OMRON Corporation Reports Earnings for the Third Quarter of Fiscal 2007

Net sales up 9.2% year-on-year to JPY 557,790 million backed by strong sales of electronic components and car electronics. Operating income up 5.5% year-on-year to JPY 43,193 million on the back of sales growth and ongoing manufacturing structure reforms. Net income increased 6.7% year-on-year to JPY 29,214 million. On course to achieve record consolidated income in fiscal 2007, for a sixth consecutive year of increased consolidated revenue and income. OMRON Corporation (TOKYO:6645; ADR: OMRNY; "Omron”) has reported earnings for the third quarter of the fiscal year ending March 31, 2008. A full English translation of these financial results (‘kessan tanshin’) will be available on www.omron.com Reviewing economic conditions during the nine months ended December 31, 2007, the global economy remained solid overall despite increasing elements of uncertainty, including the effects of the U.S. subprime loan problem on financial markets in other countries, in addition to high crude oil and raw material prices. In the U.S. economy, consumer spending stalled, reflecting higher energy costs in addition to the decline in housing investment. Meanwhile, the general economic expansion continued in Europe and Southeast Asia despite indications of a slowdown. The Chinese economy remained on its expansion track. The Japanese economy expanded steadily despite weakness in public investment, with generally firm capital investment backed by strong corporate earnings, as well as solid consumer spending. In markets related to the Omron Group, capital investment in the semiconductor and electronic components industries weakened in comparison with the same period of the previous year, but sales of factory automation control systems, the Omron Group’s core business, were generally firm. Sales of automotive electronic components continued to expand as needs for car electronics increased. In this environment, the Omron Group’s net sales for the nine-month period were JPY 557,790 million, an increase of 9.2 percent compared with the same period of the previous fiscal year, with the contribution of a weaker Yen and business acquisitions. Turning to profits for the period, operating income increased 5.5 percent compared with the same period of the previous fiscal year to JPY 43,193 million, mainly as a result of higher net sales. Income from continuing operations before income taxes, including a gain on the sale of investment securities and other factors, was JPY 44,061 million, a decrease of 7.8 percent compared with the same period of the previous fiscal year. In the same period of the previous fiscal year, the Omron Group recorded a gain on the establishment of a retirement benefit trust and a loss on the sale of the land and buildings of its Tokyo Head Office. Net income for the nine-month period was JPY 29,214 million, an increase of 6.7 percent compared with the same period of the previous fiscal year due to factors including a gain on the transfer of a business.  (1) Sales and Income (Percentages represent changes compared with the same period of the previous fiscal year.)     Millions of yen - except per share data and percentages     Nine months ended December 31, 2006   Nine months ended December 31, 2007   Year ended March 31, 2007         Change( %)       Change( %)     Net sales   510,781   17.5     557,790   9.2     723,866 Operating income   40,952   (4.3 )   43,193   5.5     62,046 Income from continuing operations before income taxes   47,811   4.3     44,061   (7.8 )   64,279 Net income   27,372   4.6     29,214   6.7     38,280 Net income per share (yen)   117.72   127.46   164.96 Net income per share, diluted (yen)   117.65   127.40   164.85 Results by Business Segment Industrial Automation Business (IAB) While capital investment in the Japanese manufacturing sector as a whole was firm, the Omron Group’s operations in Japan were impacted by a slowdown in capital investment among customers in the semiconductor and electronic components industries in comparison with the same period of the previous fiscal year, and a decrease in capital investment in the flat panel display (FPD) industry. On the other hand, the Omron Group has been reinforcing its sales infrastructure, starting from the current fiscal year, to expand the applications business, which focuses on quality and safety, and the effects of this are becoming apparent. In addition, sales of Laserfront Technologies (now OMRON LASERFRONT INC.), in which Omron acquired a 95 percent stake at the end of June, contributed to domestic sales of this segment from July onward. Overseas, demand in Europe increased, particularly for products such as programmable controllers, motion controllers and image sensors, reflecting solid economic expansion. Sales in North America expanded on the back of continued strong sales of control equipment to oil and gas-related companies. Sales expanded in China, with strong sales of products including programmable controllers and AOI as a result of the Omron Group’s focus on strengthening its sales force and rolling out new products. As a result, segment sales for the period totaled JPY 242,948 million, an increase of 9.3 percent compared with the same period of the previous fiscal year. Electronic Components Business (ECB) In Japan, consumer spending and capital investment remained firm, but industries such as semiconductor and automobile manufacturing have been slowing since the latter half of fiscal 2006, and the effects of inventory adjustments are emerging in the consumer and commerce industry, a key market for the ECB segment. Overseas, in China, where strong growth continued, electronics manufacturing service (EMS) providers began making production adjustments. In this business environment, overall performance in this segment was solid. Sales of PCB relays and other core products were flat, but sales of components for mobile and IT devices increased. Moreover, in addition to net growth in sales from the backlight business of OMRON PRECISION TECHNOLOGY Co., Ltd., which was included in the scope of consolidation in August 2006, OMRON SEMICONDUCTORS Co., Ltd. started operations in April 2007, and began contract manufacturing of semiconductors on an 8-inch CMOS production line. As a result, segment sales for the period totaled JPY 117,764 million, an increase of 16.4 percent compared with the same period of the previous fiscal year. Automotive Electronics Business (AEC) Global automobile production volume was generally steady. Despite the slump in business among U.S. auto manufacturers, automobile production continued to expand in China, India, Eastern Europe and other regions. Against this backdrop, the need for car electronics that support automobile safety and environmental friendliness continued to increase and Omron Group products were adopted in new cars, resulting in a significant increase in sales in this segment over the same period of the previous fiscal year. By geographic region, sales of products including wireless control devices and power window switches increased in North America. In China, needs for Omron Group products increased as the shift of production to China by manufacturing customers accelerated, and sales increased substantially. As a result, segment sales for the interim period were JPY 80,543 million, an increase of 19.7 percent compared with the same period of the previous fiscal year. Social Systems Business (SSB) In the public transportation systems business, despite increased demand for new machinery for airports, sales declined compared with the same period of the previous fiscal year, when there was large-scale demand for projects such as equipment conversions and renewals associated with the use of common IC cards among different railway companies. In the ID management solutions business, sales were affected by restrained investment in the credit industry due to the "gray-zone” interest rate issue. In the traffic and road management systems business, sales declined compared with the same period of the previous fiscal year due to a decrease in customer demand; however, Omron worked to expand solutions related to driving safety support systems and other applications with the aim of capturing new demand. As a result, segment sales for the period were JPY 52,419 million, a decrease of 13.6 percent compared with the same period of the previous fiscal year. Healthcare Business (HCB) In Japan, sales of consumer medical devices were solid overall against the backdrop of increasing recognition of metabolic syndrome and awareness of health promotion. Sales of this segment’s core products, including digital blood pressure monitors, digital thermometers and electric toothbrushes expanded steadily. Sales of medical devices for professional use were weak, reflecting a decrease in operating rooms at small and medium-sized hospitals and the effects of price competition for monitors for hospitals. Overseas, sales continued to be strong overall in Europe, led by the digital blood pressure monitor business in Eastern Europe and the Middle East, although price competition is intensifying in Western Europe. Sales also remained solid in China and Southeast Asia. In China in particular, sales expanded sharply due to factors including sales promotion activities that focused on hypertension, hyperglycemia and hyperlipidemia. On the other hand, sales in North America were sluggish because of factors including weaker consumer spending and the impact of price competition. As a result, segment sales for the period were JPY 52,488 million, an increase of 8.7 percent compared with the same period of the previous fiscal year. Others The "Others” segment consists mainly of new businesses being explored and developed by the Business Development Group and development and expansion of other businesses that are not covered by internal companies. The computer peripherals business posted a solid increase in sales. In new growth businesses, Omron focused on increasing orders for radio frequency identification (RFID) equipment in response to the move toward practical use of IC tags in Japan and overseas, and made steady progress with the launch of the remote monitoring and reporting systems business, which includes electricity usage monitoring and insulation monitoring. As a result, segment sales were JPY 11,628 million, an increase of 4.9 percent compared with the same period of the previous fiscal year. (2) Consolidated Financial Condition Total assets as of December 31, 2007 increased JPY 4,301 million compared with the end of the previous fiscal year to JPY 634,638 million. Shareholders’ equity increased JPY 16,926 million compared with the end of the previous fiscal year to JPY 399,748 million. As a result, the net worth ratio increased to 63.0 percent from 60.7 percent at the end of the previous fiscal year. Net cash provided by operating activities in the nine months ended December 31, 2007 was JPY 40,727 million (an increase of JPY 30,508 million compared with the same period of the previous fiscal year) mainly as a result of net income of JPY 29,214 million and a decrease in accounts receivable. Net cash used in investing activities was JPY 27,147 million (a decrease in cash used of JPY 6,922 million compared with the same period of the previous fiscal year) as a result of ongoing investment in production facilities. Net cash used in financing activities was JPY 19,142 million (an increase in cash used of JPY 41,038 million compared with the same period of the previous fiscal year), mainly for dividends paid by the Company and acquisition of treasury stock. As a result, the balance of cash and cash equivalents at December 31, 2007 decreased JPY 4,555 million from the end of the previous fiscal year to JPY 38,440 million.   Millions of yen - except per share data and percentages     As of December 31, 2006   As of December 31, 2007   As of March 31, 2007 Total assets   624,118   634,638   630,337 Net assets   373,810   399,748   382,822 Net worth ratio (percentage)   59.9   63.0   60.7 Net assets per share (yen)   1,621.75   1,755.73   1,660.68 Note: In accordance with U.S. GAAP, net assets, net worth ratio and net assets per share are calculated using total shareholders’ equity. Consolidated Cash Flows   Millions of yen     Nine months ended December 31, 2006   Nine months ended December 31, 2007   Year ended March 31, 2007 Net cash provided by operating activities   10,219     40,727     40,539   Net cash used in investing activities   (34,069 )   (27,147 )   (47,075 ) Net cash (used in) provided by financing activities   21,896     (19,142 )   (4,697 ) Cash and cash equivalents at end of period   51,011     38,440     42,995   Dividends         Year ended March 31, 2007   Year ending March 31, 2008 (actual)   Year ending March 31, 2008 (projected) Dividends per share   Interim dividend (yen)   15.00   17.00   — Year-end dividend (yen)   19.00   —   25.00   Total dividend for the year (yen)   34.00   42.00 Note: Breakdown of year-end dividend for the year ending March 31, 2008 (projected):           JPY 20.00 regular dividend; JPY 5.00 commemorative dividend. (3) Projected Results for the Fiscal Year Ending March 31, 2008 (April 1, 2007 – March 31, 2008) In the fourth quarter of the fiscal year ending March 31, 2008 (January – March, 2008), factors such as high crude oil prices, a slowdown in the U.S. economy and the spread of the U.S. subprime loan problem to financial markets in other countries are expected to fuel an increasing sense of uncertainty regarding the economic outlook. The effect of this is likely to result in slower consumer spending, and the environment for corporate capital investment is also expected to become more difficult. Markets related to the Omron Group are expected to be weak as a result of restrained capital investment, primarily among semiconductor and LCD manufacturers. The market for consumer and commerce components for IT and digital related products in Japan is expected to remain difficult to predict in the fourth quarter. Sales of automotive electronic components are projected to continue expanding, reflecting increasing needs for car electronics. In this environment, despite the positive effects of the weaker yen and the contribution of acquisitions in the fourth quarter, the Omron Group’s net sales, which increased over the same period of the previous fiscal year in the first three quarters, are expected to be below original projections for the full year as a result of lower-than-expected demand for domestic private-sector investment. Reflecting this, operating income, income from continuing operations before income taxes and net income are also forecast to be lower than original projections. As a result, Omron has made the following changes to figures in the performance forecast for the fiscal year announced on October 30, 2007. The assumed exchange rates are US$1 = JPY 110 and 1 Euro = JPY 155. Revision to Forecast for Consolidated Full-Year Financial Results (U.S. GAAP) (Percentages represent changes compared with the previous fiscal year.   (Millions of yen)     Net sales   Operating income   Income from continuing operations before income taxes   Net income Previous forecast (A)   785,000     71,000     71,000     46,000   Revised forecast (B)   775,000     65,000     66,500     42,000   Difference (B-A)   (10,000 )   (6,000 )   (4,500 )   (4,000 ) Difference as percentage   (1.3% )   (8.5% )   (6.3% )   (8.7% ) (For reference) Figures for previous fiscal year (ended March 31, 2007)   723,866     62,046     64,279     38,280   Notes: All amounts are rounded to the nearest million yen. In preparation for the implementation of a quarterly review system from the fiscal year ending March 31, 2009, the financial statements for this third-quarter period have been prepared with the cooperation of Deloitte Touche Tohmatsu. Because the system has not yet been implemented, Deloitte Touche Tohmatsu has not provided an independent auditor’s report. The number of consolidated subsidiaries is 164, and the number of companies accounted for by the equity method is 19. In accordance with U.S. GAAP, return on equity, net assets, net worth ratio and net assets per share are calculated using total shareholders’ equity. Figures for the nine months ended December 31, 2007 and the year ended March 31, 2007 include a gain of 10,141 million yen on the establishment of an employee retirement benefit trust and a loss of 5,915 million yen on the sale of land and buildings at the Tokyo Head Office. Pursuant to FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,” the figures for the nine months ended December 31, 2006 and the year ended March 31, 2007 have been reclassified in relation to operations (the entertainment business formerly included in the "Others” segment) discontinued during the three months ended June 30, 2007. This information has been translated from Japanese as a guide for non-Japanese investors and contains forward-looking statements that are based on management’s estimates, assumptions and projections at the time of publication. A number of factors could cause actual results to differ materially from expectations.