Always Growing Stronger.
Always Evolving.
E B A R A C O R P O R A T I O N
A n n u a l R e p o r t 2 0 0 8F o r t h e Y e a r E n d e d M a r c h 3 1 , 2 0 0 8
Outline
Founded in 1912, EBARA CORPORATION is one of the world’s princi-
pal manufacturers of transfer machinery for fluids and gaseous sub-
stances, with particularly strong positions in pumps, compressors,
fans, and chillers. The Company is also a prominent contractor for
environmental engineering and equipment, including water treatment
systems and solid waste processing and utilization plants.
EBARA is a leading supplier of precision machinery to the semi-
conductor device manufacturing industry. Key products in this sector
include chemical mechanical polishing systems, dry vacuum pumps,
and other equipment, such as wafer plating systems that assist the
industry in meeting the demands of manufacturing the next genera-
tion of semiconductor devices.
The EBARA Group, in the fiscal year ended March 31, 2008, in its
Fluid Machinery & Systems business segment, moved forward with
initiatives to strengthen its sales network in global markets for cus-
tom pumps, compressors and fans, and standard pumps, and contin-
ued to strengthen its manufacturing systems. In the Environmental
Engineering business segment, EBARA focused especially on improv-
ing profitability. These activities included reallocating its manage-
ment resources, including personnel, and taking steps to lower fixed
costs through the implementation of a preferential early retirement
program, in response to conditions in the matured market for domes-
tic public works construction. In the Precision Machinery business
segment, EBARA endeavored to improve profitability by lowering pro-
curement costs and substantially tightening manufacturing manage-
ment and controls in order to make further improvements in the
profit margins of core products, including dry pumps and chemical
mechanical polishing systems.
To grow together with all its stakeholders, the Company will
remain true to its traditions of offering products and services of the
high quality expected of the EBARA brand, backed by a long and dis-
tinguished accumulation of technology and experience.
CorporateCorporate
Fluid Machinery Fluid Machinery & Systems Company& Systems Company
EnvironmentalEnvironmental Engineering Company Engineering Company
Precision Machinery Precision Machinery Company Company
Corporate
Fluid Machinery & Systems Company
Environmental Engineering Company
Precision Machinery Company
Operating Highlights .....................................................................................................................................................1
Financial Highlights.......................................................................................................................................................2
Message from the Management ....................................................................................................................................4
Dialogue with Investors .................................................................................................................................................8
At a Glance ................................................................................................................................................................13
Review and Outlook
Fluid Machinery & Systems Company ....................................................................................................................14
Environmental Engineering Company .....................................................................................................................16
Precision Machinery Company...............................................................................................................................18
Governance Structure and Management Systems .........................................................................................................20
Corporate Social Responsibility ....................................................................................................................................24
Financial Section ........................................................................................................................................................26
EBARA Global Network................................................................................................................................................50
EBARA History—Resolute Commitment to Research and Development ..........................................................................52
Corporate Data ...........................................................................................................................................................53
Cautionary Statement with Regard to Forward-
Looking Statements
Certain of the statements made in this annual
report are forward-looking statements, which
involve certain risks and uncertainties that could
cause actual results to differ materially from those
projected. Readers are cautioned not to place
undue reliance on these forward-looking state-
ments, which are valid only as of the date thereof.
EBARA undertakes no obligation to republish
revised forward-looking statements to reflect events
or circumstances after the date thereof or to reflect
the occurrence of unanticipated events.
Contents
Outline of the EBARA Group
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EBARA CORPORATION ANNUAL REPORT 2008 1
Operating Highlights
Additional Capacity Comes Online at the Sodegaura Plant
The Elliott Group has expanded capacity and
installed large-scale machining centers at the
Sodegaura Plant in response to recent strong
demand for compressors and turbines in the
booming oil and gas markets. All these new
facilities were in operation at the end of
March 2008, resulting in an increase of
about 30% in manufacturing capacity.
EBARA Decided to Relocate the Haneda Plant to the New Futtsu PlantEBARA has decided to relocate the Haneda Plant—which thus far has been
the principal manufacturing center for engineered pumps—to a new facility
located in Futtsu City, Chiba Prefecture, by September 2010. The new plant
to be built in Futtsu will have world-class product development, design, and
manufacturing capabilities and will be positioned as the mother factory in
EBARA’s global production network. Now,
EBARA is designing the new factory that will
specialize in producing internationally compet-
itive, high-value-added products, while con-
sidering reducing the effects on the
environment. EBARA is also aiming to position
the new Futtsu Plant as a center of its infor-
mation network that will lead and support the
activities of the EBARA Group’s production
sites in Japan and overseas.
EBARA Receives an Order for a Filtration MembraneSystem Utilizing a Reverse Osmosis Process for a Water Purification PlantEBARA received an order from Toyooka City for a membrane water filtration
system that will make use of the largest size osmosis process currently
available. One of the key features of EBARA’s osmosis
filtration system is that it can supply high-quality drink-
ing water even from water taken from rivers that have
been muddied because of special conditions in Japan,
including the heavy seasonal rainfall in early summer
and during the times of typhoons. In addition, EBARA’s
osmosis systems can be installed in existing concrete
structures. These systems are well suited to the
upgrading of water purification systems in medium-
sized to large cities as they make it unnecessary
to purchase new sites for purification facilities, shorten the time needed
for installation, and lower costs over the life cycle of the equipment.
EBARA’s Receives Order for Providing Long-Term Operatingand Management Services on a Subcontract BasisThe EBARA Group has been focusing on expanding its after-installation
services for various types of facilities. One successful example was the
receipt of an order from Kashiwa City for pro-
viding long-term operating and management
services for that city’s municipal waste pro-
cessing facilities. This is a major order, val-
ued at approximately ¥10 billion, that will
involve the provision of operating services
over a 14-year period for an existing munici-
pal waste processing facility.
EBARA Began Volume Production of a Unique Gas Abatement System for Reducing PFC EmissionsIn the Component Division of the Precision Machinery Company, EBARA
has completed the development and field testing of an “F (fluoride) gas
captured abatement system (FDS) series” to efficiently treat PFC gases*
used in the semiconductor manufacturing process.
Because the FDS series does not generate waste-
water and captured materials in this system can be
reused for several purposes, this system contributes
to minimizing the environmental burden.
EBARA started sales of this system this year as a
second volume production system followed by the
combustion-type scrubber, such as the GDC and the
G5.
* CF4, SF6, etc.
EBARA Announces New Medium-Term Management Plan
Beginning in April 2008, EBARA has launched a new three-year management
plan. EBARA has defined this three-year period as a time for “restructuring
the Group’s management foundation.” During the period of the plan, EBARA
will focus on preparing for the implementation of subsequent medium-term
plans that will usher in a “period for taking up the challenge of business
expansion.” Under the current plan, EBARA will aim to attain consolidated
net sales of ¥590 billion, operating income of ¥35 billion, and net income of
¥14 billion by the final year of the plan, which will end on March 31, 2011.
(For further details, please refer to the section Dialogue with Investors.)
Expansion and strengthening offacilities at the Sodegaura Plant
An architect’s drawing ofEBARA’s new manufacturingcenter to be located in Futtsu,Chiba Prefecture, which will bepositioned as the mother facilityin EBARA’s global productionnetwork.
Reverse osmosismembrane filtrationsystem for waterpurification plants
EBARA will provide operatingservices on a subcontractingbasis for this waste processingfacility in Kashiwa City, ChibaPrefecture.
EBARA’s FDS serieswill contribute to thereduction of PFC emis-sions and wastewatertreatment loads in thesemiconductor manu-facturing factories.
EBARA CORPORATION ANNUAL REPORT 20082
Financial Highlights
EBARA CORPORATION and Consolidated Subsidiaries Thousands ofMillions of yen U.S. dollars*
Years ended March 31 2008 2007 2006 2008
Net sales ¥567,191 ¥538,098 ¥514,957 $5,661,153
Operating income 6,017 13,249 10,902 60,056
Net income 7,609 5,446 3,350 75,946
Depreciation and amortization 15,316 12,842 12,450 152,870
Capital expenditures 22,381 17,917 14,838 223,386
Total shareholders’ equity** 151,237 151,242 153,695 1,509,502
Total net assets 155,263 154,970 — 1,549,686
Total assets 607,007 625,033 592,631 6,058,559
Interest-bearing debt ¥184,459 ¥213,349 ¥192,140 $1,841,092
Ratio of shareholders’ equity and net assets to
total assets (%) 24.9 24.2 25.9
Ratio of dividends to shareholders’ equity (%) 41.6 58.2 82.3
Free cash flow 25,454 (1,006) (13,872) 254,057
Per share data:
Net income (yen and U.S. dollars) ¥ 18.01 ¥ 12.89 ¥ 9.11 $0.180
Cash dividends (yen and U.S. dollars) 7.50 7.50 7.50 0.075
Net assets and shareholders’ equity (yen and U.S. dollars) 358.01 357.97 363.68 3.573
Debt/equity ratio 1.22 1.41 1.25
ROE (%)*** 5.0 3.6 2.6
ROA (%) 1.2 0.9 0.6
* The U.S. dollar amounts are included solely for convenience and have been translated as a matter of arithmetical computation only at the rate of ¥100.19=US$1,the rate of exchange prevailing on March 31, 2008.
** The EBARA Group has applied “Accounting Standards for Presentation of Net Assets on the Balance Sheets” (ASBJ Statement No. 5, issued on December 9, 2005)and “Guidance on Accounting Standards for Presentation of Net Assets on the Balance Sheets” (ASBJ Guidance No. 8, issued on December 9, 2005) from the fiscalyear ended March 31, 2007. The amount corresponding to total shareholders’ equity, according to the previous method of presentation, is ¥151,237 million for thefiscal year 2008 and ¥151,242 million for the fiscal year 2007.
*** ROE: Net income/Average total shareholders’ equity of the beginning and end of the fiscal year. From fiscal year 2007, total shareholders’ equity substitutes for total net assets in the calculation.
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EBARA CORPORATION ANNUAL REPORT 2008 3
180 10
-20
-15
-10
-5
0
5
0
90
60
30
120
150
’08’07’06’05’04
Total Shareholders’ EquityROA (right scale)ROE (right scale)
Total Shareholders’ EquityROE/ROA(Billions of yen, %)
30
-20
-10
10
20
0
’08’07’06’05’04
Free Cash Flow(Billions of yen)
400
0
100
200
300
’08’07’06’05’04
Net Assets and Shareholders’ Equityper Share(Yen)
600
0
100
200
300
400
500
’08’07’06’05’04
Net Sales(Billions of yen)
10
-20
-15
-10
-5
0
5
’08’07’06’05’04
Net Income (Loss)(Billions of yen)
20
-80
-60
-40
-20
0
’08’07’06’05’04
Net Income (Loss) per Share(Yen)
1) Review of the Fiscal YearDuring the consolidated fiscal year under
review, the world economy as a whole contin-
ued to experience steady growth conditions, but
during the latter half of the fiscal year, signs of
an economic slowdown began to appear as a
result of increases in prices of energy resources
and raw materials and spreading credit uncer-
tainty in international financial markets. In the
U.S. economy, as a result of turmoil in financial
markets resulting from the emergence of the
subprime housing loan issue, the decline in
housing construction activity, and other factors,
the economy slowed. In the European econ-
omies also, growth slowed as a consequence
of instability in financial markets. On the other
hand, in the newly emerging economies, cen-
tered around South America, East Europe,
Asia, and the Middle East, economic
expansion generally continued.
In the Japanese economy,
signs of a recovery trend were
in evidence as a result of
increases in private capital
investment and other develop-
ments following the improve-
ment in corporate profitability;
however, during the latter half of
the fiscal year, stronger signs of
a slowdown in private-sector
demand appeared as a result of
the impact of rising energy and raw material
prices as well as a decline in construction
starts. On the other hand, conditions in the
public sector remained lackluster throughout
the fiscal year.
Amid this operating environment, the EBARA
Group (the Group), in its Fluid Machinery &
Systems (FMS) business, moved forward with
initiatives to strengthen its sales network in
global markets for custom pumps, compressors
and fans, and standard pumps, and continued
to strengthen its manufacturing systems. In
addition, the Group made the decision to move
its Haneda Plant to a newly constructed facility
located in Futtsu City in Chiba Prefecture, with
the objectives of improving production efficiency
and reducing the emissions load on the environ-
ment. In the Environmental Engineering (EE)
business, EBARA focused especially on improv-
ing profitability. These activities included reallo-
cating its management resources, including
personnel, and taking steps to lower fixed costs
through the implementation of a preferential
early retirement program, in response to condi-
tions in the matured market for domestic public
works construction. EBARA also adopted mea-
sures that included strengthening its capabilities
for making proposal-based sales and providing
operation and maintenance (O&M) services,
which are areas where demand is expected to
grow. In the Precision Machinery (PM) business,
EBARA CORPORATION ANNUAL REPORT 20084
Message from the Management
“Re-generating OurPreparing to Enter
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EBARA CORPORATION ANNUAL REPORT 2008 5
EBARA endeavored to improve profitability by
lowering procurement costs and substantially
tightening manufacturing management and con-
trols in order to make further improvements in
the profit margins of core products, including
dry pumps and chemical mechanical polishing
(CMP) systems.
The Group continued activities to restructure
its business portfolio and organization. These
included the sale of shares held in former con-
solidated subsidiaries Matsubo Company, Ltd.,
and Elliott Energy Systems, Inc.; the liquidation
of Ebara Environmental International Co., Ltd.;
and measures to reorganize other associated
companies in the environment business.
As the previously mentioned measures were
implemented, the Group reported an increase in
sales of the FMS business, supported mainly by
robust capital investment activities in overseas
markets; a decline in sales of the EE business
because of increased competition for projects in
the domestic public sector; and a decline in
sales of the PM business owing to lackluster
market conditions in the second half of the fiscal
year. As a result of these trends by segment,
total consolidated net sales increased over the
previous fiscal year. Operating income posted a
substantial decline from the previous year. The
principal factors accounting for this follow. In
the FMS business, performance was adversely
affected by sudden fluctuations in foreign
currency exchange rates and a decline in sales
of standard pumps and blowers owing to a drop
in the number of construction starts resulting
from the implementation of a revision of Japan’s
building code. In the EE business, additional
costs were reported in connection with the
Group’s decision to withdraw from the overseas
market for new orders for solid waste process-
ing facilities, and the profitability of work for the
domestic public sector declined as a result of
more-intense price competition. In the PM busi-
ness, sales declined as a result of requests from
customers for delays of equipment deliveries in
the face of stagnant conditions in the semicon-
ductor market.
As a result of these various developments,
the Group reported consolidated net sales of
¥567.1 billion, 5.4% higher than for the previ-
ous fiscal year; operating income of ¥6.0 billion,
54.6% below that of the prior year; and recur-
ring income of ¥2.7 billion, 73.5% lower than
for the previous fiscal year. Among extraordinary
items, the Group reported extraordinary gains
totaling ¥74.5 billion, including a ¥72.4 billion
gain on the sale of tangible fixed assets.
Extraordinary losses amounted to ¥43.7 billion,
including a loss of ¥9.8 billion on the suspension
of specific projects, ¥13.6 billion in provisions to
the reserve for losses on specific construction
projects, and ¥5.2 billion in provisions to the
reserve for losses on construction completion
guarantees. Due to the registering of such
extraordinary items and the valuation reserve for
deferred tax assets, consolidated net income
amounted to ¥7.6 billion, representing an
increase of 39.7% over the previous fiscal year.
2) Outlook and Strategies for theFiscal Year Ending March 31,2009
The outlook for the overall market environment
is for the world economy to show a decelerating
trend, as the United States and Europe continue
to experience declining growth because of the
influence of uncertainties in financial markets.
The economies of Asia outside Japan, which
have reported high economic growth in recent
years, are forecast to show slower rates of
expansion as a consequence of the influence of
deceleration in the economies of the advanced
countries. For the Group, conditions in the oil
and gas industries as well as the electric power
industry in the Middle East and Asia outside
Japan are expected to continue to be robust,
while public-sector demand in the wind power
generation equipment business is also expected
to remain strong. On the other hand, a challeng-
ing market environment is forecast to continue
in the engineering business in Japan as condi-
tions in the public sector remain difficult. In the
precision machinery and electronics businesses,
concern remains regarding the trend among
Business Platform,Our Second Century”
EBARA CORPORATION ANNUAL REPORT 20086
customers toward restraining capital investment
because of the weakness in the semiconductor
product market.
In the FMS business, although there is con-
cern regarding foreign currency exchange risk in
overseas transactions, demand for compressors
and various types of process pumps in the oil
and gas industries in East Asia, the Middle East,
and elsewhere is forecast to remain at a high
level. In addition, the market for infrastructure
improvement projects, including electric power
generation and seawater desalination, is expect-
ed to expand, while demand for standard
pumps, principally in China, the Middle East,
and Southeast Asia, is likely to continue to be
robust. In the domestic private-sector market,
even though there are some concerns, including
possible delays in recovery of the construction
market owing to the impact of revisions in
Japan’s building code, demand is expected to
continue for services to maintain and renew
facilities in the steel, petrochemical, and other
industries. Moreover, demand linked to the
movement of domestic customers into overseas
markets is also expected to continue to be firm.
On the other hand, demand in the public sector
is expected to remain low. Amid these condi-
tions, in overseas markets the Group will work
to expand its business activities in the electric
power generation and infrastructure sectors,
and, working with its overseas subsidiaries,
implement various policies to capture demand
of Japan-affiliated companies. In the domestic
public sector, the Group will further strengthen
its marketing activities, drawing on its techno-
logical capabilities and, in the domestic private
sector, will substantially improve its after-sales
service systems and capabilities to bolster its
earnings base.
In the EE business, challenging conditions
are forecast to continue in the domestic public-
sector market, which is the principal market
for the EE business’s services. However, within
this market, demand for services to renew and
extend the useful lifetimes of environmental
facilities is expected to expand. In addition,
there is a trend among public-sector entities to
subcontract facilities maintenance, manage-
ment, and operating services to private-sector
companies, and steady growth is expected in
the after-sales services business for such public
facilities. In response to these trends in the
business environment, the EE business is offer-
ing proposals for solutions to meet public-sector
customer needs, building on its strengths,
which include an extensive record of accom-
plishments in constructing and installing public-
sector facilities as well as its capabilities for
offering O&M services through its nationwide
network. In addition, in response to customer
needs related to the sharp rise in oil prices and
global warming, the EE business is strengthen-
ing its proposals for supplying methanol fermen-
tation facilities using biomass as a basic
material, biomass boilers, and facilities combin-
ing methanol production facilities and boilers.
To enhance its efficiency and price competitive-
ness, the EE business is also working to stan-
dardize its technology and designs, develop and
promote packages of services, and promote
cost reduction both in manufacturing and con-
struction. As a result of these measures, the EE
business is working to restructure its earnings
base by simultaneously achieving recoveries in
orders and sales as well as reducing fixed costs,
with the goal of achieving the breakeven point in
operating profit.
In the PM business, the outlook for the semi-
conductor manufacturing equipment market in
the fiscal year ending March 31, 2009, is for
cutting-edge customers to continue strategic
capital investments, mainly in equipment for
NAND-type flash memories and microproces-
sors, but, if the current weakness in semicon-
ductor prices prevails for some time, memory
manufacturing plants, mainly in Asia, will con-
tinue to restrain their capital investment. Amid
these conditions, the PM business will aggres-
sively introduce CMP equipment, for the most-
advanced 45nm plants, which feature superior
productivity, while adopting the key phrases of
“energy conservation” and “reducing the load
on the environment” and working to expand
sales of emission-control systems, focusing
especially on dry vacuum pumps and emission-
processing equipment. In addition, the PM busi-
ness will work to strengthen its product support
systems and improve efficiency to achieve high-
er levels of customer satisfaction.
Based on the previously mentioned policies
and initiatives, the Group has set the objective
of reaching consolidated net sales of ¥560 bil-
lion and ¥13.0 billion in operating income in the
fiscal year ending March 31, 2009.
3) Management PoliciesGoing Forward
For the Group to attain the goals of its New
Medium-Term Management Plan, which began
in fiscal 2008 (ending March 31, 2009),
strengthening the Group’s management founda-
tion has been positioned as a priority issue. The
Group is, therefore, exercising selectivity and
concentration in the allocation of resources by
withdrawing from unprofitable businesses and
investing resources in businesses that have the
potential of attaining high levels of profitability.
In the EE business especially, the Group is
focusing on profitability and is making changes
in organizations and systems as well as reduc-
ing personnel to lower fixed costs.
In addition, to achieve improved financial
soundness, the Group is implementing initiatives
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to reduce interest-bearing debt, increase share-
holders’ equity, and secure sufficient liquidity,
as well as taking other measures to address
financial issues.
Regarding the compensation that the Group
is seeking because of the notice of cancellation
of a gasification incinerator construction project
received from the Malaysian Housing and
Autonomy Ministry, negotiations are in progress
to recover the Group’s claim for compensation.
In addition, the Group is working to reduce addi-
tional costs that may arise in connection with
the InfraServe Hoechst project in Germany and
projects for which provisions have been made to
the reserve for construction losses.
We regret that, regarding the Group’s viola-
tion of Japan’s Antimonopoly Act in fiscal 2006
in connection with bidding for sludge-reprocess-
ing facilities, the Group was cited in September
2007 by the Ministry of Land, Infrastructure and
Transport for violation of Japan’s Construction
Law and received an order to cease certain
operations. In addition, judicial proceedings
were still ongoing regarding the Group’s viola-
tions of the Antimonopoly Act in connection with
sewage pump construction work for the Sewage
Commission of the City of Tokyo, which led to
the Group’s exclusion from certain activities in
2003, and, in April 2008, the Group received a
decision requesting exclusion from certain activ-
ities. In view of these circumstances, the Group
made the decision not to engage in activities in
violation of the Antimonopoly Act. Moreover, the
Group has created a checking system for day-
to-day activities and is monitoring activities on a
continuing basis.
Regarding the improper use of Group funds
by former members of management, the Group
is investigating factual information and confirm-
ing the amount of damages involved. In addi-
tion, the Group has received recommendations
from an independent evaluation committee
composed of knowledgeable persons and is
determining legal responsibilities while also
working to recover damages. Although a consid-
erable portion of damages has been recovered,
the Group is taking legal measures to recover
the remainder. In parallel with these activities, to
prevent a recurrence of such issues, the Group
has formed an independent committee of
knowledgeable persons and is making prepara-
tions to implement the preventive policies that
will be decided. To ensure that such unethical
behavior does not recur, the Group will
strengthen its corporate governance and
endeavor to create a corporate culture that
emphasizes compliance.
We want to express our deepest regret to the
many people who have been adversely affected
by these issues and to call on our shareholders
for their increased support and cooperation.
July 2008
Natsunosuke Yago
President and Representative Director
EBARA CORPORATION ANNUAL REPORT 2008 7
Message from the Management
EBARA CORPORATION ANNUAL REPORT 20088
Dialogue with Investors
Q1 How have you positioned your medium-term
management plan E-Plan2010?
A We prepared and issued our E-Plan2010 three-year medium-term
management plan in November 2007 and began to implement it at
the beginning of fiscal 2008. Over the past 15 years, the EBARA Group has
taken on the challenge of aggressively entering new business fields, but,
as a consequence, has strained its financial position. That is why we have
defined the period covered by E-Plan2010, which goes through the end of
fiscal 2010, as a time for aggressively restructuring our management foun-
dation. By that, we mean that this will be a time for reviewing our business
portfolio, strengthening our financial position, and addressing other man-
agement issues. In addition, we have defined the period of the next busi-
ness plan that will begin in fiscal 2011 as a time of “preparation for
business expansion.” For this reason, under the current medium-term plan,
we plan to maintain the following three basic postures as regards our busi-
ness portfolio. First, in our existing businesses, where we have strengths,
we will work to increase profitability, but in those businesses where we
cannot increase profitability, we plan to withdraw at an early date. Second,
we will allocate our limited human resources to give priority to increasing
profitability. Third, we will use our management resources effectively and
allocate them on a priority basis to businesses that are profitable. At the
same time, we will also use our resources as necessary to withdraw from
unprofitable businesses.
Q2 When you formulated your medium-term plan you
emphasized certain “concerns.” Could you explain
what your concerns are?
A That is correct, when we formulated E-Plan2010 and, now, as
we are implementing it, we have four concerns that I would like to
explain to you. The first of these is our “concern as a manufacturing enter-
prise.” We believe that manufacturing and marketing superior “hardware”
and providing top-quality support for our products is the core that drives
the business development of the EBARA Group. Therefore, we are going
to work to further polish our capabilities in areas where we are strong and
aim to be a top-level, international manufacturer of industrial machinery.
The second of these is our “concern for improving the environment.” We
plan to continue to provide products and services that conserve energy and
help to preserve the natural environment. By doing this, we want to lend a
hand in contributing to improvement in the earth’s environment and hand-
ing it over in good condition to the next generation. At the same time, we
also want to improve our own workplace environment, which is where we
can experience self-fulfillment.
The third is “concern for internal control systems and operating efficien-
cy.” The EBARA Group is working to enhance its internal control systems
with the goal of creating a corporate culture that emphasizes compliance.
This will not only increase the transparency of management but also, at
the same time, enable us to continue to improve operating efficiency.
Our fourth concern is expressed in our motto “EBARA walking with its
customers.” By having concern for our customers, we have been able to
grow as a company and as individuals. The EBARA Group will continue to
strive to have an accurate and future-oriented grasp of the needs of its
customers, which are changing with the times. By responding to customer
needs, we will aim to enhance customer satisfaction and, at the same time,
work toward the further development of the Group.
Of these four concerns, I would like to emphasize especially “concern
as a manufacturing enterprise” and “EBARA walking with its customers.”
In 2012, we will mark the 100th anniversary of our founding as a company.
Over the century-long history of EBARA, the driver of our growth, I feel cer-
tain, has been “quickly providing our customers with the industrial machin-
ery they want.” However, somewhere along the way, we may have strayed
Chief Concerns in Implementing This Plan
1. The Groupí s Concern as a Manufacturing Enterprise
2. Concern for Improving the Environment
3. Concern for Internal Control Systems and Operating Efficiency
4. Concern for Our Motto, “EBARA Walking with Its Customers”
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EBARA CORPORATION ANNUAL REPORT 2008 9
from this path, and our awareness, including that of our employees, is that
we have put primary emphasis on developing products that are aimed at
achieving growth in the scale of our operations. We will return to the phi-
losophy at the time of the establishment of business. And we carry out the
philosophy which “we deliver the machinery that provides our customers
with maximum productivity when they need it.”
Q3 What are your goals under the medium-term plan?
A We have three goals under the plan. First, from the point of view of
the income statement and balance sheets, in fiscal 2010 we are
aiming to reach consolidated net sales of ¥600 billion annually and a ratio
of operating income to net sales of 5% or more. At the same time, we want
to reduce interest-bearing debt to ¥150 billion or less.
Second, we want to develop new businesses. Specifically, we are aiming
to nurture two or more products that, by fiscal 2010, will have annual sales
of ¥10 billion or more and also have the possibility of reaching annual sales
of ¥30 billion or more under our next medium-term management plan.
Third, from the perspective of financial indicators, in fiscal 2010 we
want to clear two hurdles. The first of these is reporting ROE of 8% or high-
er. The second is reducing our debt-to-equity ratio to 0.9 or less or
increasing our equity ratio to 30% or more, also by fiscal 2010.
Q4 Could you please tell us what your basic policies
are to attain these goals?
A As we look to the future, we have three policies that we will imple-
ment to strengthen our management base and that will address
priority issues and make our sustainable growth possible. These are
“selectivity and concentration in the allocation of our resources,” “estab-
lishing a business foundation that takes full account of global markets,”
and “improving cash flow.”
To implement our selectivity and concentration policy, we will withdraw
from those businesses where there are no prospects for improvement in
profitability or where recovering our investment will be too time-consuming.
This holds for businesses in the parent company and in subsidiaries. On
the other hand, in those businesses where sales have exceeded ¥100 bil-
lion annually and where there is a possibility that the ratio of operating
income to sales will exceed 7%, we will make investments on a priority
basis to increase sales and improve product profitability. Such businesses
include standard pumps, engineered pumps, compressors and fans, as
well as our precision machinery business.
Our second business policy, “establishing a business foundation that
takes full account of global markets,” applies to those of our products that
can be sold internationally, and it means making further improvements in
our global systems to enable us to market and provide customer support
efficiently. On the other hand, for those products that cannot be sold across
a broad range of countries, to survive, we will withdraw from those busi-
nesses and projects in overseas markets and concentrate on domestic
business operations. We will select those businesses where we will pursue
an international strategy and those where we will focus on the domestic
market by considering a number of factors. These will include not only
whether the technology embodied in the products meets world standards
and requirements but also our capabilities for marketing, providing support,
manufacturing, and implementation. We will position standard pumps,
engineered pumps, compressors, and precision machinery as world market
businesses and work to strengthen their manufacturing and support sys-
tems. Since there are limits to our project execution capabilities in the engi-
neering business, in overseas markets, we will focus on water processing
and on projects where the scale is limited and we can implement them
successfully.
Regarding our third policy, “improving cash flow,” with the exception of
the continuation of development investments aimed at the period beginning
in fiscal 2011, which will be covered by our next medium-term plan, we
will aim for positive free cash flow in all our companies within two years.
Even in those businesses where we will be making investments on a priori-
ty basis, we will not make investments and other financial commitments
Objectives of This Plan
1. By the end of the final year of the plan, we will work to attain a ratio of operating income to net sales of 5% or more and reduce interest-bearing debt to ¥150 billion or less.
2. We will nurture two or more products to support new businesses.� In preparation for the coming period of expansion, we will nurture two or
more products that have the potential for attaining annual sales of •10 billion or more by the final year of the current plan and then ¥30 billion or more annually under the next management plan.
3. By the final year of this plan, we will work to attain the following targets:
� ROE of 8.0% or higher� Debt/equity ratio of 0.9 or less or a shareholders’ equity ratio of 30% or more
Numerical Targets
Numerical Targets (Consolidated)
Years ended March 31
(¥ billion)
Net sales
Net income
Operating income
563.0
20.0
7.0
575.0
27.0
11.0
590.0
35.0
14.0
2009 2010 2011
EBARA CORPORATION ANNUAL REPORT 200810
that will lead to overly rapid
expansion in those areas. In
addition, we will work to expand
sales to avoid any sudden dete-
rioration in operating cash
flows. By maintaining appropri-
ate control over investments
and the size of sales, our goal,
as I mentioned, will be to show positive free cash flow in all our operating
groups within two years.
Q5 What specific measures will you be taking
in each of your business segments?
A First, in the Fluid Machinery & Systems (FMS) business, to grow
steadily in the fast-changing environment, our goals will be “to
achieve sustained growth of FMS activities in global markets and increase
profitability.” We will aim to realize more synergies among the locations in
our global network and create a solid and strong position as a global, top-
class manufacturer of fluid machinery and systems. To strengthen our
management bases, which will be essential to reach our objectives, we
will implement such policies as “selectivity and concentration” to improve
our cash flow. Also, in those business domains where continuing growth
is expected, we will concentrate our investments. At the same time, to
improve the quality of management, we will establish internal control
systems and place thoroughgoing emphasis on compliance. Through the
implementation of these policies, we will aim to reach a ratio of operating
income to net sales of 6% or more by fiscal 2010.
Next, in our Environmental Engineering (EE) business, we will withdraw
from the market for new waste processing facilities in overseas locations.
We will also implement drastic restructuring and realignment measures in
the engineering group as a whole. Specifically, we will rejuvenate our water
treatment and waste processing operations by splitting off their respective
EPC and O&M functions into two separate companies with autonomous
business bases. On the other hand, we will manage these operations
with a flexible stance toward industrial realignments in their respective
industries and alliances with other companies. And we will aim to clarify
the positioning of both these businesses within the EBARA Group within
two years. As a result of these measures, we will aim to show a ratio of
operating income to sales of 2.5% or more by fiscal 2010.
In our Precision Machinery (PM) business, we will conduct these activi-
ties as a development-led business that is even more responsive and fast-
moving than in the past and is capable of providing customers around the
world with high-performance, highly reliable products and services that
meet their requirements for securing maximum productivity. To attain these
objectives, we will work to create a stable earnings structure as an inde-
pendent business and maximize cash flow from these operations. On the
other hand, to reduce business risk to a minimum, we will establish internal
control systems and strengthen compliance frameworks. As a result of
implementing these policies, we will aim for a ratio of operating income
to sales of 11% or more by fiscal 2010.
Overall Policies under the Plan
1. Strengthening the Business Base for Sustained Growth
1-1. Selectivity and Concentration
1-2. Establish a Business Base from a Global Perspective
1-3. Improve Cash Flow
2. Implementing Corporate Activities That Emphasize Compliance Numerical Targets
Numerical Targets for the FMS business (Consolidated)
Years ended March 31
(¥ billion)
Net sales
Operating income
Ratio of operating income to net sales
315.0
13.0
4.1%
325.0
16.0
4.9%
330.0
20.0
6.1%
2009 2010 2011
Numerical Targets for the EE business (Consolidated)
Years ended March 31
(¥ billion)
Net sales
Operating income (loss)Ratio of operating income (loss) to net sales
150.0
-2.0
-1.3%
155.0
1.0
0.6%
162.0
4.0
2.5%
2009 2010 2011
Numerical Targets for the PM business (Consolidated)
Years ended March 31
(¥ billion)
Net sales
Operating income
Ratio of operating income to net sales
98.0
9.0
9.2%
95.0
10.0
10.5%
98.0
11.0
11.2%
2009 2010 2011
Q6 Could you please list some of the products you
are expecting to show growth in the FMS
Business?
A Policies for dealing with environmental issues, especially global
warming and water shortages, are subjects of discussion around
the world. Along with this, market requirements for industrial machinery are
undergoing major change. As a manufacturer of industrial machinery, look-
ing ahead, EBARA will position product groups where growth is anticipated
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EBARA CORPORATION ANNUAL REPORT 2008 11
as strategic areas and work to strengthen its development and marketing
capabilities in these areas.
In recent years, as a result of the problem of global warming and rising
prices of crude oil, interest in nuclear power generation has revived in
Europe and the United States. Moreover, demand for electric power is
expanding in China, Russia, India, and elsewhere because of the impact
of economic growth, and plans have been drawn up for the construction
of a substantial number of nuclear power plants. These include plans for
nuclear power generation facilities in 17 countries, such as 33 nuclear
power generation facilities in the United States, 30 in China, 40 in Russia,
and 20 in India as well as other plants in Indonesia, Thailand, Vietnam and
elsewhere. Estimates indicate that the combined demand for new nuclear
plants and renovation of existing plants will mean demand for the equiva-
lent of about 200 plants between now and 2030. We anticipate this will
create a market for water pumps for use in turbines in nuclear power
plants amounting to an accumulated total of about ¥240 billion. EBARA
takes pride in its strong record of deliveries of pumps for nuclear power
plants. Ebara is also proud of its position as one of the few pump manufac-
turers that can deliver highly reliable pumps to meet the requirements of
both boiling water reactors (BWRs) and pressurized water reactors (PWRs).
At present, EBARA is making preparations to move its Haneda Plant, its
principal pump manufacturing facility, to Futtsu in Chiba Prefecture. The
new Futtsu Plant is scheduled to go into full-scale operation beginning in
2011. Looking to the future, EBARA is outfitting this new plant with produc-
tion equipment that can respond to the expected increase in demand for
pumps for use in nuclear power plants and will work to expand its sales in
this area.
It has been said that the 21st century will be the “water century.” With
water expected to be in short supply worldwide, the market for seawater
desalination plants is forecast to grow at a high rate of 10% annually, prin-
cipally in the Middle East and Australia. In addition, going forward, the mar-
ket for seawater desalination plants is expected to expand in North America
and China. At present, the market for desalination plants that use the
reverse osmosis (RO) method, which is becoming the principal desalination
process, is estimated to be approximately ¥390 billion annually. Of this
total, the market for fluid handling machinery where EBARA has strengths,
including pumps and energy recovery equipment, is estimated to be about
¥37 billion annually. The market for fluid handling equipment supplied to
desalination plants using the RO method is forecast to grow to about ¥100
billion annually in size by 2015. Converting seawater to desalinated water
requires extremely large amounts of energy. About one-third of the running
cost of seawater desalination plants using the RO process is accounted for
by electric power used to operate the pumps. Therefore, high-efficiency
pumps and fluid handling machinery that can recover energy will play
important roles in lowering the cost of water production. EBARA is making
use of its water pressure servo technology, which was developed at the
EBARA Research Laboratory in past years, in developing capacity-type
energy recovery equipment. Looking ahead, the capacity of seawater
desalination plants employing the RO method will become larger, and we
expect the capacity of fluid handling machinery will also expand to meet
the requirements of these larger facilities. Pumps used in seawater desali-
nation plants must also meet demanding technological requirements,
including having the capacity for handling fluids under high pressure,
resistance to corrosion, and high operating efficiency. When these require-
ments are combined with the need for fluid machinery to handle ever larger
volumes, there are only a few companies in the world in the same class as
EBARA that can satisfy all these requirements. We at EBARA intend to
become a leading company globally in this field.
Q7 In the Precision Machinery Business, what products
are likely to experience growth in the years ahead?
A The issue of preventing global warming has become a major one that
companies in the semiconductor manufacturing sector must address.
PFC gases (PFCs), which are widely used in the semiconductor manufacturing
process, have global warming coefficients that are several tens of thousands of
times higher than CO2. Therefore, the introduction of technology for breaking
down and processing PFCs will be essential. As a result, the market for waste
gas processing equipment that can handle PFCs that are given off by manufac-
turing processes or are unused is showing strong expansion. However, waste
gas processing equipment that has been available previously employs water to
remove the fluoride compounds in PFCs and therefore has the demerit of also
High pressure pumps for reverse osmosis desalination for Fukuoka District WaterworksAgency
EBARA CORPORATION ANNUAL REPORT 200812
Dialogue with Investors
requiring equipment to process the fluoride wastes. As a result of the rapid
introduction of waste gas processing equipment, the load on fluoride waste
processing equipment has increased and users are faced with a problem of
being unable to process these wastes in sufficient volume. To address this
issue, EBARA has begun to market fluoride-fixing waste gas processing equip-
ment that emits no effluent containing fluorides and fully processes greenhouse
gases. EBARA’s F-type gas processing equipment, which it will begin to market
in fiscal 2008, is a product designed to work in the etching process, which is
the portion of the semiconductor manufacturing process that uses the most
PFCs. Since this EBARA product does not use water in gas processing, it emits
no effluent containing fluoride compounds and, therefore, places no burden on
effluent facilities. In addition, compared with existing products, it is capable of
handling large volumes of process gases. From the perspective of performance,
since this product combines the properties of acidified special metals and cata-
lyst functions, it removes 99% or more of PFCs. In addition, calcium flouride,
which is produced by this equipment as a by-product, can be reused in the
steelmaking and other industrial processes and therefore can be recycled as an
industrial material.
Q8 What is the positioning of the environmental engi-
neering business and what are your strategies for
attaining growth in this area?
A Since EBARA’s establishment in 1912, we have supplied prod-
ucts and services related to “water.” EBARA has been growing
along with the improvement of Japan’s environment-related social
infrastructure—including water supply, sewage systems, and municipal
waste incinerators—all the while. The long history and major contributions
of EBARA’s environmental engineering business are a source of pride for
the EBARA Group as a whole. Therefore, as long as the continuation of its
operations can be guaranteed, we would like to continue the EE business.
However, we cannot continue in businesses that are running losses.
Under the E-Plan2010 medium-term plan, if the EE business cannot reach
breakeven by the year ending March 31, 2010, we will conduct a drastic
review of this business. Of course, we will steadily implement measures to
enable this business to reach breakeven by the end of the year ending in
March 2010. To create an organization that is matched to the market envi-
ronment, we will streamline the personnel composition of this business,
and an urgent task will be to respond to market needs, including offering
private finance initiative (PFI) arrangements and comprehensive service
contracts. To tackle business models not only for the construction of facili-
ties but also for subsequent operation and maintenance, we will realign
and integrate the plant construction organization and the operating and
maintenance services organization, which, thus far have been kept sepa-
rate to respond to industry realignments that might have occurred in some
form.
Other growth products we are anticipating in this field include plating
equipment for inter-layer silicon electrodes and other equipment for use in
3-D semiconductor mounting processes that are expected to go into full-
scale production in the years ahead. Our basic policy for the development
and commercialization of related products will be to gain a grasp of the
changing requirements of our existing customers, then rapidly develop and
commercialize products that will be extensions of our core technologies
to be sure we meet customer requirements without fail. Going forward,
we intend to follow this policy and expand our portfolio of products.
EBARA plating system: UFP series
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EBARA CORPORATION ANNUAL REPORT 2008 13
At a Glance
Established as a manufacturer of centrifugal pumps in the early 20th century, EBARA has expanded the frontiers of technology for
systems that are essential for transporting fluid and gaseous substances. The Company’s activities are divided into three in-house
companies that work actively to anticipate customer needs and provide innovative solutions.
Main Products & Services
◆ Cooling and water supply systems for thermal and nuclear
power plants
◆ Engineered pumps
◆ Standard pumps
◆ Turbo-compressors, blowers, and fans
◆ Steam and gas turbines
◆ Fluid machinery system engineering
◆ Chillers
◆ Water treatment systems for nuclear power plants
Main Products & Services
◆ Waterworks systems
◆ Sewage systems
◆ Industrial water/wastewater treatment plants
◆ Solid waste processing/utilization systems
◆ Chemicals
◆ Groundwater and soil remediation services
◆ Flue gas treatment systems
◆ Plant operation & maintenance services
Fluid Machinery & Systems Company
Environmental Engineering Company
Precision Machinery Company
Main Products & Services
◆ CMP systems
◆ Plating systems
◆ Bevel polishing equipment
◆ Dry vacuum pumps
◆ Turbo-molecular pumps
◆ Gas abatement systems
◆ Ozonized water generators
The Fluid Machinery & Systems Company has long
provided pumps, fans, compressors, chillers, and other
machinery/engineering/services that serve as the infrastruc-
ture of daily life and industry.
Currently, the company is expanding overseas production
and sales bases to develop its business from a global per-
spective, and is making a significant contribution to the
industrial progress and infrastructural development of
nations around the world.
The Environmental Engineering Company is committed to
developing technologies that will establish the foundations
for the “sustainable society.” The company offers a com-
prehensive range of equipment and systems for supplying
water, processing wastes, and generating energy. One focus
of the company’s activities is making proposals to regional
communities for optimal social infrastructure systems.
The Precision Machinery Company is a global leader in
supplying leading-edge equipment for semiconductor manu-
facturing, including chemical mechanical polishing (CMP)
systems for 300mm silicon wafers. The company places
maximum priority on developing technologies and systems
for next-generation semiconductor products and has
received a uniformly high evaluation from its customers.
56.2%
24.9%
18.9%
EBARA CORPORATION ANNUAL REPORT 200814
Review and Outlook
EVM-type vertical multilayered pumpmanufactured by Ebara Pumps EuropeS.p.A. located in northern Italy
Horizontal dual intake spiral-typepump with an aperture diameter of1,200mmEight of these pumps have been suppliedfor a petrochemical plant in Saudi Arabia.
Newly developed HPA-type shallow-well pump
Steam turbine rotorRotor for use in turbines for drivingcharged gas compressors for use inethylene plants
Fluid Machinery &
Systems CompanyAtsuo Suzuki, President
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EBARA CORPORATION ANNUAL REPORT 2008 15
OverviewAmong orders for the FMS Company, orders for custom pumps, compres-
sors, and fans showed strong expansion supported by continued active capi-
tal investments in the oil and gas industry as well as the electric power
industry, principally in the overseas markets of the Middle East and the Asian
region. In addition, orders for standard pumps continued to be firm, princi-
pally in overseas markets. In the Japanese market, the FMS Company was
able to record a gain in orders over those of the previous year from the pub-
lic sector, despite a difficult market environment, by conducting activities to
secure small to medium-sized projects, while large-scale projects also con-
tributed. In addition, the FMS Company expanded the volume of orders from
the private sector, where demand from the steel and other industries for the
maintenance, renewal, and expansion of existing equipment was firm,
through assiduous, customer-centric sales activities and improvement in
after-sales service.
Sales of the FMS Company for the fiscal year under review expanded as a
result of robust orders for custom pumps, compressors and fans, mainly
from the overseas oil and gas industry and electric power industry, as well
as strong demand for capital investment in the basic materials industries in
Japan and overseas. However, operating income declined because of sud-
den fluctuations in foreign currency exchange rates and the decline in the
number of construction starts resulting from the implementation of a revision
of Japan’s building code.
Market Trends and Basic StrategiesIn overseas markets, performance in the oil and gas industry is expected to
remain at the same level as in the previous fiscal year, but expansion is
anticipated in the electric power industry and in water-related infrastructure
projects. In the domestic market, conditions in the public sector are forecast
to continue to be severe, but demand for maintenance and replacement
investment is expected to remain strong in the private sector, including the
steel, petrochemical, and other industries.
Amid these market trends, to increase earning power, the FMS Company
will work steadily to meet demand in the overseas oil and gas industry as
well as expand its business related to the electric power and water-related
infrastructure fields. In Japan, the FMS Company will work to substantially
strengthen its business systems for providing after-sales services for equip-
ment and facilities.
Issues to Be AddressedTo attain steady growth in a business environment undergoing major
changes, the FMS Company will focus especially on expanding its operations
in global markets and increasing earning power. As concerns are foreseen
related to rising raw material prices, foreign exchange risk, and other devel-
opments, the FMS Company must redouble its efforts to realize synergies
among its business locations around the world through strengthening its
management from a Groupwide perspective, improve its cash flow to further
strengthen its business base, and move ahead with measures to focus its
investments in business domains where rapid growth is expected to continue.
In the custom pump business, the FMS Company will concentrate on
products for the oil and gas industry, electric power sector, and desalination
facilities as well as work to expand sales not only in areas where it has a
strong presence, such as the Middle East and China, but also in India and
other emerging markets.
Also, in China and other markets, the FMS Company will strengthen its
manufacturing centers, move ahead with the effective division of production
among production centers, and substantially strengthen its after-sales ser-
vice business operations. In the standard pump business, there is concern
that the adverse impact of the revision in Japan’s building code may be pro-
longed, but as the FMS Company works to structure business systems that
promote teamwork among manufacturing, marketing, and after-sales service
around the world, including Japan, it will make investments as necessary in
high-priority regions, such as China, Europe, and elsewhere, with the aim of
bolstering its business foundation as a global enterprise. In the compressor
and turbine field, the FMS Company will endeavor to make improvements
and implement further development for large-scale equipment types to
reduce costs and improve profitability, while working to expand sales and
income from after-sales service business activities.
In addition, in the domestic public sector business, a challenging operat-
ing environment is expected to continue. Accordingly, the FMS Company will
tighten its management of projects and implement thoroughgoing measures
to improve profitability, including the streamlining of its operations. In the
chillers business, the FMS Company will expand its offerings of energy-
saving turbo cooling equipment and expand its sales activities into global
markets in collaboration with its business operations in China.
The FMS Company will pass a major milestone in its development with the
relocation of its Haneda Plant, which has had a history of about 70 years.
Along with the implementation of measures for individual businesses, the
FMS Company is making preparations to begin operations at the new Futtsu
Plant, which will be the “mother” plant of a worldwide, optimal production
sharing manufacturing system that EBARA can point to with pride as one of
the most advanced in the world and will enable the FMS Company to contin-
ue to develop its activities as a global corporation.
EBARA CORPORATION ANNUAL REPORT 200816
The EE Company has received an order for aproject tentatively entitled “Recycle Park AsaoEnhancement Project: Construction of a WasteProcessing Facility” located in Kawasaki,Kanagawa Prefecture.
This submerged membrane filtra-tion facility, located in Toyooka,Hyogo Prefecture, is the largest ofits kind.
This biomass facility reduces CO2 emis-sions by about 300 tons annually, com-pared with conventional facilities(Located in Miyakojima City, OkinawaPrefecture).
The EE Company is providing long-termO&M services for this waste processingcenter located in Kashiwa, ChibaPrefecture.
Masayoshi Hirose, President
EnvironmentalEngineering
Company
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EBARA CORPORATION ANNUAL REPORT 2008 17
OverviewIn the EE Company, challenging conditions persisted because of more-
intense competition for the domestic public-sector projects, which are the
principal target for the EE Company. As a result of efforts by the EE Company
to strengthen its capabilities for making proposal-based sales and its com-
petitiveness, the following important results were reported. In the water
treatment and sewage processing field, the EE Company won an order for a
submerged membrane filtration facility, which will be the largest of its kind.
In the solid waste processing facility field, the EE Company won an order for
a large-scale municipal garbage incineration facility in the Kanto metropoli-
tan area. In addition, the EE Company is continuing to strengthen its capabil-
ities for providing O&M services and was successful in winning long-term
contracts for the services for waste processing centers as well as multiyear
contracts for the services for water treatment facilities. On the other hand,
the EE Company made the decision to withdraw from accepting new con-
tracts for overseas solid waste processing projects and bioethanol facilities,
where it is difficult to avoid business risk. As a result of these various factors,
orders declined from the level of the previous fiscal year.
Restructuring the profit base of the EE Company is an urgent task. The EE
Company has concentrated resources on those businesses, mainly domestic
ones, that are expected to grow going forward, reduced the number of per-
sonnel, liquidated certain subsidiaries, and taken other measures to reduce
fixed costs. In addition, reserves for possible future construction and other
losses, principally related to overseas projects, have been set aside.
Sales of the EE Company for the fiscal year under review declined from
the previous fiscal year, reflecting difficulties in the operating environment
stemming from more-intense competition in the domestic public works mar-
ket. The operating loss of the EE Company increased from that of the previ-
ous fiscal year, owing to additional costs arising from the withdrawal from
overseas markets for new orders for solid waste disposal facilities, declining
profit margins because of more-intense price competition in the domestic
public works market, and other factors.
Market Trends and Basic StrategiesAlthough the domestic market for public works projects will continue to be
intensely competitive, steady expansion is anticipated in after-sales and
maintenance services for renewal and extending the useful lives of existing
facilities. In the private sector, although capital investment is likely to be
stagnant, a steady level of capital investment is expected for lowering costs
and reducing CO2 emissions. Amid these market conditions, the EE Company
will work to improve profitability in the public works project market, which
is its core activity, improve its earnings base by lowering fixed costs, and
steadily expand after-sales and maintenance services for private-sector
customers.
Issues to Be AddressedThe top priority for the EE Company is to rapidly create a streamlined organi-
zation suited to the smaller size of the market. Plans call for taking drastic
measures to address this issue during the current fiscal year. The first step
will be to continue measures begun in the previous fiscal year aimed at
reducing personnel. The next step will be to realign the EE Company’s envi-
ronmental businesses, which are now dispersed among four companies
under the EE Company, into two companies, one specializing in water-
related businesses (the “water company”) and the other in incineration
businesses (the “fire company”). As a result of this realignment, the two
newly formed companies will be positioned to provide integrated services
from engineering, procurement, and construction (EPC) through after-sales
services and conduct their operations more efficiently.
The most important strengths of the EE Company are its extensive record
of accomplishments in EPC and its nationwide network for O&M services.
The EE Company will draw fully on these strengths to offer products and
services that match customer needs.
In the EPC business, the EE Company will endeavor to increase profitabili-
ty by lowering both manufacturing and construction costs through standard-
izing its technology and designs, creating equipment modules, and offering
product and service packages. In addition, the EE Company will expand its
lineup of highly competitive original components and unit equipment as well
as increase profitability by enhancing the value added of its products. In the
O&M business, the market for O&M-related services is expected to show
firm expansion while also becoming substantially more competitive. To offer
the EE Company’s know-how, which has been accumulated through many
years of experience, more effectively, the EE Company will strive to promote
comprehensive, multiyear contracts for its O&M services. In addition, the EE
Company will use its nationwide network to the maximum extent to provide
maintenance and operating services and improve the efficiency of these
services. In its services for the private sector, the EE Company will endeavor
to increase profitability by focusing on its most-promising clients, and, while
strengthening its after-sales services made available through its nationwide
network, develop unit products comprising standard products and thereby
lower local construction costs. In addition, to expand its orders, the EE
Company will respond to the needs of the times, including providing solu-
tions for dealing with high oil prices and the CO2 emissions issue, by offering
biomass boilers, methane fermentation equipment, and multi-function prod-
ucts that draw on its comprehensive capabilities. In overseas markets, the
EE Company will work to complete projects on order successfully and take
initiatives to enhance project profitability.
EBARA CORPORATION ANNUAL REPORT 200818
CMP (chemical mechanical polishing)system: F★Rex300SII
Equipment incorporating dry vacuumpumps and waste gas emission proces-sors
Kozo Nakao, President
PrecisionMachinery
Company
Dry vacuum pumps: EST Series Fluorine (F)-fixation-type gas abatementsystem: FDS Series
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EBARA CORPORATION ANNUAL REPORT 2008 19
Review and Outlook
OverviewIn the PM Company, sales of semiconductor manufacturing equipment,
which are the PM Company’s core products, held firm during the first half of
the fiscal year as memory manufacturers in Japan, Korea, and Taiwan, who
are the PM Company’s principal customers, continue their aggressive capital
investment. However, in the second half of the fiscal year, the weakening of
semiconductor prices, mainly for DRAMs, prompted one semiconductor
manufacturer after another to delay or suspend their investment plans. Amid
this operating environment, the PM Company focused its marketing activities
on high-throughput CMPs for technologically leading-edge copper intercon-
nection processes and processors for removing PFC (perfluorinated carbon)
gas, which is a greenhouse gas that places a heavy emissions load on the
environment. However, orders were below their level of the previous year.
In addition, in the fourth quarter, conditions in the semiconductor market
experienced a further marked deterioration, and shipments were delayed at
customers’ request. As a consequence, sales and operating income were
below their respective levels of the previous fiscal year.
Market Trends and Basic StrategiesDuring fiscal 2008, in the semiconductor manufacturing market, strategic
investments by cutting-edge companies are forecast to continue, centering
on equipment for NAND flash memory and microprocessor production.
However, if the current stagnation in semiconductor prices proves to be pro-
longed, investment by memory manufacturers, principally in Asia, is expect-
ed to continue to be weak. Amid this operating environment, the PM
Company will focus on aggressive marketing of its CMP equipment, which
offers highly superior productivity, to 45nm cutting-edge semiconductor
manufacturing plants. In addition, the PM Company will market products that
address the issues of energy conservation and reduction in the environmen-
tal load of semiconductor production, focusing especially on dry vacuum
pumps and emission gas processing equipment. In addition, the PM
Company will further upgrade and improve the efficiency of its product
support systems, with the aim of enhancing customer satisfaction.
Issues to Be AddressedThe semiconductor industry is expected to continue making active invest-
ments in the medium-to-long term, and the semiconductor manufacturing
equipment industry that the PM Company is serving is also expected to
grow. Under this situation, we recognize the most-important issue to be
addressed is not only to expand our business size but also to maintain the
continuity and stability of our profitability. For that purpose, we will catch
up with the timing of the market expansion and the changes in customers’
needs as well as will provide customers with new products and technology
through the support for their R&D and mass production activities under our
close relationships with customers by providing continuously the products
and support matched with customer needs through our global sales and
marketing network. Through such activities, we will endeavor to expand the
market share and accelerate efforts to strengthen cost-competitiveness for
stable profitability.
The medium-to-long term business strategy is to grow the business of
newly developed equipment as our strategic products, such as bump plating
equipment, and PFC gas treatment systems along with the dry vacuum
pump and CMP businesses.
Aimed at these activities, we will implement measures to steadily, but
speedily, address issues we are facing, while working to improve our finan-
cial position and being ready to respond quickly to market changes, and will
aim for close teamwork among our R&D, manufacturing, and sales and mar-
keting divisions, as well as will work to expand the scope of our business
operations.
EBARA CORPORATION ANNUAL REPORT 200820
Governance Structure and Management Systems
Corporate Governance
Based on the Corporation Law of Japan, the Company’s organization
for management decision making, execution of business operations, and
auditing comprises the Board of Directors, the Board of Corporate Auditors,
and an independent auditor. The Board of Directors is composed of 11
members, and 2 of these are independent, outside auditors who have no
special relationship interests with EBARA. Under the rules that have been
established for the activities of the Board of Directors, EBARA endeavors
to ensure that Board members will act in compliance with relevant laws
and the Company’s Articles of Incorporation in the conduct of their duties.
In addition to its regular monthly meetings, the Board meets in special
sessions when necessary.
The Board of Corporate Auditors comprises five corporate auditors, three
of whom are outside auditors who have no special interest relationships
with EBARA. In addition to establishing rules for the Board of Corporate
Auditors, each of the Corporate Auditors, in addition to conducting his
required auditing duties, meets every three months with the EBARA presi-
dent and representative director and with the independent auditor to
exchange opinions and ensure the effectiveness of auditing activities.
Under the Corporation Law of Japan and the Financial Instruments
and Exchange Law, the Company appoints an independent auditor under
contract to conduct audits of its accounts. Based on the annual audit plan
proposed by the independent auditor, the Company’s financial accounts
are audited efficiently by a team of certified public accountants and
other professionals.
In addition to the previously mentioned Board of Directors, the Company
has established rules for its monthly Management Meeting. The purpose
of this meeting is to conduct broad-ranging discussions of management
policy and management strategy.
Going forward, the Company is aware of the importance of corporate
governance and intends to continue to work to draw on the capabilities of
individuals inside and outside the Company, enhance the soundness of
management, and strengthen the Company’s operating and financial posi-
tions by drawing on its effective management supervisory organization.
ReportingSelection/Dismissal
Selection/Dismissal/Surveillance
Board of Directors
Guidance/Transmission of Information
Guidance
Internal Audits
President and Representative Director
Management Planning Committee
Support forManagementandExecution
Management Meeting
Risk Management Panel
ReportingSelection/Dismissal
Supplementary Assistance
ReportingAuditing
Auditing/Reporting
Auditing
Exchange of Opinions
Selection/Dismissal
Exchange of Informationand Opinions
Board of Corporate Auditors
Corporate Auditorí s Secretary’s Office
Independent Auditor
Outline of EBARA’s Corporate Governance Framework
General Meeting of Shareholders
Subsidiaries and Affiliated Companies
Executive Officer Meeting
ReportingInternal Audits
Corporate Audit Department
Internal Control Improvement & Enhancement Division
Compliance Department
EBARA’s corporate philosophy is “extensive contribution to society by providing superior technologies and services related to water, air, and the
environment.” Based on this corporate philosophy, EBARA has positioned working toward enhancing its corporate value through the sustained
expansion of its business activities and continuing to return a portion of the profits it earns to shareholders as its most important management
issues. To address these issues effectively, EBARA believes that enhancing the soundness and transparency of management is indispensable.
Accordingly, EBARA is working to strengthen its corporate governance and its internal control systems to ensure compliance with relevant rules
and regulations.
Accordingly, EBARA has prepared its Group Code of Conduct to provide guidelines for corporate operations that are in compliance with relevant
laws and regulations.
www.global-reports.com
EBARA CORPORATION ANNUAL REPORT 2008 21
Internal Controls
The Company’s Board of Directors, based on the Corporation Law of
Japan, has decided on a policy for internal controls and made this policy an
integral part of the Company’s basic regulations. These basic regulations
cover a range of management issues and set forth a compliance system for
the conduct of duties by directors and employees, regulations and systems
for controlling risk, and systems for the supervision of the behavior of
Group companies and management as well as other systems. These regu-
lations have the objective of clarifying policy initiatives to create systems to
ensure the proper conduct of operations in each of these areas. With the
goal of improving and promoting specific policies related to internal con-
trols, the Company has created an organizational unit that takes initiatives
in these areas and reports directly to the president. Also, in the area of
financial reporting, to create improved internal control systems, the
Company has formed a specialized unit with the goal of implementing
improvements in the process for preparing financial reports properly to
enhance trust and confidence in the Company. With these initiatives as
a foundation, the Company is working to create systems for timely and
appropriate information disclosure to its wide range of stakeholders.
Regarding risk management, the Company has formed a Risk
Management Panel, which is responsible for the risk management of the
EBARA Group, including compliance risk. For strategic risks, the Risk
Management Panel is preparing a set of regulations and will decide on
Companywide risk management systems, while also working especially to
manage risks related to projects and other activities with high inherent risks.
In its internal control systems, the Company has established a Corporate
Audit Department as an independent unit reporting to the president. Based
on the Company’s internal audit regulations, this unit conducts internal
audits with the aim of evaluating the internal control methods of the com-
pliance, risk management, and other internal control functions in the
Company’s operating divisions. In addition to these auditing activities, the
Corporate Audit Department has formed an internal unit for auditing the
appropriateness of transactions. This unit audits and supervises the
Company’s participation in bidding activities for public works projects and
its transactions with subcontractors. Through this auditing and supervision
of operating divisions, this unit provides advice to the divisions it examines
and monitors, issues directives for making improvements in activities, and
reports the results of these activities to the president. In addition, as
deemed necessary, the Corporate Audit Department exchanges information
and opinions with the Corporate Auditors as well as participates in meet-
ings of the Board of Corporate Auditors with the representative directors
and attends meetings of the Group auditors to improve teamwork with
other units responsible for auditing activities.
Compliance System
The Company is fully aware that unethical behavior due to the lack of
adherence to high standards of compliance may damage its management
foundation. Accordingly, the Company positions full compliance with laws
and regulations as one of its most important internal control objectives.
In addition, to fulfill its many social responsibilities as well as conduct its
corporate activities in accordance with social mores, including ethical
and moral practices, the Company has formed the CSR Division, which
has internal units specializing in compliance, management of trade under
security and defense agreements, environmental preservation, promoting
understanding of human rights, making a contribution to society, and other
CSR-related initiatives. In addition, the Company has formed a Corporate
Ethics Committee, which is chaired by the president, and, in addition to
including outside legal counsel among its members, this committee is
responsible for discussing appropriate courses of action from an overall
perspective related to legal provisions for internal controls, appropriateness
of transactions, environmental preservation, human rights, the EBARA
Group Code of Conduct, and other similar matters. At the same time, by
performing periodic checks on the state of compliance promotion from a
Company perspective, this committee monitors the execution of business
activities and contributes to improvement in activities.
The Company’s Compliance Department acts as the focal point for these
various initiatives by providing advice and building the base for promoting
compliance and ethical behavior in the Company’s overall activities. The
activities of the department include conducting systematic training programs
for various levels of Company personnel to heighten their awareness of com-
pliance and other issues. In addition, to ensure that the various measures
decided by the Corporate Ethics Committee are applied and implemented
in Group companies, EBARA has formed the Group Compliance Network,
which includes personnel in charge of corporate ethics at related companies.
With the goal of ensuring that the awareness of the importance of compli-
ance is communicated to each and every employee, EBARA has also estab-
lished its Compliance Liaison System under which about one employee in
100 is assigned liaison functions. In addition, the Compliance Department
conducts a compliance survey once a year, and, by assessing how well the
spirit of compliance has permeated the organization from the survey results,
the office contributes to the improvement of related systems and policies.
Moreover, to address potential violations of legal provisions and other
ethical issues, the basic understanding is that personnel will receive advice
from their supervisors and others in the normal course of business opera-
tions. However, in addition, the Company provides for consultation with
qualified persons, including a compliance consultation function outside the
Company conducted by outside legal counsel. Under this “whistle blower”
system, measures have been adopted to preserve the confidentiality of per-
sonnel providing such compliance-related information and prevent them
from being disadvantaged. This system is designed to actively solicit compli-
ance-related information from internal sources and thereby prevent unethi-
cal behavior as well as discover improper behavior as quickly as possible.
Going forward, the Company will continue these activities to further
heighten the awareness of the importance of compliance and thereby
endeavor to create a corporate culture where compliance matters have
been fully internalized, and proper emphasis is placed on the observance
of relevant rules and regulations.
EBARA CORPORATION ANNUAL REPORT 200822
Board of Directors(As of June 27, 2008)
From left: (Back row) Tetsuji Fujimoto, Itaru Shirasawa, Kozo Nakao, Atsuo Suzuki, Akihiro Ushitora, Akira Itoh(Front row) Tetsuya Yamamoto, Masayoshi Hirose, Natsunosuke Yago, Hiroshi Kamiya, Seiichi Ochiai
Board of Directors
Natsunosuke YagoPresident and Representative Director Chairman of the Board
Masayoshi Hirose*Director
Hiroshi Kamiya*Director
Kozo Nakao*Director
Atsuo Suzuki*Director
Itaru Shirasawa*Director
Akihiro Ushitora*Director
Tetsuji Fujimoto*Director
Akira Itoh*Director
Tetsuya YamamotoOutside director
Seiichi OchiaiOutside director
Directors of the Board marked with* hold the post of Executive Officer concurrently.
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EBARA CORPORATION ANNUAL REPORT 2008 23
Governance Structure and Management Systems
Executive Officers
Vice President Executive Officer
Masayoshi HirosePresident, Environmental Engineering Company, DivisionExecutive, Water Treatment & Waste Division, EnvironmentalEngineering Company
Senior Managing Executive Officer
Hiroshi KamiyaDivision Executive, CSR Division, Division Executive, GeneralAffairs Division, Executive General Manager, Haneda Office
Managing Executive Officers
Kozo NakaoPresident, Precision Machinery Company
Atsuo SuzukiPresident, Fluid Machinery & Systems Company
Itaru ShirasawaVice President, Fluid Machinery & Systems Company, DivisionExecutive, Marketing Sales Division, Fluid Machinery & SystemsCompany, Division Executive, Domestic Sales Office Division,Executive General Manager, Shinagawa Office
Akihiro UshitoraVice President, Environmental Engineering Company, Division Executive, Environmental Plant Division, Environmental Engineering Company
Tetsuji FujimotoDivision Executive, Finance & Corporate Accounting Division
Yasuo OgasawaraVice President, Fluid Machinery & Systems Company, DivisionExecutive, Custom Pump Division, Division Executive, FluidMachinery Development Division, Fluid Machinery & SystemsCompany
Manabu TsujimuraDivision Executive, Semiconductor Equipment Division, PrecisionMachinery Company
Shotaro KuryuDivision Executive, Standard Custom Pump Business Division, Fluid Machinery & Systems Company
Akira OgataDivision Executive, Production & Assurance Division, PrecisionMachinery Company
Yasuyuki UrumaFluid Machinery & Systems Company
Senior Executive Officers
Hitoshi HandaDeputy Division Executive, Environmental Plant Division,Environmental Engineering Company
Masakatsu OhyaDivision Executive, Fuel Cell Division
Executive Officers
Akira ItohDivision Executive, Technologies, Research & DevelopmentDivision, Deputy Division Executive, Internal Control Improvement& Enhancement Division
Masaru ArakiDivision Executive, Production Engineering Division, FluidMachinery & Systems Company
Minoru TakanoDeputy Division Executive, Environmental Plant Division,Environmental Engineering Company, Deputy Division Executive,Domestic Sales Office Division
Yasuji MoriDeputy Division Executive, Domestic Sales Office Division,Executive General Manager, Osaka Branch
Hisashi OikawaDeputy Division Executive, Standard Pump Business Division,Division Executive, Technology and Production Division, FluidMachinery & Systems Company
Koji OtaDivision Executive, Sales and Marketing Division, PrecisionMachinery Company, Deputy Division Executive, Domestic SalesOffice Division
Kiyoshi MiyagawaDeputy Division Executive, Marketing & Sales Division, DivisionExecutive, Electric Power Sector, Fluid Machinery & SystemsCompany
Hiroshi OtaniDeputy Division Executive, Standard Pump Business Division,Division Executive, Business Development Division, FluidMachinery & Systems Company
Teruo KawasakiDeputy Division Executive, Custom Pump Division, ExecutiveGeneral Manager, Custom Pump Fujisawa Plant, Fluid Machinery& Systems Company, Executive General Manager, Fujisawa District
Toichi MaedaDeputy Division Executive, Custom Pump Division, ExecutiveGeneral Manager, Haneda Plant, Fluid Machinery & SystemsCompany, Executive General Manager, Haneda District
Toshihiro YamashitaGeneral Manager, Corporate Audit Department
Masaru ShibuyaDivision Executive, Human Resource & Legal Division
Yoichi AmemiyaDivision Executive, Administration Division, EnvironmentalEngineering Company
Nobuharu NojiDivision Executive, Components Division, Precision MachineryCompany
Atsuo OhiGeneral Manager, Corporate Strategy Planning Department
Corporate Auditors
Full-Time Corporate Auditors
Michihisa HozumiYasuo Watarai
Corporate Auditors
Seigoh Hirayama*Yoshio Omori*Yoshihiro Machida* Individuals marked with * are Outside Corporate Auditors.
Corporate Auditors and Executive Officers(As of June 27, 2008)
EBARA CORPORATION ANNUAL REPORT 200824
Corporate Social Responsibility
EBARA’s overall objective is “to be a trusted corporate member of the global community.” This
means not only offering quality products and services that customers can rely on but also emphasiz-
ing compliance with laws and regulations, having respect for human rights, being concerned about
preserving the natural environment, and making contributions to social well-being and development.
EBARA’s initiatives to fulfill its corporate social responsibility (CSR) have been recognized interna-
tionally, and its stock continues to be selected for inclusion in FTSE4Good, the world’s leading
socially responsible investing (SRI) index. Logo of the FTSE4Good Index
CSR Structure and Missions
EBARA’s CSR system has seven organizational units, and each of these
is implementing initiatives to fulfill its mission.
1. Compliance Department: Responsible for planning and formulating mea-
sures to promote management that ensures compliance with laws and regu-
lations and for conducting compliance education and awareness programs
2. Human Rights Awareness Department: Responsible for informing EBARA
personnel and improving their awareness of human rights issues as well
as for providing counseling related to human rights
3. Corporate Environmental Management: Has Groupwide responsibility
for environmental conservation and takes the leadership in announcing
environmental goals and working toward meeting them
4. Social Contribution Department: Responsible for expanding and
improving the EBARA Group’s activities that contribute to society in five
areas: namely, encouraging the arts and technology, environmental con-
servation, communication with local communities, and promoting
sports activities as well as social welfare.
5. Security Trade Control Department: Collects information and conducts
internal programs to heighten awareness to ensure compliance with
regulations governing trade security
6. Integrated Procurement Department: Has overall responsibility for the
appropriateness of the procurement operations of the EBARA Group
7. Integrated Quality Assurance Department: Has overall responsibility
throughout the EBARA Group for ensuring that customers can use EBARA
products safely and with confidence
The CSR activities of the EBARA Group are described in detail in the
EBARA Group CSR Report, which is published annually in Japanese and
English.
http://www.ebara.co.jp/en/csr/
Environmental Protection Initiatives
EBARA confirms compliance with environmental laws and regulations at
its plants and other business locations through conducting environmental
audits. At the business establishment level, policies for preventing global
warming are focused mainly on reducing CO2 emissions released from
energy sources. EBARA is implementing specific policies to reduce CO2
emissions and meet its objective for fiscal 2010 (achieving a 10% reduc-
tion in comparison with the level in 2000).
In addition, since the Group’s materials recycling ratio reached 93.1% in
fiscal 2006, the target for fiscal 2010 has been increased to 95% or more.
Cover of the EBARA Group CSR Report 2008 (Available inJapanese and English and downloadable from the EBARAcorporate website)
www.global-reports.com
EBARA CORPORATION ANNUAL REPORT 2008 25
Contributing to Society
Among activities to contribute to society, the EBARA Hatakeyama Memorial
Fund (EHMF), which was established in 1989, has been promoting inter-
national cooperation for 19 years, especially in the countries of Southeast
Asia. These activities aim to promote voluntary activities in neighboring
countries, especially in Southeast Asia, for technology transfers on a non-
commercial basis for the purpose of upgrading engineering capabilities
through assisting the cultivation of human resources as well as the devel-
opment of appropriate technologies. In fiscal 2007, activities included
cooperation with the Asian Institute of Technology (AIT) to hold an interna-
tional training course on “Planning and Design of Pumping Works,” which
was organized by the Association for Overseas Technical Scholarship
(AOTS). Thirty participants attended from 10 countries in Southeast and
South Asia, including Sri Lanka and India. In addition, training courses
entitled “Industrial Applications of Fluid Machinery—focused on Energy
Conservation”—were also organized by AOTS and implemented by EHMF
in Malaysia and Indonesia. EHMF held a total of 10 short courses/seminars
over the year in Mongolia, Cambodia, the Philippines, Indonesia, and
Thailand, including 3 training courses organized by AOTS. The number
of educational programs sponsored by the EHMF has reached 188 in
16 countries through the end of March 2008, and more than 8,744
participants have benefited from these programs.
Subjects for future short
courses/seminars, for which
many requests have been
received, include “Energy
Conservation in Industries” and
“Effective Technologies for Using
Waste Heat.” 10th international training course on “Planningand Design of Pumping Works” organized byAOTS, implemented by AIT and EBARA (August 20 to 31, 2007)
Seminar List Held in Fiscal 2007
(1)Rajamangala University of Technology Thanyaburi
ThailandTitle: Effective Energy Systems
(2)Mongolian Energy Association
MongoliaTitle: Effective Energy Systems - Focused on Renewable Energies -
(3)National Irrigation Administration
PhilippinesTitle: Pumps and Turbines in Agriculture
(4)AOTS/Asian Institute of Technology
ThailandTitle: Planning and Design of Pumping Works
(5)AOTS/Association of Consulting Engineers Malaysia
MalaysiaTitle: Industrial Applications of Fluid Machinery
(6)AOTS/Association of Consulting Engineers Malaysia, Sabah Branch
MalaysiaTitle: Industrial Applications of Fluid Machinery
(7)Khon Kaen University
ThailandTitle: Energy Issues and Hydraulic Machinery
(8)Royal University of Agriculture
CambodiaTitle: Effective Energy Systems - Focused on Applications of Hydraulic Machinery -
(9)AOTS/Institute of Technology Bandung
IndonesiaTitle: Industrial Applications of Fluid Machinery - Focused on Energy Conservation -
(10)PTEI/Institute of Technology Bandung
IndonesiaTitle: Effective Energy System - Focused on Renewable Energies -
(11)Burapha University
ThailandTitle: Applications of Turbo Type Fluid Machinery - Focused on Energy Saving -
AOTS is an expert training organization under the jurisdiction of the Japanese Ministry of Economy, Trade and Industry (METI) that promotes technical cooperation through training activities in Japan and abroad, focusing mainly on
managers and engineers from developing countries.
EBARA CORPORATION ANNUAL REPORT 200826
Financial Section
2008 2007 2006
Net sales ¥567,191 ¥538,098 ¥514,957
Cost of sales 469,865 434,934 418,414
Gross profit 97,326 103,164 96,543
Operating income (loss) 6,017 13,249 10,902
Net income (loss) 7,609 5,446 3,350
Capital expenditures 22,381 17,917 14,838
R&D expenses 10,812 11,357 10,883
Total shareholders’ equity** 151,237 151,242 153,695
Total net assets 155,263 154,970 —
Total assets 607,007 625,033 592,631
Net income (loss) per share
(yen and U.S. dollars) ¥18.01 ¥12.89 ¥9.11
ROE (%)*** 5.0 3.6 2.6
ROA (%) 1.2 0.9 0.6
* The U.S. dollar amounts are included solely for convenience and have been translated as a matterof arithmetical computation only at the rate of ¥100.19=US$1, the rate of exchange prevailing onMarch 31, 2008.
** The EBARA Group has applied “Accounting Standards for Presentation of Net Assets on theBalance Sheets” (ASBJ Statement No. 5, issued on December 9, 2005) and “Guidance onAccounting Standards for Presentation of Net Assets on the Balance Sheets” (ASBJ GuidanceNo. 8, issued on December 9, 2005” from the fiscal year ended March 31, 2007. The amountcorresponding to total shareholders’ equity, according to the previous method of presentation,is ¥151,237 million for the fiscal year 2008 and ¥151,242 million for the fiscal year 2007.
*** ROE: Net income/Average total shareholders’ equity of the beginning and end of the fiscal year.From the fiscal year 2007, total shareholders’ equity substitutes for total net assets in thecalculation.
EBARA CORPORATION and Consolidated SubsidiariesYears ended March 31
C o n t e n t sE l e v e n - Y e a r S u m m a r y
Eleven-Year Summary.........................26
Financial Review ..................................28
Consolidated Balance Sheets.............34
Consolidated Statements of Income............................................36
Consolidated Statements of Shareholders’ Equity/Net Assets .....37
Consolidated Statements of Cash Flows.....................................38
Notes to the Consolidated Financial Statements .........................39
Report of Independent Certified Public Accountants............................49
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EBARA CORPORATION ANNUAL REPORT 2008 27
Thousands ofMillions of yen U.S. dollars*
2005 2004 2003 2002 2001 2000 1999 1998 2008
¥478,397 ¥507,767 ¥517,981 ¥562,592 ¥599,835 ¥566,383 ¥557,728 ¥568,553 $5,661,153
384,168 405,760 420,079 454,853 472,095 453,462 466,955 455,473 4,689,739
94,229 102,007 97,902 107,739 127,740 112,921 90,773 113,080 971,414
7,581 10,446 (1,424) 3,522 13,934 20,666 6,253 30,695 60,056
(19,649) 2,586 (28,538) (17,936) 2,562 8,673 (3,273) 10,389 75,946
12,706 13,690 19,600 25,698 18,420 16,098 25,103 23,700 223,386
9,994 10,965 14,116 17,287 19,997 16,576 24,671 22,544 107,915
102,952 112,578 106,782 140,107 155,844 161,668 134,520 141,504 1,509,502
— — — — — — — — 1,549,686
558,265 576,412 613,759 642,605 672,215 624,888 611,875 602,290 6,058,559
¥(64.43) ¥8.34 ¥(95.49) ¥(59.99) ¥8.57 ¥29.57 ¥(11.38) ¥36.12 $0.180
(18.2) 2.3 (23.1) (12.1) 1.6 5.9 (2.4) 7.5
(3.5) 0.4 (4.6) (2.7) 0.4 1.4 (0.5) 1.7
EBARA CORPORATION ANNUAL REPORT 200828
Financial Review
OverviewDuring the consolidated fiscal year under review, the world economy as a whole continued to experi-ence firm conditions, but during the latter half of the fiscal year, signs of an economic slowdownbegan to appear as a result of increases in prices of energy and raw materials and spreading credituncertainty in international financial markets. In the U.S. economy, as a result of turmoil in financialmarkets resulting from the emergence of the subprime housing loan issue, the decline in housing con-struction activity, and other factors, the economy slowed. In the European economies also, growthslowed as a consequence of instability in financial markets. On the other hand, in the newly emergingeconomies, centered around the BRIC nations, Asia, and the Middle East, economic expansiongenerally continued.
In the Japanese economy, signs of a recovery trend were in evidence as a result of increases in pri-vate capital investment and other developments following the improvement in corporate profitability;however, during the latter half of the fiscal year, stronger signs of a slowdown in private-sectordemand appeared as a result of the impact of rising energy and raw material prices as well as adecline in construction starts. On the other hand, conditions in the public sector remained lacklusterthroughout the fiscal year.
Amid this operating environment, the EBARA Group (the Group), in its Fluid Machinery & Systems(FMS) Group, moved forward with initiatives to strengthen its sales network in global markets forcustom pumps, compressors and fans, and standard pumps and continued to strengthen its manu-facturing systems. In addition, the Group made the decision to move its Haneda Plant to a newlyconstructed facility located in Futtsu City in Chiba Prefecture, with the objectives of improving produc-tion efficiency and reducing the emissions load on the environment. In the Environmental Engineering(EE) Group, the Group focused especially on improving profitability. These activities included reallocat-ing its management resources, including personnel, to respond to conditions in the market fordomestic public works construction, which has matured, and took steps to lower fixed costs throughthe implementation of a preferential early retirement program. The Group also adopted measures thatincluded strengthening its capabilities for making proposal-based sales and providing operation andmaintenance (O&M) services, which are areas where demand is expected to grow. In the PrecisionMachinery (PM) Group, the Group endeavored to improve profitability by making further improve-ments in profit margins of core products, including dry pumps and chemical mechanical polishing(CMP) systems, by lowering procurement costs and substantially tightening manufacturing manage-ment and controls.
The Group continued activities to restructure its business portfolio and organization. These includ-ed the sale of shares held in former consolidated subsidiaries Matsubo Company, Ltd. and ElliottEnergy Systems, Inc.; the liquidation of Ebara Environmental International Co., Ltd.; and measures toreorganize other associated companies in the environment business.
As the previously mentioned measures were implemented, the EBARA Group reported an increasein sales of the FMS Group, supported mainly by robust capital investment activities in overseas mar-kets; a decrease in sales of the EE Group because of increased competition for projects in thedomestic public sector; and a fractional decline in sales of the PM Group owing to lackluster marketconditions in the second half of the fiscal year. As a result of these trends by segment, total consoli-dated net sales increased over the previous fiscal year. Operating income posted a substantial declinefrom the previous year. The principal factors accounting for this were as follows. In the FMS Group,performance was adversely affected by sudden fluctuations in foreign currency exchange rates and adecline in sales of standard pumps and blowers owing to a drop in the number of construction startsresulting from the implementation of a revision of Japan’s building code. In the EE Group, additionalcosts were reported in connection with the Group’s decision to withdraw from the overseas marketfor new orders for solid waste processing facilities, and the profitability of work for the domestic publicsector declined as a result of more-intense price competition. In the PM Group, sales declined as aresult of requests from customers for delays of equipment deliveries in the face of stagnant conditionsin the semiconductor market.
As a result of these various developments, the Group reported consolidated net sales of ¥567.1billion, 5.4% higher than for the previous fiscal year; operating income of ¥6.0 billion, 54.6% belowthat of the prior year; and ordinary income of ¥2.7 billion, 73.5% lower than for the previous fiscalyear. Among extraordinary items, the Group reported extraordinary gains totaling ¥74.5 billion, includ-ing a ¥72.4 billion gain on the sale of tangible fixed assets. Extraordinary losses amounted to ¥43.7billion, including losses on the suspension of specific projects amounting to ¥9.8 billion, provisions tothe reserve for losses of specific construction work amounting to ¥13.6 billion, and losses on comple-tion guarantees for specific projects amounting to ¥5.2 billion. After a provision to the valuationreserve for deferred tax assets, consolidated net income amounted to ¥7.6 billion, representing anincrease of 39.7% over the previous fiscal year.
2004
2005
2006
2007
2008
Operating Margin(Billions of yen, %)
Years ended March 31
SalesCost of salesSG&A expensesOperating margin (%) (right scale)
0
100
200
300
400
500
600
0
0.5
1.0
1.5
2.0
2.5
3.0
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EBARA CORPORATION ANNUAL REPORT 2008 29
Information by Business SegmentThe Group changed the segmentation of wind power generation business and cooling and watersupply systems for nuclear power plants from the EE Group to the FMS Group at the beginning of thefiscal year ended March 31, 2008, to optimize the Group from an overall perspective and restructureits organization. Comparisons with the same period of the previous year were prepared after reclassifi-cation under the new segmentation.Fluid Machinery & SystemsAmong orders for the FMS Group, orders for custom pumps as well as compressors and fansshowed strong expansion supported by continued active capital investments in the oil and gas indus-try as well as the electric power industry, principally in overseas markets in the Middle East and theAsian region outside Japan. In addition, orders for standard pumps continued to be firm, principally inoverseas markets. In the Japanese market, the FMS Group was able to record a gain in orders overthose of the previous year from the public sector, despite a difficult market environment by conduct-ing activities to secure small to medium-sized projects, while large-scale projects also contributed. Inaddition, the FMS Group expanded the volume of orders from the private sector, where demand fromthe steel and other industries for the maintenance, renewal, and expansion of existing equipment wasfirm, through assiduous, customer-centric sales activities and improvement in after-sales service.
Sales of the FMS Group for the fiscal year under review amounted to ¥318.4 billion, 9.8% higherthan for the previous fiscal year. These results reflected robust orders for gaseous and fluid transportequipment, mainly from the overseas oil and gas industries and the electric power industry, as wellas strong demand for capital investment in the basic materials industries in Japan and overseas.However, operating income amounted to ¥10.2 billion, 2.9% lower than for the previous fiscal year,owing to sudden fluctuations in foreign currency exchange rates and the decline in the number ofconstruction starts resulting from the implementation of a revision of Japan’s building code.Environmental EngineeringIn the EE Group, challenging market conditions persisted because of more-intense competition in thedomestic public-sector area, which is the principal market for the EE Group. As a result of efforts bythe EE Group to strengthen its capabilities for making proposal-based sales and its competitiveness,the following important results were reported. In the water treatment and sewage processing field,these included winning an order for a submerged membrane filtration facility, which will be the largestof its kind. In the solid waste processing facility field, the EE Group won an order for a large-scalemunicipal garbage incineration facility in the Kanto metropolitan area. In addition, the EE Group iscontinuing to strengthen its capabilities for providing O&M services and was successful in winninglong-term contracts for waste processing centers as well as multiyear contracts for water treatmentfacilities. On the other hand, the EE Group made the decision to withdraw from accepting new con-tracts for overseas solid waste processing projects and bioethanol facilities, where it is difficult toavoid business risk. As a result of these various factors, orders declined from the level of the previousfiscal year.
Restructuring the profit base of the EE Group is an urgent task. The EE Group has concentratedresources on those businesses, mainly domestic ones, that are expected to grow, reduced the num-ber of personnel, liquidated certain subsidiaries, and taken other measures to reduce fixed costs. Inaddition, reserves for possible future construction and other losses, principally related to overseasprojects, have been set aside.
Sales of the EE Group were ¥141.4 billion, 0.8% higher than for the previous fiscal year, reflectingthe difficult operating environment resulting from more-intense competition in the domestic publicworks project market. The EE Group’s operating loss increased to ¥12.1 billion, ¥4.7 billion more thanin the previous fiscal year. This was due to a number of factors, including the incurrence of additionalcosts in connection with the withdrawal from the overseas market for new orders in the solid wasteprocessing facilities field and the decline in profitability owing to more-intense price competition in thedomestic public works sector.Precision MachineryIn the PM Group, sales of semiconductor manufacturing equipment, which is the PM Group’s coreproduct, held firm during the first half of the fiscal year as memory manufacturers in Japan, Korea,and Taiwan, who are the PM Group’s principal customers, continue their aggressive capital invest-ment. However, in the second half of the fiscal year, the weakening of semiconductor prices, mainlyfor DRAMs, prompted one semiconductor manufacturer after another to delay or suspend theirinvestment plans. Amid this operating environment, the PM Group focused its marketing activities onhigh-throughput CMPs for technologically leading-edge copper interconnection processes andprocessors for removing PFC (perfluorinated carbon) gas, which is a greenhouse gas that places aheavy emissions load on the environment. However, orders were below the level of the previous year.In addition, in the fourth quarter, conditions in the semiconductor market experienced a further
2004
2005
2006
2007
2008
Net Sales by Business Segment (Billions of yen)
Years ended March 31
Fluid Machinery & SystemsEnvironmental EngineeringPrecision Machinery
0
100
300
200
400
500
600
Operating Income (Loss) by Business Segment (Billions of yen)
Years ended March 31
Fluid Machinery & SystemsEnvironmental EngineeringPrecision Machinery
-15
-10
-5
0
5
10
15
25
20
2004
2005
2006
2007
2008
EBARA CORPORATION ANNUAL REPORT 200830
marked deterioration, and shipments were delayed at customers’ request. As a consequence, salesand operating income were below their respective levels of the previous fiscal year.
Sales of the PM Group amounted to ¥107.2 billion, 0.4% lower than for the previous fiscal year.Operating income stood at ¥7.9 billion, representing a decline of 20.8% from the prior year.
Information by Geographic SegmentJapanIn Japan, sales of products to the steel industry and the oil and gas sector were strong, reflecting thefirmness in private capital investment, but conditions in the market for public-works related productsand services were challenging. In addition, as a result of the weakness in the semiconductor marketin the latter half of the fiscal year under review, sales of products to the semiconductor industry werebelow the levels of the previous fiscal year. As a result of these factors, net sales in Japan rose 3.8%,to ¥457.4 billion, but, as a result of a deterioration in operating income of ¥12.7 billion from the previ-ous year, an operating loss of ¥4.0 billion was reported for the fiscal year.North AmericaSales of products to the oil and gas sector expanded in North America, and net sales rose 3.5%, to¥64.1 billion. Operating income rose a sharp 100.9%, to ¥5.2 billion.Other AreasIn other areas, as a result of robust capital investments in the oil and gas sector and the electricpower industry, sales of gaseous and fluid handling products of the FMS Group held firm. As a result,net sales rose 28.2% over the previous fiscal year, to ¥45.6 billion. In addition, as a result of increasedprofits from sales of the products of the FMS Group and sales of products of the PM Group to thesemiconductor industry, operating income rose 65.7%, to ¥5.0 billion.
Other Income (Expenses) and Net IncomeOther income (expense), net, improved ¥29.7 billion from the previous year and amounted to incomeof ¥27.6 billion. Other income included ¥72.4 billion in a gain on sales of fixed assets and ¥2.2 billionin interest and dividend income. On the other hand, expenses included ¥13.7 billion for the provisionto the reserve for losses on specific construction work, ¥9.9 billion for the losses on suspension ofspecific projects, ¥6.1 billion for the write-down of inventories, and ¥5.3 billion for the losses oncompletion guarantees for specific projects.
As a result, income before income taxes improved ¥22.5 billion from the previous year, to ¥33.6billion. Net income improved ¥2.2 billion and amounted to ¥7.6 billion.
Financial PositionAssetsAs a result of a decrease from the end of the previous year in current assets of ¥14.7 billion and adecrease in fixed assets of ¥3.3 billion, total assets declined ¥18.0 billion, to ¥607.0 billion. The princi-pal reasons for these movements in assets were as follows.
Among current assets, the principal item showing an increase was securities, but inventories andother current assets posted declines. Securities increased ¥18.9 billion, as the Group invested avail-able funds in negotiable certificates of deposit (NCDs). Inventories, however, decreased ¥15.4 billion,owing to the early application of the newly introduced “Standards for Evaluation of Inventories.” Othercurrent assets declined ¥11.9 billion because of the transfer of claims for compensation in connectionwith the cancellation of the gasification incinerator construction project by Malaysia’s Housing andAutonomy Ministry from other current assets to other investments.
Tangible and intangible fixed assets were approximately the same as at the end of the previous fis-cal year as a net result of capital expenditures of ¥22.3 billion, depreciation write-offs of ¥15.3 billion,the sale of certain assets, and other factors.
Investments and other assets declined ¥4.3 billion from the previous fiscal year-end, to ¥76.5 mil-lion, because of the decrease of marketable investment securities and other factors.LiabilitiesCompared with the previous fiscal year-end, current liabilities decreased ¥12.0 billion, and long-termliabilities decreased ¥6.3 billion; thus, total liabilities declined ¥18.3 billion, to ¥451.7 billion. The princi-pal causes of these decreases were as follows.
Current liabilities declined, primarily as a result of a rise in the settlement of notes and accountspayable of ¥17.1 billion and a decline in commercial paper (CP) due to a redemption of ¥15.0 billionin CP outstanding.The reserve for construction losses increased ¥16.5 billion in connection with theInfraserv project in Germany and other undertakings.
2004
2005
2006
2007
2008
Interest-Bearing Debt/Equity Ratio(Billions of yen, %)
As of March 31
Shareholdersí equityLiabilities, except interest-bearing debtInterest-bearing debtEquity ratio (%) (right scale)
0
100
200
300
400
500
600
700
0
4
8
12
16
20
24
28
2004
2005
2006
2007
2008
Net Sales by Geographic Area(Billions of yen)
Years ended March 31
JapanNorth AmericaOther
0
100
200
300
400
500
600
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EBARA CORPORATION ANNUAL REPORT 2008 31
Long-term liabilities decreased ¥6.3 billion owing to a decline in the balance of bonds outstandingand other items of ¥10.3 billion, largely as a result of the transfer of bonds due within one year to thecurrent portion of long-term debt among current liabilities.Net AssetsAmong items in net assets, shareholders’ equity increased ¥4.8 billion, but total valuation and trans-lation adjustments and others decreased ¥4.8 billion, while minority interests in consolidated sub-sidiaries increased, moving up ¥0.3 billion. As a result, net assets were up ¥0.3 billion and amountedto ¥155.3 billion at the end of the period under review. The increase in shareholders’ equity was main-ly due to the reporting of net income of ¥7.6 billion and the payment of dividends from retained earn-ings of ¥3.2 billion.
Cash FlowsNet cash provided by operating activities before payments of interest and taxes was ¥14.1 billionlower than for the previous fiscal year and amounted to a net outflow of ¥6.3 billion, owing todecreases in interest and dividends received and higher payments of corporate income taxes.
Among investing activities, the Group reported a gain on the sale of fixed assets of ¥64.3 billion,including principally the sale of the land on which the Group’s Haneda Plant was located. In addition,the Group made expenditures of ¥16.7 billion on the acquisition of fixed assets. As a result of thepurchase of ¥20.0 billion in securities using available cash and other activities, the Group was ableto report net cash provided by investing activities of ¥31.8 billion for the fiscal year under review.
Net cash provided by financing activities amounted to a net outflow of ¥21.8 billion as the Groupmade a net decrease in refunding of ¥19.2 billion through the redemption of bonds and refunds toother types of interest-bearing debt, cash dividends paid of ¥3.2 billion, and other factors.
As a consequence, consolidated cash and cash equivalents at the end of the period were¥69.2 billion, ¥3.1 billion higher than at the end of the previous fiscal year.
Capital ExpendituresAs a result principally of expansion of the EBARA Group’s plant facilities in response to strong marketconditions, investments in production equipment, etc., with a view to commercializing new products,and investments in equipment to enhance productivity, total capital investments implemented duringthe fiscal year under review amounted to ¥22.4 billion. This figure includes investments in intangiblefixed assets and long-term prepaid expenses.
Principal investments by business segment were as follows. Please note that the amount of invest-ments includes intersegment transactions.Fluid Machinery & SystemsCapital expenditures in this segment, which amounted to ¥9.8 billion, were allocated mainly for theconstruction of a manufacturing facility for machinery for gaseous substances.Environmental EngineeringThis segment made investments in production facilities with a view to the commercialization offuel cells for household electric power generation. Total investments by the segment amountedto ¥4.2 billion.Precision Machinery GroupTotal investment of this segment amounted to ¥8.4 billion and was used for the construction ofa manufacturing facility for dry pumps.
Liquidity and Capital Resources(1) Capital ResourcesAt the end of the fiscal year under review, on a consolidated basis, the Company had total interest-bearing debt of ¥184.5 billion, comprising ¥77.1 billion in short-term interest-bearing liabilities and¥107.4 billion in long-term interest-bearing liabilities. Although this balance decreased ¥28.9 billionfrom a total balance at the end of the previous fiscal year of ¥213.3 billion, the Company’s depen-dence on interest-bearing debt remains at a high level, and management believes that reducing thisdependence is an important issue. We believe that increasing profitability and the efficiency of capitalare basic to strengthening the Company’s financial base.
During the fiscal year under review, the Company’s free cash flow, defined as net cash provided by(used in) operating activities plus net cash provided by (used in) investing activities amounted to a netinflow of ¥25.5 billion, and the amount of net inflow increased ¥26.5 billion from the previous fiscalyear, because investing cash inflows increased ¥42.3 billion from the previous fiscal year mainly forthe reasons mentioned above.
2004
2005
2006
2007
2008
Net Cash Provided by (Used in) Operating Activities (Billions of yen)
Years ended March 31
-20
-10
0
10
20
30
2004
2005
2006
2007
2008
Capital Expenditures (Billions of yen)
Years ended March 31
Fluid Machinery & SystemsEnvironmental EngineeringPrecision Machinery
0
5
10
15
25
20
EBARA CORPORATION ANNUAL REPORT 200832
(2) Management of LiquidityThe Company takes the position that reducing cash and cash equivalents is a basic requirement forincreasing asset efficiency. To manage liquidity risk, the Company has concluded commitment linecontracts with its principal banks that provide an adequate amount of financial liquidity for its opera-tions.
In addition, to increase the efficiency of cash within the EBARA Group, the Company has instituteda system whereby idle cash is concentrated in the parent company and then allocated to other Groupcompanies with cash requirements.
The consolidated balance of cash and cash equivalents at the end of the fiscal year was ¥69.2 bil-lion. In addition, the available balance of commitment lines was ¥36.6 billion, and available overdraftsamounted to ¥13.9 billion.
R&D ExpensesR&D expenditures of the EBARA Group can be divided into three major categories:1. Basic research aimed at discovering and establishing seed technologies for the long term,2. Development research focused on the application of technologies and the creation of new prod-
ucts, and3. R&D to provide support for the development of existing businesses.R&D in the first category above is implemented mainly by consolidated subsidiary Ebara ResearchCo., Ltd. R&D in the second and third categories is conducted through coordinated teamwork amongindividual business divisions, Group companies, and Ebara Research. Total R&D expenditures duringthe fiscal year under review amounted to ¥10.8 billion. Activities by business segment are as follows.Fluid Machinery & SystemsThe Fluid Machinery & Systems (FMS) Group is accelerating the development of products for theenergy, environmental, water treatment, and other fields that are globally competitive. The FMS Groupis working as a team, from marketing through its R&D activities, and is focusing on the developmentof equipment for desalination plants, high-efficiency turbo refrigeration equipment, eco-friendly stan-dard pumps for the global market, and other products. In addition, the FMS Group has beenstrengthening its numerical analysis environment technologies and bolstering its fundamental tech-nologies for analytical engineering and optimizing technologies. The FMS Group made expenditureson R&D amounting to ¥3.8 billion during the year under review.Environmental Engineering GroupThe Environmental Engineering (EE) Group positions water treatment and incineration systems asits core businesses and is placing priority on conducting research and developing products on thesecore and peripheral businesses. The EE Group is also working to improve its product groups thatcontribute to cost saving, energy saving, and laborsaving as well as reduction in CO
2emissions.
In addition, the EE Group is working to further promote its EPC + O&M business through focusingon the development of products that feature lower running costs and are easier to use in actualmaintenance and supervisory operations. The EE Group made expenditures on R&D amountingto ¥4.2 billion during the year under review.Precision Machinery GroupIn the Precision Machinery (PM) Group, activities are under way to secure an absolutely superior posi-tion in next-generation process technologies through improvements in process equipment, especiallyCMP and plating equipment, for semiconductor wafer manufacturing processes. In addition, in thecomponent products area, the PM Group is moving forward aggressively with the development ofemission gas treatment systems for dealing with greenhouse gas emissions to prevent global warm-ing. The PM Group made expenditures for R&D amounting to ¥2.8 billion during the year underreview.
Business RisksThe Group confronts a number of business risks that may have an influence on the judgment ofinvestors. These are described below. In addition to being aware of the possibility of the emergenceof these risks, the Group implements measures to prevent their occurrence and deal with them whenthey emerge.
This section includes forward-looking statements that are based on judgments made at the timeof the preparation of this report on the Group’s performance.1. Market RiskPublic works projects account for a high percentage of the sales of the FMS Group and the EEGroup. Accordingly, there is a possibility that cutbacks in public works by the national government,regional governments, and related entities may increase fluctuations in the Group’s business activi-ties, performance, and financial position.
2004
2005
2006
2007
2008
R&D Expenses(Billions of yen)
Years ended March 31
0
5
10
15
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EBARA CORPORATION ANNUAL REPORT 2008 33
In addition, the business of the PM Group is strongly influenced by the silicon cycle. Accordingly,fluctuations in the market for semiconductors may increase fluctuations in the Group’s businessactivities, performance, and financial position.2. Large-Scale Projects and Overseas Business ActivitiesThe Group manufactures and constructs machinery and plants in big projects both in Japan and for-eign countries. Some of these projects involve a high level of technical difficulty. Also, major projectsin foreign countries involve risks related to business environments that differ from those of Japan.The Group takes every possible measure to control these risks and provides for construction lossesby setting aside an amount based on its estimate of such costs; however, if actual additional costsexceed the reserves, this may have a detrimental impact on the Group’s performance.
Foreign currency transactions, etc., related to overseas business activities are converted into yenwhen preparing the consolidated financial statements. The value of transactions may vary accordingto the foreign currency exchange rates prevailing at the time of conversion, but, if the yen appreciates,this may have an adverse impact on the business operations of the Group. Conversely, if the yendepreciates in value against foreign currencies, this may have positive impact on the Group’s busi-ness activities.3. Interest Rate RiskThe EBARA Group is working to reduce its interest-bearing debt, but, as of March 31, 2008, short-term interest-bearing debt amounted to ¥77.1 billion, and the balance of long-term interest-bearingdebt was ¥107.4 billion; thus, total interest-bearing debt reached a total of ¥184.5 billion. Interest-bearing debt includes fixed- and floating-rate liabilities. For that portion of interest-bearing debt bor-rowed at floating rates, the Group has arranged for interest rate swaps to fix the interest liability andloans with floating rates to lessen the risk of interest rate fluctuations; however, if interest paymentson the unhedged portion rise due to higher interest rates, this may have an impact on the Group’sperformance.4. Risks Related to the Impact of Natural Disasters
and Impairment of the Social InfrastructureIf an EBARA Group place of business is struck by a major typhoon, earthquake, or other naturaldisaster that adversely affects its ability to conduct business activities, this may have a detrimentalimpact on Group performance. In addition, in the event of a major accident affecting the labor forceor an accident involving equipment that leads to a stoppage, or impairment, of business activities,this may have an adverse impact on Group performance.5. Government Penalties, Etc.Regarding the order to cease certain operations that has been under consideration since 2004by Japan’s Fair Trade Commission relating to orders for sewage pump construction work for theSewage Commission of the City of Tokyo, in April 2008, the Company received the statement of aruling requesting that such an exclusion order be issued.
As a result of the circumstances described here, the Group may receive an order from the nationaland local governments or others that will exclude it from certain projects; this would result in a declinein orders and have an adverse impact on the Group’s performance.6. Deferred Tax AssetsThe Group believes that its deferred tax assets will make it possible to make recoveries from futuretaxable income. Regarding the portion of deferred tax assets for which the Group believes there isdoubt about making recoveries, the Group has provided the valuation allowance for such doubtfulamounts. However, the estimate of future taxable income may vary depending on performance at thattime. In the event that factors influencing the estimate of taxable income vary, it may be necessary tomake changes in the valuation allowance amounts. In such cases, the Group will make adjustmentsin the doubtful portion of deferred tax assets, and, since an equivalent amount will be reflected in thedeferred tax benefit on the Consolidated Statements of Income, there is a possibility that net incomemay decline as a result.7. Material ProcurementThe Group procures parts and materials for its manufacturing and construction activities and is influ-enced by fluctuations in market conditions for these materials. Increases in prices of materials resultin higher material costs for the Group and may have an adverse impact on the Group’s performance.8. Legal RestrictionsThe Group conducts operations in Japan and foreign countries and is subject to the laws of the coun-tries where its operations take place. In some instances, the passage of laws and changes in existinglegislation may result in an alteration of assumptions for operating and business plans. Such changesin assumptions may have an adverse impact on the Group’s performance.
EBARA CORPORATION ANNUAL REPORT 200834
Consolidated Balance Sheets
Thousands ofU.S. dollars
Millions of yen (Note 4)
ASSETS 2008 2007 2008
Current assets:Cash and cash equivalents ¥ 89,160 ¥ 66,086 $ 889,909Trade receivables 215,791 225,005 2,153,818Allowance for doubtful receivables (636) (2,004) (6,348)Inventories (Notes 3, 6) 81,177 96,590 810,231Deferred tax assets (Note 10) 12,075 14,765 120,521Others 19,368 31,227 193,313
Total current assets 416,935 431,669 4,161,444
Investments and long-term receivables:Investment securities (Note 5) 21,098 30,253 210,580Investments in and advances to subsidiaries and affiliates 17,478 17,003 174,448Reserve for revaluation of investments (111) (1,625) (1,108)Long-term loans receivable 423 461 4,222Deferred tax assets (Note 10) 13,223 25,128 131,979Other investments 34,030 8,657 339,655Allowance for doubtful receivables (11,693) (1,097) (116,708)
Total investments and long-term receivables 74,448 78,780 743,068
Property, plant and equipment (Notes 3, 11):Land 19,567 18,884 195,299Buildings 87,171 85,505 870,057Machinery and equipment 161,519 160,711 1,612,127Construction in progress 10,747 4,740 107,266
279,004 269,840 2,784,749Accumulated depreciation (176,136) (171,563) (1,758,020)
Property, plant and equipment, net 102,868 98,277 1,026,729
Other assets 12,756 16,307 127,318
¥607,007 ¥ 625,033 $6,058,559The accompanying notes are an integral part of these statements.
EBARA CORPORATION and Consolidated SubsidiariesAs of March 31, 2008 and 2007
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EBARA CORPORATION ANNUAL REPORT 2008 35
Thousands ofU.S. dollars
Millions of yen (Note 4)
LIABILITIES AND NET ASSETS 2008 2007 2008
Current liabilities:Bank loans (Note 8) ¥ 54,499 ¥ 58,501 $ 543,957Commercial paper — 15,000 —Current portion of long-term debt (Note 8) 22,585 24,535 225,422Trade payables 150,763 167,881 1,504,771Advance payments received 12,560 18,294 125,362Accrued income taxes 5,468 2,911 54,576Deferred tax liabilities 112 5 1,118Reserve for losses on construction completion guarantees 4,674 3,322 46,651Reserve for construction losses 17,130 670 170,975Reserve for losses arising from violation of Japan’s Antimonopoly Act 962 920 9,602Reserve for legal expenses 200 — 1,996Reserve for expenses related to the sale of land 2,774 — 27,687Accrued expenses and other current liabilities 38,334 29,997 382,613
Total current liabilities 310,061 322,036 3,094,730Long-term liabilities:
Long-term debt (Note 8) 107,375 115,313 1,071,714Accrued severance and pension costs (Note 9) 28,079 30,115 280,257Deferred tax liabilities 957 880 9,552Reserve for expenses related to the sale of land 2,800 — 27,947Other long-term liabilities 2,472 1,719 24,673
Total long-term liabilities 141,683 148,027 1,414,143Net Assets:
Shareholders’ equity:Common stock:
Authorized: 1,000,000,000 sharesIssued: 2008—422,725,658 shares 61,284 61,284 611,678
Additional paid-in capital 65,212 65,212 650,883Retained earnings (Note 15) 24,256 19,455 242,100Treasury stock, at cost
2008—267,250 shares (134) (93) (1,337)Total shareholders’ equity 150,618 145,858 1,503,324
Net unrealized gain:Net unrealized gain on investment securities 2,918 6,767 29,124Profit/Loss deferral hedge accounting 6 13 60Translation adjustments (2,299) (1,383) (22,946)
Total net unrealized gain 625 5,397 6,238Minority interests in consolidated subsidiaries 4,020 3,715 40,124
Total net assets 155,263 154,970 1,549,686¥607,007 ¥625,033 $6,058,559
EBARA CORPORATION ANNUAL REPORT 200836
Consolidated Statements of Income
Thousands of U.S. dollars
Millions of yen (Note 4)
2008 2007 2006 2008
Net sales ¥567,191 ¥538,098 ¥514,957 $5,661,153Cost of sales 469,865 434,934 418,414 4,689,739
Gross profit 97,326 103,164 96,543 971,414Selling, general and administrative expenses 91,309 89,915 85,641 911,358
Operating income 6,017 13,249 10,902 60,056
Other income (expenses):Interest and dividend income 2,218 3,702 1,068 22,138Interest expenses (3,988) (3,739) (3,524) (39,804)Gain on sales of securities 1,243 7,246 5,055 12,406Write-down of investments in unconsolidated subsidiaries (1,999) (1,443) (51) (19,952)Write-down of securities and other investments (1,036) (44) (135) (10,340)Bond issue costs — (76) (8) —Gain on sales and disposal of fixed assets, net 69,992 217 3,613 698,593Impairment losses (Note 7) (903) (341) (459) (9,013)Write-down of inventories (6,096) — (1,081) (60,845)Reserve for revaluation of investments — (198) (346) —Legal expenses — (960) — —Reserve for legal expenses (200) — — (1,996)Losses arising from violation of Japan’s Antimonopoly Act (6) (1,927) — (60)Reserve for losses arising from violation of Japan’s
Antimonopoly Act (298) (920) — (2,974)Loss on equity method — (1,132) — —Loss on the prior year adjustment — (1,183) — —Loss on completion guarantees for specific projects (5,278) — — (52,680)Provision to the reserve for losses on specific construction work (13,659) — — (136,331)Losses on suspension of specific projects (9,864) — — (98,453)Special retirement benefits paid (1,500) — — (14,972)Other, net (1,057) (1,333) (1,349) (10,550)
27,569 (2,131) 2,783 275,167
Income before income taxes 33,586 11,118 13,685 335,223
Income taxes (Note 10):Current taxes 9,089 4,162 3,623 90,718Deferred tax benefits 17,436 2,536 6,670 174,029
26,525 6,698 10,293 264,747
Minority interests in consolidated subsidiaries (548) (1,026) 42 (5,470)
Net income ¥ 7,609 ¥ 5,446 ¥ 3,350 $ 75,946
U.S. dollarsYen (Note 4)
Per share of common stock:Net income ¥18.01 ¥12.89 ¥9.11 $0.180Fully diluted net income 16.34 12.31 8.89 0.163Cash dividends 7.50 7.50 7.50 0.075
The accompanying notes are an integral part of these statements.
EBARA CORPORATION and Consolidated SubsidiariesFor the years ended March 31, 2008, 2007 and 2006
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EBARA CORPORATION ANNUAL REPORT 2008 37
Consolidated Statements of Shareholders’ Equity/Net Assets
Consolidated Statements of Shareholders’ EquityMillions of yen
Netunrealized
Number of Additional gain on Treasury Totalshares Common paid-in Retained investment Translation stock, shareholders’issued stock capital earnings securities adjustments at cost equity
Balance at March 31, 2005 334,562,245 ¥41,231 ¥45,265 ¥15,851 ¥6,236 ¥(5,613) ¥(18) ¥102,952Change in interest in newly consolidated or divested subsidiaries 273 273
Net income 3,350 3,350Cash dividends (2,509) (2,509)Shares issued on conversion of convertible bonds 88,162,505 20,053 19,947 40,000Net unrealized gain on investment securities 7,240 7,240Changes in translation adjustments 2,425 2,425Purchase of treasury stock (36) (36)Loss on disposal of treasury stock (0) (0)
Balance at March 31, 2006 422,724,750 ¥61,284 ¥65,212 ¥16,965 ¥13,476 ¥(3,188) ¥(54) ¥153,695
Consolidated Statements of Net AssetsMillions of yen
Net unrealized Profit/Loss Minority
Number of Additional gain on Treasury deferral interests inshares Common paid-in Retained investment Translation stock, hedge consolidated Totalissued stock capital earnings securities adjustments at cost accounting subsidiaries net assets
Balance at March 31, 2006 422,724,750 ¥61,284 ¥65,212 ¥16,965 ¥13,476 ¥(3,188) ¥ (54) ¥— ¥ — ¥153,695Change in interest in newlyconsolidated or divested subsidiaries 1,014 1,014
Change in interest in newly accounted for equity method (801) (801)
Net income 5,446 5,446Cash dividends (3,169) (3,169)Shares issued on conversion of convertible bonds 908 0 0 0
Net unrealized gain on investment securities (6,709) (6,709)
Changes in translation adjustments 1,805 1,805
Purchase of treasury stock (43) (43)Loss on disposal of treasury stock (0) 4 4Changes in profit/loss deferral hedge accounting 13 13
Changes in minority interest in consolidated subsidiaries 3,715 3,715
Balance at March 31, 2007 422,725,658 61,284 65,212 19,455 6,767 (1,383) (93) 13 3,715 154,970Change in interest in newly
consolidated or divested subsidiaries 363 363
Net income 7,609 7,609Cash dividends (3,169) (3,169)Net unrealized gain on
investment securities (3,849) (3,849)Changes in translation
adjustments (916) (916)Purchase of treasury stock (49) (49)Loss on disposal of treasury stock (2) 8 6Changes in profit/loss deferral
hedge accounting (7) (7)Changes in minority interest in consolidated subsidiaries 305 305
Balance at March 31, 2008 422,725,658 ¥61,284 ¥65,212 ¥24,256 ¥ 2,918 ¥(2,299) ¥(134) ¥ 6 ¥4,020 ¥155,263
Thousands of U.S. dollars (Note 4)Net
unrealized Profit/Loss MinorityAdditional gain on Treasury deferral interests in
Common paid-in Retained investment Translation stock, hedge consolidated Totalstock capital earnings securities adjustments at cost accounting subsidiaries net assets
Balance at March 31, 2007 $611,678 $650,883 $194,176 $67,542 $(13,804) $ (928) $130 $37,080 $1,546,757Change in interest in newly consolidatedor divested subsidiaries 3,626 3,626
Net income 75,946 75,946Cash dividends (31,629) (31,629)Net unrealized gain on investment securities (38,418) (38,418)
Changes in translation adjustments (9,142) (9,142)Purchase of treasury stock (19) (489) (508)Loss on disposal of treasury stock 80 80Changes in profit/loss deferral hedge accounting (70) (70)
Changes in minority interest in consolidated subsidiaries 3,044 3,044
Balance at March 31, 2008 $611,678 $650,883 $242,100 $29,124 $(22,946) $(1,337) $ 60 $40,124 $1,549,686The accompanying notes are an integral part of these statements.
EBARA CORPORATION andConsolidated SubsidiariesFor the year ended March 31, 2006
EBARA CORPORATION andConsolidated SubsidiariesFor the years ended March 31,2008 and 2007
EBARA CORPORATION ANNUAL REPORT 200838
Consolidated Statements of Cash Flows
Thousands ofU.S. dollars
Millions of yen (Note 4)
2008 2007 2006 2008
Cash flows from operating activities:Income before income taxes ¥ 33,586 ¥11,118 ¥13,685 $ 335,223Income charges (credits) not affecting cash:
Depreciation and amortization 15,316 12,842 12,450 152,870Impairment losses 903 341 459 9,013Gain on sales of securities (1,243) (7,246) (5,055) (12,406)Loss on violation of Japan’s Antimonopoly Act 304 2,847 — 3,034Legal expenses 200 960 — 1,996Increase (decrease) in allowances 30,044 (2,567) (4,650) 299,870Gain on sales of fixed assets (77,930) (501) (4,664) (777,822)Other noncash expenses 5,738 3,754 3,299 57,271Interest and dividend income (2,218) (3,702) (1,068) (22,138)Interest expenses 3,988 3,739 3,524 39,804Decrease (increase) in accounts receivable (1,626) 2,068 (19,992) (16,229)Decrease (increase) in inventories 10,906 (11,867) 1,109 108,853Increase (decrease) in accounts payable (13,378) 6,783 10,485 (133,526)Other (3,169) (3,078) (9,335) (31,630)
Sub-total 1,421 15,491 247 14,183Interest and dividends received 2,278 3,817 823 22,737Interest expenses paid (4,138) (3,452) (3,704) (41,302)Loss on violation of Japan’s Antimonopoly Act and legal expenses (835) (1,998) — (8,334)Income taxes paid (5,043) (4,314) (7,139) (50,334)
Net cash provided by (used in) operating activities (6,317) 9,544 (9,773) (63,050)Cash flows from investing activities:
Sales of fixed assets 64,286 2,607 6,344 641,641Purchases of fixed assets (16,730) (17,489) (13,959) (166,983)Sales of investment securities 5,040 10,180 7,798 50,304Purchases of investment securities (1,113) (2,703) (2,794) (11,109)Purchases of securities (17,800) — — (177,662)Payments into time deposits (2,200) — — (21,958)Sales or purchases of other investments, net 934 764 321 9,322Collection of loans receivable 4,040 4,108 1,756 40,323Disbursement of loans receivable (5,568) (6,201) (3,565) (55,574)Sale (acquisition) of stock in subsidiaries with a change of basis of consolidation — (1,621) — —
Sales of stock in subsidiaries with a change of basis of consolidation 882 (195) — 8,803Net cash provided by (used in) investing activities 31,771 (10,550) (4,099) 317,107
Cash flows from financing activities:Issue of bonds — 39,924 39,992 —Redemption of bonds (14,100) (20,118) (16,000) (140,733)Proceeds from bank loans, commercial paper and long-term debt 149,308 59,159 49,744 1,490,249Repayment of bank loans, commercial paper and long-term debt (154,457) (59,357) (49,904) (1,541,641)Capital paid in from minority shareholders 1,007 920 649 10,051Dividends paid (3,169) (3,169) (2,509) (31,630)Dividends paid to minority shareholders in consolidated company (356) (153) (175) (3,553)Purchase and sales of treasury stock (40) (39) (36) (399)
Net cash provided by (used in) financing activities (21,807) 17,167 21,761 (217,656)Translation adjustments (748) 1,691 376 (7,466)Increase in cash and cash equivalents 2,899 17,852 8,265 28,935Cash and cash equivalents:
At beginning of period:Balance brought forward 66,086 47,511 38,960 659,607Net effect of deconsolidation and consolidation of subsidiaries 175 723 286 1,746
At end of period ¥ 69,160 ¥66,086 ¥47,511 $ 690,288The accompanying notes are an integral part of these statements.
EBARA CORPORATION and Consolidated SubsidiariesFor the years ended March 31, 2008, 2007 and 2006
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EBARA CORPORATION ANNUAL REPORT 2008 39
Notes to the Consolidated Financial Statements
EBARA CORPORATION and Consolidated Subsidiaries
EBARA CORPORATION (the “Company”) and its subsidiaries (hereinafter, collectively referred toas the “Group”) maintain their records and prepare their statutory financial statements in accor-dance with accounting principles generally accepted in Japan, and its foreign subsidiaries inconformity with those of the countries of their domicile. The accompanying consolidated financialstatements were also prepared in accordance with accounting principles generally accepted inJapan.
Basis of consolidation The consolidated financial statements include the accounts of the Company and those of certainof its subsidiaries. All significant intercompany transactions and accounts are eliminated in con-solidation.
The differences, at the time of acquisition or consolidation newly made, between the cost andunderlying net equity of investments in consolidated subsidiaries are included in other assetsand are amortized on a straight-line basis over a reasonable estimated period of time less thana 20-year period in respect of each particular difference.
Foreign currency translationForeign currency denominated trade receivables and payables are translated into yen at thebalance sheet date. Investments are translated into yen at the exchange rates current whenthe transactions occur.
Assets and liabilities of foreign consolidated subsidiaries are translated into yen at appropriateyear-end rates. Revenue, expenses and net income of these companies are also translated intoyen at the appropriate year-end rates. Contributed capital to those companies by the parentcompany is translated at the rates at which the transactions were made. Receivables andpayables with the parent company are translated at the same rates used by the parent compa-ny, and the resultant translation adjustments are stated in the net assets section.
Cash and cash equivalentsCash and cash equivalents include cash on hand, demand deposits, time deposits with maturi-ties of three months or less and highly liquid investments.
Investment securities and other financing instrumentsInvestment securities and other financing instruments are valued using the following methods:
(a) Securities having market value are stated at market value, and unrealized gain or loss,net of tax, is credited or debited to shareholders’ equity as shown in the balance sheets.
(b) Those not quoted are recorded at the gross average cost.(c) Bonds held to maturity are stated at cost less accumulated amortization.(d) Other financing assets (or instruments), including golf memberships, are valued at market
value, if available.
InventoriesFinished products and raw materials are stated at the gross average cost (computed by loweringthe value on the balance sheets from book value to account for any decline in earnings-genera-tion capacity of such assets), except for in the Precision Machinery Group, which employs themoving average method (computed by lowering the value on the balance sheets from bookvalue to account for any decline in earnings-generation capacity of such assets), and work inprocess is valued at accumulated job cost (computed by lowering the value on the balancesheets from book value to account for any decline in earnings-generation capacity of suchassets). Real estate for sale represents the accumulated cost for each parcel of land and eachstructure.
Property, plant and equipment and related depreciationProperty, plant and equipment are stated at cost. Depreciation is computed on the declining-balance method at rates based on the estimated useful lives of the assets of the Company andits domestic subsidiaries, except for buildings placed in service after April 1, 1998, depreciationfor which is computed on the straight-line method. The straight-line method is used by the con-solidated foreign subsidiaries. Maintenance, repairs and minor renewals are charged to incomeas incurred.
2. Summary of SignificantAccounting Principles
1. Basis of PresentingConsolidated FinancialStatements
EBARA CORPORATION ANNUAL REPORT 200840
With respect to the Company and its domestic consolidated subsidiaries, the estimated use-ful lives of the assets used for computing depreciation, which are the same as the useful livesprovided for under the Japanese income tax regulations, are shown below:
Buildings 3 to 50 yearsMachinery and equipment 2 to 20 years
LeasesAll leases of the Company and its domestic subsidiaries are accounted for as operating leases.Under Japanese accounting standards for leases, finance leases that are deemed to transferownership of the leased property to the lessee are to be capitalized, while other finance leasesare permitted to be accounted for as operating lease transactions if certain “as if capitalized”information is disclosed in the notes to the lessee’s financial statements.
Income taxesDeferred tax assets and liabilities are determined based on the differences between financialreporting and the tax bases of the assets and liabilities and are measured by applying currentlyenacted tax rates and laws.
Severance and pension plans The cost of the severance and pension plans, based on actuarial computations of currentand future employee benefits, including the unfunded severance indemnities plan, is chargedto income.
Retirement benefits to directors and corporate auditors are also accrued at the amountsof the future liability in relation to the length of service at the balance sheet date and includedin accrued severance and pension costs.
Shareholders’ equity(a) Additional paid-in capitalUnder the Corporation Law of Japan (the “Law”), the entire amount of the issue price (or con-version price) is required to be accounted for in the common stock account, although a compa-ny may, by a resolution of its board of directors, account for an amount not exceeding one-halfof the issue price of the shares as additional paid-in capital. The Code provides that a “transferof distributable profit to the common stock account” must be approved at the general meetingof shareholders as an appropriation of unappropriated retained earnings. (b) DividendsDividends charged to retained earnings in the accompanying statements of shareholders’ equi-ty represent (i) dividends approved at the general meeting of shareholders held during the finan-cial period and paid during such period plus (ii) interim dividends paid.
Revenue recognitionSales are recorded when the units are accepted by the customers. However, sales of majorunits (¥100 million ($998 thousand) or more), installation of which requires more than 12months, are recorded on a percentage-of-completion basis.
Sales recorded on a percentage-of-completion basis were ¥134.6 billion.In the wind power generation business, for those long-term contracts that provide for future
reductions in the “unit price that can be charged,” EBARA recognizes revenues based on oneof two methods: the “adjusted unit price” or the “weighted average unit price over the period ofthe contract.”
The differences between consolidated net sales based on the “unit price that can becharged” and consolidated net sales based on one of the two methods are recognized in thefiscal year when the “unit price that can be charged” declines and is treated as a carryforward.The amount carried forward is presented under other long-term liabilities.
Stock and bond issue costsStock and bond issue costs are charged to income as incurred.
Research and development costsCosts relating to research and development activities are charged to income as incurred.Research and development costs charged to income were ¥10,812 million ($107,915 thousand)and ¥11,357 million for the years ended March 31, 2008 and 2007, respectively.
Allowance for doubtful receivablesAn allowance for doubtful receivables is provided on a statistical rate in accordance with theaccounting standards for financial instruments.
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EBARA CORPORATION ANNUAL REPORT 2008 41
Reserve for revaluation of investmentsTo prepare for possible declines in the value of stocks of subsidiaries and affiliated companies,the Company makes provisions based on estimates of the effects of major fluctuations in foreignexchange rates and changes in the financial positions of these subsidiaries and affiliated companies.
Reserve for losses on construction completion guaranteesTo provide for possible expenses arising from guarantees against defects, the Company makes rea-sonable estimates of the ratio of such expenses and uses this ratio to derive provisions for such losses.
Reserve for construction lossesTo prepare for possible losses on construction projects contracted to the Company, the Companymakes estimates of such losses for those uncompleted projects deemed to have a strong possibili-ty of incurring losses and for which such construction losses can be reasonably estimated.
Reserve for losses arising from violation of Japan’s Antimonopoly ActTo provide for possible expenses arising from violation of Japan’s Antimonopoly Act, the Groupmakes reasonable estimates of the expenses.
Reserve for legal expensesTo provide for possible expenses arising from lawsuits, the Group makes reasonable estimates ofthe expenses.
Reserve for expenses related to the sale of land Accompanying the sale of the land formerly occupied by the Group’s Haneda Plant, this reservehas been created to provide for expenses related to restoring the land to its original condition andmoving to the new Futtsu Plant as well as other related costs.
Net income (loss) and dividends per sharePrimary net income (loss) per share of common stock is based on the average number of sharesof common stock outstanding during each period, appropriately adjusted for stock splits.
Common stock equivalents on warrants and convertible bonds are not taken into considerationfor the above computation. Fully diluted net income per share of common stock is computedassuming outstanding convertible bonds at that date are all converted to common shares afteradjustment of after-tax debt servicing costs, unless antidilutive effect results.
(Depreciation of tangible assets)Accompanying the revision of Japan’s Corporate Tax Law, beginning with the current fiscal year,tangible fixed assets acquired on April 1 or later are depreciated according to methods stipulat-ed in the revised corporate tax regulations.
As a result of this accounting change, operating income, ordinary income and income beforeincome taxes was ¥414 million lower than this loss would have been under the previous methodof accounting.
(Valuation standards and method for inventories)Accompanying the granting of permission to apply the “Accounting Standards for Valuation ofInventories” (Corporate Accounting Standard No. 9; July 5, 2006) for consolidated financial state-ments for years commencing March 31, 2008, or earlier, the Group has applied this accountingstandard beginning with the fiscal year under review. As a consequence, income before incometaxes was ¥6,095 million lower than it would have been otherwise.
The U.S. dollar amounts are included solely for convenience and have been translated as amatter of arithmetical computation only at the rate of ¥100.19=US$1, the rate of exchangeprevailing on March 31, 2008. This translation should not be construed as a representation thatyen amounts actually represent or could be converted into U.S. dollars.
4. U.S. Dollar Amounts
3. Change in AccountingPolicies in FY2008
EBARA CORPORATION ANNUAL REPORT 200842
Marketable and investment securities comprise securities which have fair value. The book value,gross unrealized gains and losses, and fair value for such securities are as follows:1) Held-to-maturity:
Millions of yen
As of March 31, 2008 Book value Unrealized gains Unrealized losses Fair value
Fair value over book value:Japanese government bonds ¥— ¥— ¥— ¥—
2) Other securities:Millions of yen
As of March 31, 2008 Historical cost Unrealized gains Unrealized losses Fair value
Fair value over historical cost:Equity securities ¥6,054 ¥6,392 ¥ — ¥12,446
Historical cost over fair value:Equity securities 4,707 — 1,682 3,025
Proceeds from sales of marketable and investment securities and realized gains and lossesare as follows:Other securities:
Millions of yen
As of March 31, 2008 Proceeds from sales Realized gains Realized losses
Equity securities ¥4,156 ¥1,724 ¥481
The maturity schedule of held-to-maturity securities with due dates is as follows:Millions of yen
Maturity
Over 1 year and Over 5 years and
As of March 31, 2008 Within 1 year less than 5 years less than 10 years Over 10 years
Japanese government bonds ¥— ¥— ¥— ¥—Other government bonds 1 5 1 —
Inventories comprise the following:Thousands of
Millions of yen U.S. dollars
2008 2007 2008
Real estate for sale ¥ 644 ¥ 1,364 $ 6,428Finished products 12,996 12,411 129,714Materials 25,745 29,653 256,962Work in process 41,792 53,162 417,127
¥81,177 ¥96,590 $810,231
The EBARA Group reported impairment losses of long-lived assets amounting to ¥903 million($9,013 thousand) in the fiscal year ended March 31, 2008. These impairment losses were recog-nized in the following asset groups: rental housing, goodwill, parking lots, and idle assets.
Outline of asset grouping: The Group groups its assets according to its business segments,but idle assets are grouped individually.
Recognition of impairment losses : Regarding goodwill, impairment losses are recognized whenrevenues assumed in the original business plans prepared at the time of purchase of the sharesare deemed to be unattainable. For rental assets and idle assets, when the market price of suchassets falls substantially below book value, the book values are adjusted downward to theamount that is deemed to be recoverable.
Computation of recoverable value: Recoverable value is calculated based on the value in use ofthe asset or the net sale value of the asset. For land, buildings, and structures, recoverable valueis estimated based on the appraised real estate value of the assets. When recoverable value isestimated based on value in use, the discount rate for future cash flows is assumed to be 4%.
7. Impairment Losseson Long-Lived Assets
6. Inventories
5. Marketable andInvestment Securities
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EBARA CORPORATION ANNUAL REPORT 2008 43
Bank loans (average interest rate—1.705%) as of March 31, 2008, of ¥54,499 million ($543,956thousand) are represented by short-term notes (having a life of less than 365 days) of which¥622 million ($6,208 thousand) is secured.
Long-term debt comprised:Thousands of
As of March 31, 2008 Millions of yen U.S. dollars
1.000% to 18.250% loans from banks, insurance companiesand other due 2009 to 2020:Secured ¥ 10,160 $ 101,407Unsecured 49,600 495,060
2.38% unsecured yen bonds due 2008 issued in the domestic market 10,000 99,8101.04% unsecured yen bonds due 2010 issued in the domestic market 20,000 199,6210.70% unsecured bonds with stock acquisition rights due 2011 issued in the overseas market 20,000 199,621
1.30% unsecured bonds with stock acquisition rights due 2013 issued in the overseas market 20,000 199,621
0.57%–1.06% bonds due 2008–2009 issued in the domestic market 200 1,996
129,960 1,297,136Less current portion due within one year 22,585 225,422
¥107,375 $1,071,714
The aggregate annual maturities of long-term debt during the succeeding five years are as follows:
Thousands ofYears ending March 31 Millions of yen U.S. dollars
2009 ¥22,585 $225,4222010 34,330 342,6492011 14,759 147,3102012 21,846 218,0462013 14,279 142,519
The Company and its domestic consolidated subsidiaries and some foreign consolidated sub-sidiaries have severance and defined benefit pension plans as follows:
Thousands ofAs of March 31, 2008 Millions of yen U.S. dollars
Benefit obligation:Benefit obligation ¥87,072 $869,069Fair value of plan assets (56,709) (566,015)Unrecognized actuarial loss (2,777) (27,717)Unrecognized prior service cost (91) (908)
Net amount recognized ¥27,495 $274,429
Accrued severance and pension costs as of March 31, 2008 include the directors’ retirementallowance reserve of ¥584 million ($5,829 thousand).
Thousands ofYear ended March 31, 2008 Millions of yen U.S. dollars
Benefit cost:Service cost ¥4,243 $42,349Interest cost 2,609 26,040Expected return on plan assets (2,360) (23,555)Recognized prior service cost 12 120Recognized actuarial loss 456 4,551Special retirement benefits 1,500 14,972
Net periodic benefit cost ¥6,460 $64,477
9. Severance andPension Plans
8. Interest-Bearing Debt
EBARA CORPORATION ANNUAL REPORT 200844
Year ended March 31, 2008
Assumptions to determine above obligation and cost:Discount rate 2.0%Discount rate (Subsidiaries outside Japan) 5.8%Expected return on plan assets 2.7%Expected return on plan assets (Subsidiaries outside Japan) 8.0%Recognition period of actuarial loss 10 yearsAmortization period of prior service cost 10 years
Significant components of the deferred tax assets and liabilities are as follows:Thousands of
As of March 31, 2008 Millions of yen U.S. dollars
Deferred tax assets:Excess provision of accrued bonuses to employees ¥ 2,804 $ 27,987Loss recognized on a percentage-of-completion basis 2,278 22,737Accrued enterprise tax 412 4,112Intercompany profit on ending inventories 637 6,358Intercompany profit on fixed assets 1,746 17,427Accrued severance and pension costs 10,426 104,062Tax loss carried forward 4,240 42,320Write-down of other investments 249 2,485Loss from liquidation of subsidiaries and affiliates 1,996 19,922Loss on write-down of real estate for sale 973 9,711Loss on write-down of inventories 5,104 50,943Research and development expenses 544 5,430Reserve for losses on construction completion guarantees 8,014 79,988Allowance for doubtful receivables 3,792 37,848Others based on tax codes outside Japan 6,332 63,200Others 7,338 73,241
56,885 567,771
Valuation allowance (23,272) (232,279)
Total deferred tax assets 33,613 335,492Deferred tax liabilities:
Reserve for deferral of capital gains on sales of property (1,260) (12,576)Reserve for compressed entry (4,859) (48,498)Net unrealized gain on marketable equity securities (2,600) (25,951)Others (665) (6,637)
Total deferred tax liabilities (9,384) (93,662)
Net deferred tax assets ¥24,229 $241,830
Summary of the major differences between the Japanese statutory tax rate and the Company’seffective tax rate:Year ended March 31, 2008
Statutory tax rate, giving tax effect on enterprise tax payable 40.5%Entertainment expenses and other expenses not deductible 1.9Per capita equalization inhabitants’ taxes 0.5Dividends received not taxable (0.2)Amortization of goodwill 1.7Valuation allowance 40.1Others (5.5)
Effective tax rate as shown in statements of income 79.0%
10. Income Taxes
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EBARA CORPORATION ANNUAL REPORT 2008 45
The Company and its consolidated subsidiaries had the following commitments and contingentliabilities:
Thousands ofAs of March 31, 2008 Millions of yen U.S. dollars
Loans guaranteed:Unconsolidated subsidiaries and affiliates ¥11,728 $117,058Others 950 9,482
Off-balance notes receivable with repurchase obligation 584 5,829Commitments outstanding for the purchases of property, plant and equipment 193 1,926
The following pro forma amounts concern the finance leases, which would have been reflectedin the financial statements if finance lease accounting had been applied to the finance leasetransactions currently accounted for as operating leases: (As lessee)
Thousands ofAs of March 31, 2008 Millions of yen U.S. dollars
Acquisition costs:Machinery and equipment ¥11,939 $119,164
Accumulated depreciation:Machinery and equipment 5,474 54,636
Net book value:Machinery and equipment 6,465 64,528
Lease obligations (excluding the interest portion thereon):Due within one year 2,408 24,034Due after one year 4,092 40,842
Total ¥ 6,500 $ 64,876
Lease payments relating to finance lease transactions accounted for as operating leases:Total ¥ 2,256 $ 22,517
Depreciation expense 1,904 19,004Interest expense 151 1,507
The depreciation expense is computed by the straight-line method over the lease terms.
Information concerning operating leases is as follows:(As lessee)
Thousands ofAs of March 31, 2008 Millions of yen U.S. dollars
Lease obligations:Due within one year ¥ 477 $ 4,761Due after one year 712 7,106
Total ¥1,189 $11,867
Derivatives under contract Derivative financial instruments, which include foreign exchange forward contracts and interestrate swap agreements, were used.
Use policyThe Company and its consolidated subsidiaries use derivatives only for the purpose of hedgingrelated to exports, imports, funding and others.
Hedging instrumentsForeign exchange forward contracts, foreign currency option contracts and interest rate swapagreements were used.
Hedging objectsCurrency exchange rate risk and interest rate risk on existing assets and liabilities in foreigncurrencies are hedging objects.
13. Derivative FinancialInstruments
12. Leases
11. Commitments andContingent Liabilities
EBARA CORPORATION ANNUAL REPORT 200846
Assessing the effectiveness of hedgingInterest rate risk
The effectiveness of hedging is assessed by comparing the accumulated cash flows betweenhedging instruments and hedging objects. However, with regard to the interest rate swapsthat agree with hedge criteria, the assessments are omitted.
Currency exchange rate riskAs long as one hedging instrument and one hedging object correspond, the hedge is consid-ered effective.
Risk concerning derivative contractsAlmost all derivative transactions are entered into to hedge the risk associated with changesin interest rates and foreign currency exchange rates, but the risk is largely offset by equal andopposite movements. It is not expected that any of the counterparties will fail to meet theirobligations because the majority are large-scale financial institutions.
Risk management organizationThe Company manages its derivative financial instruments based on internal rules that definethe dealing authority and the dealing limit. The Company manages its subsidiaries’ derivativerisk based on the dealing guidelines for subsidiaries and affiliates.
Business segment information of the Company and consolidated subsidiaries for the yearsended March 31, 2008 and 2007, is as follows:
Millions of yenFluid Machinery Environmental Precision Elimination and
Year ended March 31, 2008 & Systems Engineering Machinery corporate Consolidated
Sales to third parties ¥318,450 ¥141,446 ¥107,295 ¥ — ¥567,191Intersegment sales and transfer 2,465 6,489 161 (9,115) —
Total 320,915 147,935 107,456 (9,115) 567,191Operating costs and expenses 310,631 160,116 99,471 (9,044) 561,174
Operating income (loss) ¥ 10,284 ¥ (12,181) ¥ 7,985 ¥ (71) ¥ 6,017
Assets ¥295,377 ¥138,993 ¥107,884 ¥64,753 ¥607,007Depreciation expense 7,356 2,672 5,334 (46) 15,316Impairment losses on fixed assets 895 8 — — 903Capital expenditures 9,844 4,249 8,436 (148) 22,381
Year ended March 31, 2007
Sales to third parties ¥282,335 ¥148,063 ¥107,700 ¥ — ¥538,098Intersegment sales and transfer 2,875 4,869 692 (8,436) —
Total 285,210 152,932 108,392 (8,436) 538,098Operating costs and expenses 273,689 161,280 98,309 (8,429) 524,849
Operating income (loss) ¥ 11,521 ¥ (8,348) ¥ 10,083 ¥ (7) ¥ 13,249
Assets ¥281,034 ¥158,575 ¥129,900 ¥55,524 ¥625,033Depreciation expense 5,372 3,359 4,142 (31) 12,842Capital expenditures 8,540 2,483 6,941 (47) 17,917
The Group changed the segmentation of wind power generation business and cooling and water supplysystems for nuclear power plants from the Environmental Engineering Group to the Fluid Machinery &Systems Group at the beginning of the fiscal year ended March 31, 2008 to optimize the Group from anoverall perspective and restructure its organization. Figures for the year ended March 31, 2007 under newsegmentation are as follows:
Millions of yenFluid Machinery Environmental Precision Elimination and
Year ended March 31, 2007 & Systems Engineering Machinery corporate Consolidated
Sales to third parties ¥290,099 ¥140,299 ¥107,700 ¥ — ¥538,098Intersegment sales and transfer 2,890 4,829 692 (8,411) —
Total 292,989 145,128 108,392 (8,411) 538,098Operating costs and expenses 282,397 152,572 98,309 (8,429) 524,849
Operating income (loss) ¥ 10,592 ¥ (7,444) ¥ 10,083 ¥( 18 ¥ 13,249
Assets ¥299,698 ¥139,910 ¥129,900 ¥(55,525) ¥625,033Depreciation expense 6,065 2,666 4,142 (31) 12,842Capital expenditures 8,680 2,343 6,941 (47) 17,917
14. Segment Information
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EBARA CORPORATION ANNUAL REPORT 2008 47
Thousands of U.S. dollarsFluid Elimination
Machinery Environmental Precision andYear ended March 31, 2008 & Systems Engineering Machinery corporate Consolidated
Sales to third parties $3,178,461 $1,411,777 $1,070,915 $ — $5,661,153Intersegment sales and transfer 24,603 64,767 1,607 (90,977) —
Total 3,203,064 1,476,544 1,072,522 (90,977) 5,661,153Operating costs and expenses 3,100,419 1,598,123 992,824 (90,269) 5,601,097
Operating income (loss) $ 102,645 $ (121,579) $ 79,698 $ (708) $ 60,056
Assets $2,948,169 $1,387,294 $1,076,794 $646,302 $6,058,559Depreciation expense 73,421 26,669 53,239 (459) 152,870Impairment losses on fixed assets 8,930 83 — — 9,013Capital expenditures 98,253 42,410 84,200 (1,477) 223,386
Accompanying the revision of Japan’s Corporate Tax Law, beginning with the current fiscal year,tangible fixed assets acquired on April 1 or later are depreciated according to methods stipulatedin the revised corporate tax regulations, and that are acquired on or before March 31, 2007, andhave been fully depreciated to the limit prescribed in previous corporate tax provisions. Beginningwith the year following depreciation to the limit of 5% of the original value, the difference betweenthe remaining value of such assets and a hypothetical reminder value will be depreciated in equalamounts over a five-year period. As a result of these adoptions, operating income of the FMSGroup was ¥540 million less than, the PM Group was ¥336 million less than, and the operatingloss of the EE Group was ¥119 million larger than the previous method of calculation.
Geographical segment information of the Company and consolidated subsidiaries for theyears ended March 31, 2008 and 2007, is as follows:
Millions of yenElimination
andYear ended March 31, 2008 Japan North America Other corporate Consolidated
Sales to third parties ¥457,448 ¥64,142 ¥45,601 ¥ — ¥567,191Intersegment sales and transfer 17,706 9,488 6,467 (33,661) —
Total 475,154 73,630 52,068 (33,661) 567,191Operating costs and expenses 479,141 68,402 47,111 (33,480) 561,174
Operating income (loss) ¥ (3,987) ¥ 5,228 ¥ 4,957 ¥ (181) ¥ 6,017
Assets ¥512,030 ¥55,328 ¥48,295 ¥ (8,646) ¥607,007
Millions of yenElimination
andYear ended March 31, 2007 Japan North America Other corporate Consolidated
Sales to third parties ¥440,576 ¥61,957 ¥35,565 ¥ — ¥538,098Intersegment sales and transfer 20,173 4,820 6,042 (31,035) —
Total 460,749 66,777 41,607 (31,035) 538,098Operating costs and expenses 452,078 64,174 38,616 (30,019) 524,849
Operating income ¥ 8,671 ¥ 2,603 ¥ 2,991 ¥ (1,016) ¥ 13,249
Assets ¥537,849 ¥55,847 ¥40,240 ¥ (8,903) ¥625,033
Thousands of U.S. dollarsElimination
andYear ended March 31, 2008 Japan North America Other corporate Consolidated
Sales to third parties $4,565,805 $640,203 $455,145 $ — $5,661,153Intersegment sales and transfer 176,724 94,700 64,548 (335,972) —
Total 4,742,529 734,903 519,693 (335,972) 5,661,153Operating costs and expenses 4,782,323 682,722 470,217 (334,165) 5,601,097
Operating income (loss) $ (39,794) $ 52,181 $ 49,476 $ (1,807) $ 60,056
Assets $5,110,590 $552,231 $482,034 $ (86,296) $6,058,559
EBARA CORPORATION ANNUAL REPORT 200848
Accompanying the revision of Japan’s Corporate Tax Law, beginning with the current fiscal year,tangible fixed assets acquired on April 1 or later are depreciated according to methods stipulatedin the revised corporate tax regulations, and that are acquired on or before March 31, 2007, andhave been fully depreciated to the limit prescribed in previous corporate tax provisions. Beginningwith the year following depreciation to the limit of 5% of the original value, the difference betweenthe remaining value of such assets and a hypothetical reminder value will be depreciated in equalamounts over a five-year period. As a result of these adoptions, the operating loss in Japan was¥996 million larger than this loss would have been under the previous method of calculation.
Overseas sales of the Company and consolidated subsidiaries for the years ended March 31,2008 and 2007, are as follows:
Millions of yen
Year ended March 31, 2008 Asia North America Other Total
Overseas sales ¥83,803 ¥38,755 ¥90,214 ¥212,772Consolidated net sales 567,191Ratio of overseas sales to consolidated net sales 14.8% 6.8% 15.9% 37.5%
Millions of yen
Year ended March 31, 2007 Asia North America Other Total
Overseas sales ¥63,950 ¥38,589 ¥64,523 ¥167,062Consolidated net sales 538,098Ratio of overseas sales to consolidated net sales 11.9% 7.2% 12.0% 31.0%
Thousands of U.S. dollars
Year ended March 31, 2008 Asia North America Other Total
Overseas sales $836,441 $386,815 $900,429 $2,123,685Consolidated net sales 5,661,153Ratio of overseas sales to consolidated net sales 14.8% 6.8% 15.9% 37.5%
Appropriation of unappropriated retained earningsThe following appropriation of unappropriated retained earnings for the year ended March 31, 2008,was approved at the general meeting of shareholders of the Company held on June 27, 2008:
Thousands ofMillions of yen U.S. dollars
Cash dividends ¥3,169 $31,629
Reversal of special retirement allowanceThe operating environment for EBARA’s Environmental Engineering (EE) Company is challengingbecause of the reduction in the Japanese government’s public works investments. EBARA isworking to restructure the activities of the EE Company and reduce the size of its operations to alevel that is appropriate for the current size of the market. As part of these restructuring activities,EBARA has instituted a system to provide special benefits to employees taking early retirement.
To implement this early retirement system, EBARA estimated special retirement costs underthis system and set aside a reserve for special retirement allowances of ¥1,500 million at the endof the fiscal year ended March 31, 2008; however, through June 13, 2008, which was the end ofthe period for applying for early retirement benefits, 93 employees had applied. As a result, thefinal figure for special retirement costs was reduced to ¥712 million and a reversal of the specialretirement allowance reserve in the amount of ¥787 million, representing the difference betweenthe estimated amount and the confirmed amount to be paid to employees taking early retire-ment, will be reported in the current fiscal year.
15. Subsequent Event
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EBARA CORPORATION ANNUAL REPORT 2008 49
Report of Independent Certified Public Accountants
To the Board of Directors of EBARA CORPORATION
We have audited the accompanying consolidated balance sheets of EBARA CORPORATION and its consolidated subsidiaries as
of March 31, 2008 and 2007, and the related consolidated statements of income, net assets and cash flows for each of the three
years in the period ended March 31, 2008, stated in yen. These financial statements are the responsibility of the Company’s man-
agement; our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with auditing standards generally accepted in Japan, which
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits provide reasonable basis for our opinion.
In our opinion, the consolidated financial statements examined by us present fairly the financial position of EBARA CORPORA-
TION and its consolidated subsidiaries as of March 31, 2008 and 2007, and the results of their operations and their cash flows
for each of the three years in the period ended March 31, 2008, in conformity with accounting principles generally accepted in
Japan applied on a consistent basis.
(1) As described in Note 3, effective for the year ended March 31, 2008, the Company applied early the new accounting stan-
dards for valuation of inventories.
(2) As described in Note 15, in the current fiscal year, the Company will reverse the special retirement allowance reserve in the
amount of ¥787 million.
The U.S. dollar amounts in the consolidated financial statements have been translated for convenience only on the basis
described in Note 4.
HIJIRIBASHI AUDIT CORPORATION
Tokyo, Japan
June 27, 2008
EBARA CORPORATION ANNUAL REPORT 200850
EBARA Global Network (As of April 30, 2008)
Italy Office Via Pacinotti 32, 36040 Brendola (Vicenza), ItalyPhone: 39-0444-706-857Fax: 39-0444-706-950Beijing Office 2001 Beijing Fortune Bldg., 5 Dong Sanhuan Bei-Lu, Chaoyang District, Beijing 100004, China Phone: 86-10-6590-8150 Fax: 86-10-6590-8158 Bangkok Office 3rd Floor, ACME Bldg., 125 Petchburi Road, Thungphayathai, Rajthevee, Bangkok 10400,Thailand Phone: 66-2-216-4935/4936 Fax: 66-2-216-4937
Manila Branch Unit 1-C, Cypress Gardens Condominiums, 112 V.A.Rufino St., Legaspi Village, Makati City, Philippines Phone: 63-2-816-7524 Fax: 63-2-817-6662 Taipei Office Room 1402, Chia Hsin Bldg. (13F) 96, Sec. 2, Chung Shan N. Rd.,Taipei, TaiwanPhone: 886-2-2567-1310Fax: 886-2-2567-1046Ebara Middle East P.O. Box 61383, Jebel Ali Dubai, UAE Phone: 971-4-8838-889 Fax: 971-4-8835-307
Zurich Representative OfficeThurgauerstr. 40, 8050 Zurich, SwitzerlandPhone: 41-44-307-3527Fax: 41-44-307-3526Cairo Representative Office27, El-Geziera El-Wosta Street, Zamalek, Cairo, EgyptPhone: 20-2-736-3466Fax: 20-2-736-2499Ho Chi Minh City Representative OfficeSun Wah Tower, Unit 1607, 115 Nguyen Hue St., Dist. 1, Ho Chi Minh City,VietnamPhone: 84-8-821-9910Fax: 84-8-821-9911
PRINCIPAL SUBSIDIARIES AND AFFILIATED COMPANIES ✩ Consolidated subsidiary
DOMESTIC
Fluid Machinery & Systems Company✩ EBARA DENSAN LTD.
Engineering and manufacture of electrical and electronic equipment
✩ Ebara Techno-serve Co., Ltd.Maintenance services Sale of standard pumps
✩ Ebara Shinwa Ltd.Manufacture of cooling towers
✩ Ebara Material Co., Ltd.Manufacture of cast products
✩ Ebara Yoshikura Hydro-Tech Co., Ltd.Manufacturing and sales of pumps for industrial use,installation of industrial equipment, and plant-relatedconstruction
✩ EBARA HAMADA BLOWER CO., LTD.Manufacture of industrial fans and machines
✩ Ebara Environmental Technologies Hokkaido Co., Ltd.
Design and engineering of machines and facilities✩ Ebara-Byron Jackson, Ltd.
Sale and maintenance of pumps for nuclear power plants✩ Ebara Refrigeration Equipment
& Systems Co., Ltd.Manufacture, sale, installation, maintenance, and trialoperation of, as well as technical guidance for, chillersand heat-exchange systems
✩ EBARA KIDEN CO., LTD.Manufacturing and sales of pump motors and relatedequipment; manufacturing, sales, and service for equip-ment supplied to the rental industry
✩ ECO Power Co., Ltd.Sale and engineering of wind power generation systems
✩ Elliott Ebara Turbomachinery CorporationDesign, manufacture, sale, construction, and installationof compressors, turbines, and blowers
E-Square Co., Ltd.Sale of electric power
Pacific Machinery and Engineering Co., Ltd. Manufacture and sale of special-purpose pumps,including slurry pumps, facilities for transportation of liquid, and powder processing equipment
Environmental Engineering Company✩ Ebara Engineering Service Co., Ltd.
Maintenance of environmental facilities✩ EBARA INDUSTRIAL CLEANING CO., LTD.
Chemical cleaning and decontamination of power plants✩ Aqua Engineering Co., Ltd.
Engineering of water treatment equipment✩ Nissetsu Co., Ltd.
Engineering and construction of air-conditioning,sanitation, and electric supply equipment
✩ Ebara Environmental Engineering CorporationDesign, implementation, and operational maintenance aswell as supervision for environment-related equipment
Chubu Recycle Co., Ltd.Melting and reuse of incinerator ash and fly ash
Clean System CorporationProcessing and recycling of industrial and householdwaste
Precision Machinery Company✩ Ebara Field Tech. Corporation
After-sales service of products for semiconductors✩ Ebara Kyushu Co., Ltd.
Manufacture of systems for semiconductors
Corporate✩ Ebara Research Co., Ltd.
Technical research and development services✩ Ebara Agency Co., Ltd.
Internal agency service for insurance, travel,printing, and real estate
✩ Ebara Shohnan Sports Center Inc.Management of sports club
✩ Ebara Meister Co., Ltd.Temporary staff agency
✩ Ebara Ballard CorporationManufacture, sale, and maintenance of power systems(stationary fuel cells)
ECE Co., Ltd.Development, manufacture, and sale of function materialsmaking use of radioactive grafting technology
IT Engineering LimitedConsultation of integrated IT systems and developmentand operational support of business management,operational management, and engineering systems
OVERSEAS
Fluid Machinery & Systems Company✩ Ebara Industrias Mecánicas e Comércio Ltda.
Manufacture and sale of pumps Rua Joaquim Marques de Figueiredo 2-31,Bauru, São Paulo, Brazil Phone: 55-14-3103-0000Fax: 55-14-3103-0044✩ Ebara Pumps Europe S.p.A.
Manufacture and sale of pumps Via Campo Sportivo 30, 38023,Cles (Trento), Italy Phone: 39-0463-660411Fax: 39-0463-422782 ✩ Sumoto S.r.l.
Manufacture and sale of deep well motorsVia Peripoli 1/3, 36041 Montecchio Maggiore,Vicenza, ItalyPhone: 39-0444-490515Fax: 39-0444-490518✩ Ebara Engineering Singapore Pte. Ltd.
Sale of Ebara products, engineering and construction,and sale and after-sales service of products for semiconductors
No. 1 Tuas Link 2, Singapore 638550Phone: 65-6862-3536 Fax: 65-6861-0589 ✩ Ebara Benguet, Inc.
Manufacture of castings Canlubang Industrial Estate, Cabuyao 4025, Laguna, Philippines Phone: 63-49-549-1806Fax: 63-49-549-1915✩ Elliott Ebara Company Ltd.
Holding company for the Elliott Group (with ElliottCompany and Ebara Elliott as subsidiaries)
901 North Fourth Street, Jeannette, PA 15644, U.S.A.Phone: 1-724-527-2811Fax: 1-724-600-8525✩ Yantai Ebara Air Conditioning
Equipment Co., Ltd. Manufacture and sale of chillers
720 Yongda Road, New & Hi-Tech Industry Zone, Fushan,Yantai, Shandong, ChinaPhone: 86-535-6322300 Fax: 86-535-6321078
OVERSEAS OFFICES
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EBARA CORPORATION ANNUAL REPORT 2008 51
✩ Ebara Great Pumps Co., Ltd.Design, manufacture, and sale of process pumps, high-pressure pumps, and peripheral equipment
North Industrial Zone, Phase II, Ruian, Zhejiang 325204, ChinaPhone: 86-577-6532-2287Fax: 86-577-6532-3555✩ Ebara International Corporation
Manufacture and sale of pumps 350 Salomon Circle, Sparks, NV 89434, U.S.A. Phone: 1-775-356-2796Fax: 1-775-356-2884✩ Elliott Company
Design, manufacture, and sale of air and gas turbo-compressors and steam turbines
901 North Fourth Street, Jeannette, PA 15644, U.S.A. Phone: 1-724-527-2811Fax: 1-724-600-8525✩ Ebara-Elliot Service (Taiwan) Co., Ltd.
Maintenance and repair of turbo-compressors1, Road 42, Industrial Zone, Taichung City, TaiwanPhone: 886-4-2359-4202Fax: 886-4-2359-5510✩ Elliott Ebara Singapore Pte. Ltd.
After-sales services for Elliott products, including salesof parts, dispatching of service/training personnel,repairs, and inspection
29 International Business Park, #04-05, Acer Building Tower B, Singapore 609923Phone: 65-6563-6776Fax: 65-6563-1387Ebara España Bombas S.A.
Manufacture and sale of industrial and standard pumps C/Cormoranes nR 6y8, Poligono Industrial La Estacio, 28320, Pinto (Madrid), Spain Phone: 34-91-692-3630Fax: 34-91-691-0818Ebara (Thailand) Limited
Sale of Ebara products, engineering, and construction 3rd Floor, ACME Bldg., 125 Petchburi Road,Thungphayathai, Rajthevee, Bangkok 10400,Thailand Phone: 66-2-216-4935 Fax: 66-2-216-4937 P.T. Ebara Indonesia
Manufacture and sale of pumps Jl. Raya Jakarta-Bogor KM. 32, Desa Curug,Cimanggis-Bogor, Jawa Barat, Indonesia Phone: 62-21-8740852 Fax: 62-21-8740033 Ebara Hai Duong Company Ltd.
Manufacture and sale of pumps Nguyen Trai Road, Hai Duong City, Hai DuongProvince, Vietnam Phone: 84-320-850182Fax: 84-320-850180 Ebara Pumps Malaysia Sdn. Bhd.
Sale and service of pumps and chillers 20, Jalan Juruhebah U1/50,Temasya Industrial Park,40150 Shah Alam, Selangor, MalaysiaPhone: 60-3-5569-1655Fax: 60-3-5569-3766Ebara-Densan Taiwan Manufacturing Co., Ltd.
Manufacture of electrical submergible motors and after-sales service of products for semiconductors
No. 7 Nan-Yuen 2nd Road, Chung Li City,Tao Yuen Hsien, Taiwan Phone: 886-3-451-5881 Fax: 886-3-452-7904 Ebara Machinery (China) Co., Ltd.
Manufacturing, sales, and service for standard pumpsand related equipment in China
Beizang Cun Countryside Tiangon, Industry Area,Daxing Xian, Beijing 102609, ChinaPhone: 86-10-6027-5167Fax: 86-10-6027-5163
Ebara Densan (Kunshan) Mfg. Co., Ltd.Manufacture and sale of submergible motors andpumps
No. 521, Qingyangbeilu, Zhoushi-Countryside, Kunshan City, Jiangsu Province, ChinaPhone: 86-512-5762-6121Fax: 86-512-5762-6125Ebara Boshan Pumps Co., Ltd.
Design, manufacturing, and sales of large-scale pumpsand high-pressure pumps in China
No. 7 Kaifaqu North Road,New and High Technology Zone,Zibo City, Shandong Province 255086, ChinaPhone: 86-533-3919555Fax: 86-533-3919567Ebara Pumps Australia Pty. Ltd.
Sale of standard pumps2 Diligent Drive, Bayswater, VIC 3153, AustraliaPhone: 61-3-9738-1530Fax: 61-3-9738-1540Hyosung-Ebara Co., Ltd.
Manufacture and sale of pumps 450, Kongduk-Dong, Mapo-ku,Seoul 121-720, Republic of Korea Phone: 82-2-707-6972Fax: 82-2-711-5501 Kirloskar Ebara Pumps Limited
Manufacture and sale of process pumps Pride Kumar Senate Building, Senapati Bapat Road,Pune 411016, India Phone: 91-20-25600151Fax: 91-20-25600351Ebara Pump Industries (P.J.S.)
Sale of standard pumps No. 8 Mohamadian Alley, Aliakbari St.,Motahari Ave., Tehran 15766, IranPhone: 98-21-88743913Fax: 98-21-88742608
Environmental Engineering Company✩ Ebara Qingdao Co., Ltd.
Manufacture of boilers 1 Banghai Rd., Sifang Qingdao, Shandong Province, China Phone: 86-532-84862975Fax: 86-532-84862983P.T. Ebara Prima Indonesia
Manufacture and sale of activated carbon Kawasan Industri Modern Cikande, Jl. Modern Industri,1 No. 12 Cikande, Serang, Jawa Barat, Indonesia Phone: 62-254-402184Fax: 62-254-401950Ebara Vietnam Corporation
Engineering and construction of environmental facilities13th Floor, Tung Shing Square, 2 Ngo Quyen Street, Hoan Kiem District, Hanoi City, VietnamPhone: 84-4-934-9601Fax: 84-4-934-9617Shanghai Ebara Engineering and Services Co., Ltd.
Engineering and construction of environmental facilities D-308 Room, Oriental International Plaza 85,Loushanguan Rd., Shanghai 200336, China Phone: 86-21-6208-2211Fax: 86-21-6208-6195Qingdao Ebara Rebirth Resource Power Co., Ltd.
Sale of electric power from ICFBs making use of flyash raw materials and production and sale of steam
183 Changcheng Road, Jiaonan, Shandong, ChinaPhone: 86-532-618-1937Fax: 86-532-618-1251Hyosung Ebara Engineering Co., Ltd.
Engineering and construction of environmental facilities Bangbae B/D 7F, 1006-2, Bangbae-Dong,Seocho-Gu, Seoul 137-850, Republic of Korea Phone: 82-2-707-5800Fax: 82-2-707-5888
Precision Machinery Company✩ Ebara Precision Machinery Europe GmbH
Sale and after-sales service of products forsemiconductors
Rodenbacher Chaussee 6, D-63457 Hanau, GermanyPhone: 49-6181-1876-0 Fax: 49-6181-1876-40 ✩ Ebara Precision Machinery Korea
IncorporatedSale and after-sales service of products forsemiconductors
20 FL, Kangnam Bldg., 1321 Seocho-dong, Seocho-ku, Seoul, Republic of Korea Phone: 82-2-581-6901 Fax: 82-2-581-4211✩ Ebara Precision Machinery Taiwan
IncorporatedSale and after-sales service of products forsemiconductors
Room No. 1402, No. 96. Chungshan N. Rd., Sec. 2, Taipei, Taiwan Phone: 886-2-2560-1166Fax: 886-2-2560-1177✩ Ebara Technologies Incorporated
Manufacture and sale of products for semiconductors 51 Main Avenue, Sacramento, CA 95838, U.S.A.Phone: 1-916-920-5451Fax: 1-916-925-6654Shanghai Ebara Precision Machinery Co., Ltd.
Sale and after-sales service of products for semiconductors
Zhangjiang High-Tech Park, No. 76, Lane 887,Zuchongzhi Road, Shanghai 201203, ChinaPhone: 86-21-5131-7008 Fax: 86-21-5131-7048
Corporate✩ Ebara America Corporation
Finance, investment, and holding2157-H O’Toole Avenue, San Jose, CA 95131, U.S.A.Phone: 1-408-434-1008Fax: 1-408-434-1994
EBARA CORPORATION ANNUAL REPORT 200852
EBARA History Resolute Commitment to Research and Development
1912 Inokuchi Type Machinery Office founded Issey Hatakeyama was appointed general manager, under the supervision of Ariya Inokuchi, professor of Tokyo Imperial University.
1920 EBARA CORPORATION established A plant was constructed near Shinagawa, Tokyo, marking the establishment of the Company, which assumed the responsibilities of the Inokuchi TypeMachinery Office and began manufacturing centrifugal pumps.
1938 New plant built in Haneda The head office and manufacturing operations shifted from Shinagawa to the new facility in Haneda.
1941 New plant built in Kawasaki The new plant began manufacturing machine tools according to the Machine Tool Manufacturing Law.
1945 Haneda Plant damaged in war All operations, except a pump testing facility, fabrication & welding shop, and main building, deemed no longer functional. As a result, production was transferred to the Kawasaki Plant.
1955 Haneda Plant reopens The Haneda Plant was resurrected to spearhead the Company’s manufac-turing operations.
1956 Ebara-Infilco Co., Ltd., established A 50-50 joint venture between EBARA CORPORATION and Infilco Inc., of the United States, was set up to manufacture water treatment equipment.
1964 Bangkok Office opened EBARA’s first post-WWII overseas sales office
1965 Fujisawa Plant opened The first facility in Japan to mass-produce standard pumps, ittook over the production of chillers from the Haneda Plant.
1971 Central Research Institute established within Fujisawa Plant complex
1972 Ebara-Infilco Central Research Institute established
1975 Ebara Indústrias Mecánicas e Comércio Ltda. EBARA’s first overseas production facilityestablished in Brazil
Sodegaura Plant opened To manufacture mainly compressors and turbines
1981 Ebara International Corporation established in Pump business base in North Americathe United States
1984 Ebara Research Co., Ltd., established Set up to assume and expand the functions of the EBARA and Ebara-Infilcocentral research institutes
1985 Kawasaki Plant integrated into Fujisawa Plant
1987 No. 1 precision machining facility established Vacuum equipment production for the semiconductor manufacturing at Fujisawa Plant industry commenced
1989 Ebara Italia S.p.A. established To manufacture stainless steel standard pumps
1990 Environment Business Division established To strengthen EBARA’s environmental engineering capabilities
1991 Sodegaura Chemical Plant opened
1992 Ebara Qingdao Co., Ltd., established in China To manufacture various types of boilers
1994 Company merged with Ebara-Infilco
2000 Ebara Techno-serve Co., Ltd., established Combined sales and maintenance services for the standard pumps business New Elliot Corporation became a wholly For expansion of compressor and turbine businessowned subsidiary
2002 Global Marketing & Sales Group established
2005 In-house company system introduced Former operating groups realigned under Corporate, which will function as theHead Office, with three core in-house companies (Fluid Machinery & SystemsCompany, Environmental Engineering Company, and Precision MachineryCompany) and one strategic company (New and Renewable Energy Company)
Ebara Boshan Pumps Co., Ltd., established To act as a manufacturing and sales base in China for large-scale pumps and in China high-pressure pumps
2006 Ebara Environmental Engineering Corporation The domestic water and sewage processing department was split off as a established separate company.
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EBARA CORPORATION ANNUAL REPORT 2008 53
Corporate Data (As of March 31, 2008)
EBARA CORPORATION
Head Office 11-1, Haneda Asahi-cho, Ohta-ku, Tokyo 144-8510, Japan Phone: 81-3-3743-6111 Fax: 81-3-5736-3100
Date of Foundation November 1912
Number of Employees (Consolidated)16,074
Paid-in Capital ¥61,284 million
Common Stock Issued and outstanding: 422,725,658 shares
Number of Shareholders 55,894
Securities Traded Tokyo Stock Exchange and Sapporo Securities Exchange
Transfer Agent and Registrar The Chuo Mitsui Trust and Banking Company, Limited33-1, Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan
Auditor Hijiribashi Audit Corporation (Ernst & Young Shin Nihon will become thecompany auditor as of June 27, 2008, the date of the Company’sOrdinary General Meeting of Shareholders.)
Major Shareholders (% of total) JP Morgan Chase Bank 380055 7.0The Master Trust Bank of Japan, Ltd. (Trust Account) 4.1Nippon Life Insurance Company 4.0Mizuho Corporate Bank, Ltd. 2.4Japan Trustee Service Bank, Ltd. (Trust Account) 2.3The Chase Manhattan Bank N.A. London S.L., Omnibus Account 2.0Bank of Tokyo-Mitsubishi UFJ, Ltd. 1.7EBARA CORPORATION Employee Shareholders 1.4Deutsche Bank Securities Co., Ltd. 1.3State Street Bank and Trust Company 505041 1.2
COMPOSITION OF SHAREHOLDERS
Securities Companies3.4%Other Domestic
Corporations6.4%
Financial Institutions25.5%
Individualsand Others
38.6%
Foreign Corporations and Individuals26.1%
0
500
1,000
1,500
2,000
0
5,000
10,000
15,000
20,000
4/07 6/07 8/07 10/07 12/07 2/0812/06 2/07
EBARA Stock Price (Yen) Nikkei Average (Yen)
Nikkei AverageEBARA Stock PriceEBARA Stock Turnover (Thousand shares)
100,000
200,000
4/06 6/06 8/06 10/0610/05 12/05 2/06 0
STOCK PRICE RANGE AND TURNOVER
EBARA CORPORATIONHead Office
11-1, Haneda Asahi-cho, Ohta-ku,
Tokyo 144-8510, Japan
Phone: 81-3-3743-6111
Fax: 81-3-5736-3100
Internet home page: http://www.ebara.co.jp
E-mail: [email protected]
Printed in Japan on recycled paper using soybean-oil ink
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