Aim to be a Truly Global, Truly Excellent Company

All of us at the Topcon Group extend our sincere condolences to everyone affected by the Great East Japan Earthquake, and our heartfelt wishes for the region’s rapid recovery and revitalization.

FY2011 3Q Financial Results
 
The U.S. economy was in a gradual recovery mode during the third quarter under review, while Europe’s financial uncertainties made for challenging conditions. The situation in China and other newly developing economies varied by country, but clouds have begun to gather over the region’s overall expansionary trend.     
 
Economic activity began to pick up in Japan in the aftermath of the March 11 disaster. Concerns remained about the slowdown in Europe and the high value of the yen, but business conditions on the whole were recovering.
 
The Topcon Group views the current period of flux as an opportunity to make great strides. Mobilizing our collective strengths, we are challenging ourselves anew to achieve “profitable, sustainable growth.” And with “Reform & Enhancement” as our slogan, we are taking the measures needed to rapidly establish a stable revenue base and a sound financial structure, and to transform Topcon into an even more robust company that is less susceptible to the external environment. 
 
Moreover, the Topcon Group has determined that it is essential to work toward further strengthening profitability and improving our financial health. This comes against a backdrop of deepening concerns about a deterioration in business conditions caused by last year’s appreciation of the yen, and increasing uncertainty about the global economic outlook. In addition to implementing a voluntary retirement program in the third quarter under review, the Group has also decided to significantly scale down the Finetech Business beginning in the fourth quarter of FY2011.
 
(Group net sales)
The Eye Care Business enjoyed brisk YoY sales, particularly in Europe. But net sales deteriorated overall due to sluggish market conditions in the Finetech Business, and the foreign exchange impact. Group net sales came to ¥68.877 billion, down 2.6% YoY.
 
(Group income)
In spite of the decline in net sales, Group-wide business structure reforms drove down fixed costs and the cost of goods sold. Accordingly, our operating loss came to ¥1.320 billion (an improvement of ¥798 million YoY), and our ordinary loss totaled ¥2.828 billion (an improvement of ¥593 million YoY). The Group’s quarterly net loss worsened in YoY terms, coming to ¥5.877 billion (an increase of ¥1.936 billion YoY). This was the result of extraordinary losses related to the downsizing of the Finetech Business and our voluntary retirement plan.
 
(Operating income by business segment)
The Positioning Business expanded in the U.S. and Asian markets. But due to the impact of the strong yen, net sales edged down to ¥35.773 billion, a 0.3% decrease YoY. The segment posted an operating loss of ¥713 million. This represented a YoY improvement of ¥776 million, and was made possible by revenue enhancements resulting from lower fixed costs and other factors.   
 
The strong yen also affected the Eye Care Business, but growth in European markets resulted in net sales of ¥22.811 billion, up 3.4% YoY. With revenues enhanced by the growth in net sales, the segment reported operating income of ¥299 million, a YoY improvement of ¥868 million.
 
The Finetech Business was affected by slow sales of projector-related products and weakness in the semiconductor and FPD-related markets. Factors such as these resulted in net sales of ¥10.292 billion, a decrease of 19.3% YoY. Lower net sales led to an operating loss of ¥906 million, a deterioration of ¥845 million YoY.

FY 2011 Forecast

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 yen
Revised Forecast (B)	97,000	1,800	0	(5,000)	(53.98 yen)
Difference (B-A)	(3,000)	(1,200)	(1,700)	(5,800)	―
Change (%)	(3.0)%	(40.0)%	―	―	―
Result for the last fiscal year (Reference)	102,470	1,799	608	(1,288)	(13.91 yen)

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).

Realizing Profitable, Sustainable Growth

The Topcon Group will to improve profitability and cash flow by reducing fixed expenses and product cost at the fastest possible speed and thereby surpass the competition. We are also making a further strong push in our TM-1 (Time to Market No. 1) movement, under which we are undertaking to achieve “World Leading monozukuri,” that is, we are pursuing the monozukuri (superb manufacturing) where manufacturing industries have their roots, as we aim to become a truly global, truly excellent company possessing global competitive strength.
 
The Topcon Group considers coexistence with society to be one of its corporate principles. We will devote our energies to promoting CSR initiatives, including activities that foster consciousness about the environment and benefit society, and also work to advance the establishment of corporate governance mechanisms and compliance activities.
 
Every member of the Topcon Group wishes to ensure that our company is deserving of the trust of all stakeholders, beginning with our shareholders and investors, and that it is a business that consistently achieves profitable, sustainable growth. I respectfully ask for your further support and encouragement.