1. FY2011 3Q Consolidated Financial Results and Full-Year Forecast

1) FY2011 3Q Consolidated Financial results

FY2011 3Q Consolidated Financial Results
Net Sales	68,877	YoY   (1,826)
Operating Income (Loss)	(1,320)	YoY   799
Ordinary Income (Loss)	(2,828)	YoY   593
Net Income (Loss)	(5,877)	YoY   (1,937)

Sales were strong in the U.S. (Positioning Business) and in Europe (Eye Care Business). But because of a slowdown in markets where the Finetech Business is active and the impact of the strong yen, net sales totaled about 95% of the amount recorded during the same quarter a year earlier. The Group succeeded in narrowing its operating loss by about ¥800 million, as business structure reforms yielded reductions in fixed costs and the cost of goods sold. Our ordinary loss also improved, narrowing by about ¥600 million year-on-year, despite the negative impact of the strong yen. The Group recorded a significant net loss on extraordinary losses taken as a result of the downsizing of the Finetech Business and our voluntary retirement program.

In the Positioning Business, growth in the U.S. and Asian markets was not enough to offset the negative effects of the high yen, and net sales declined by 0.3% year-on-year. The operating loss for this segment narrowed by ¥776 million year-on-year, as revenues improved in line with a reduction in fixed costs.

Net sales in the Eye Care Business rose by 3.4% year-on-year as growth in European markets outweighed the impact of the strong yen. The increase in net sales boosted operating income, which increased by ¥868 million from the same period a year earlier.

The Finetech Business posted a 19.3% year-on-year decline in net sales on a slowdown in projector-related products and sluggishness in markets for semiconductor and FPD-related products. Operating income deteriorated significantly, dropping by ¥845 million year-on-year, due to the net sales decrease.

2) FY2011 Full-Year Forecast

[Consolidated]		FY2011
		1Q-3Q		Full Year
		Actual	YoY(%)	Forecast	YoY(%)
Net Sales		68,877	97.4%	97,000	94.7%
Operating Income(Loss)		(1,320)	- %	1,800	100.1%
Ordinary Income (Loss)		(2,828)	- %	0	- %
Extraordinary Income (Loss)		(4,406)	- %	(5,400)	- %
Current Term (a quarter) Net Income (Loss)		(5,877)	- %	(5,000)	- %
ROE		---	---	(15.1)%	---
Dividends		￥2	---	￥4	---
Exchange Rate (Average)	US$	￥79.17	---	￥78.21	---
	EUR	￥111.32	---	￥108.71	---

The Topcon Group recorded extraordinary losses during the third quarter under review due to losses stemming from the downsizing of the Finetech Business. The Group has revised its full-year earnings forecast in consideration of the effects of the extraordinary losses as well as our performance and the business climate to date.

	Net Sales	Operating Income	Ordinary Income	Net Income	Net Income per share
Previous Forecast (A) (announced on October 28, 2011)	100,000	3,000	1,700	800	￥8.64
Revised Forecast (B)	97,000	1,800	0	(5,000)	￥(53.98)
Difference (B-A)	(3,000)	(1,200)	(1,700)	(5,800)	-
Change(%)	(3.0)%	(40.0)%	-	-	-
Result for the last foscal year (Reference)	102,470	1,799	608	(1,288)	￥(13.91)

Our revised forecast assumes that net sales, operating income and ordinary income will be lower than the amounts contained in our previous consolidated full-year earnings forecast (issued on October 28, 2011). This is partly the result of a deterioration in the performance of the Finetech Business caused by a sudden slowdown in the semiconductor and FPD-related markets. In addition, the Group posted extraordinary losses during the third quarter on losses tied to the downsizing of the Finetech Business and our voluntary retirement program. Owing to these and other factors, we now expect net income to decline significantly, and our revised projection is ¥5.8 billion less than previously forecast.

We have also revised the yen/euro exchange rate assumption that serves as the basis for our full-year earnings forecast. Our current forecast assumes major exchange rates of ¥75/dollar and ¥100/euro (¥75/dollar, ¥105/euro in the previous forecast).

The Topcon Group implemented a voluntary retirement program for full-time employees aged 40 and over from December 5 to December 27, 2011. The 126 employees who enrolled in the program retired on January 31, 2012.
 
The voluntary retirement program resulted in a special retirement expense of ¥700 million, but the Group estimates that the program will yield ¥1.2 billion in future profit enhancements, beginning in the next fiscal year.

The Topcon Group has revised its business policy in order to focus its investment of finite resources in Positioning and Eye Care, two businesses with high growth potential.

These changes mainly involve the downsizing of the Finetech Business. Measures include staff reductions affecting 150 personnel, scaling back from 20 business lines to 4, eliminating the Finetech business unit, and transferring these 4 lines to a wholly owned subsidiary beginning in April 2012. In keeping with these changes, we project that the Finetech Business will achieve higher profits on reduced revenues. Specifically, we estimate FY2012 net sales of ¥6.3 billion (down ¥7.7 billion compared with the FY2011 projection) and operating profit of ¥200 million (up ¥1.4 billion compared with the FY2011 projection).

Q. Will the downsizing of the Finetech Business result in any redundant facilities? Also, will Topcon simply halt some operations rather than transferring them?
A. Some facilities being used at Tokyo headquarters and in China will become redundant, but they have been included in the exit costs. There will be some remaining IP assets and technologies related to the businesses Topcon is exiting, and we would like to find a buyer for them.

Q. What implications do these drastic structural reforms have for the figures in Topcon’s Mid-Term Business Plan?
A. We believe that net sales will decline in line with the downsizing of the Finetech Business. But we don’t believe it is necessary to revise our income projections, because the effects of reductions made in past fiscal years to fixed costs and the cost of sales will materialize.

Q. Does Topcon’s mid-term growth strategy include any measures concerning development or production systems for China and other newly developing countries?
A. At present, our Beijing factory primarily produces products for the Positioning Business. However, we would like to begin full-scale production in China of products for the Eye Care Business, and we are developing a plan for a new factory that would accommodate both businesses. Initially, we expect to produce eyeglass-making machinery for the Eye Care Business in China. We intend to lay out the specifics concerning the timing and scale of our plans when we release our FY2012 Mid-Term Business Plan.

Q. How much demand do you anticipate from recovery activities related to the Great East Japan Earthquake?
A. We anticipate year-on-year growth of around 20%. However, Japan accounts for around 15% of the Positioning Business’s overall net sales, so the effect on business as a whole will likely be limited.

Q. Could you comment further on orders received for common platform total station products for positioning?
A. In terms of numbers of units, we have a production system in place to handle 1.5 times the volume compared with a year ago, and the response from around the world has been considerable. The line’s new products are equipped with TSshield as a standard solution. The TSshield’s functions are similar to those of KOMTRAX by construction equipment manufacturer Komatsu Ltd. We believe the TSshield offers numerous advantages to users, distributors and rental companies, thanks to its resource management functions and other capabilities.