in 2019/3.

Green Star Product Sales Ratio: This ratio increased significantly from 52.0% in 2015/3 to 72.0% in 2019/3, indicating growth in environmentally conscious product sales.

Greenhouse Effect Gas Production Volume: Production volume showed a slight decrease, from 38,224 t-CO2 in 2015/3 to 35,796 t-CO2 in 2019/3.

Heat Calculated Using Energy Consumption: Energy consumption remained relatively stable, around 612,632 GJ to 660,479 GJ.

[Chart Descriptions: Multiple bar and line charts illustrate trends for Number of Board Members, Ratio of Outside Directors, Number of Employees, Rate of Female Employees, Number/Rate of Female Executives, Persons Taking Childcare Leave, Rate of Return from Childcare Leave, Overtime Hours, Greenhouse Effect Gas Production Volume, Green Star Product Sales Ratio, and Heat Calculated Using Energy Consumption for the fiscal years 2015/3 through 2019/3.]