FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of December 2005
Commission File Number 2 - 68279
RICOH COMPANY, LTD.
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(Translation of Registrant's name into English)
13-1, Ginza 8-chome, Chuo-Ku, Tokyo 104-8222, Japan
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(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.)
Form 20-F X Form 40-F __
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): __ )
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): __ )
(Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.)
Yes __ No X
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-__ )
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Ricoh Company, Ltd.
------------------------------
(Registrant)
By: /S/ Zenji Miura
------------------------------
Zenji Miura
Director,
Corporate Executive Vice President
and Chief Financial Officer
December 9, 2005
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RICOH COMPANY, LTD.
Interim Consolidated Financial Statements
For the six months ended September 30, 2005
This is an English translation of the Interim Securities Report (Hanki
Hokokusho) for the six months ended September 30, 2005 pursuant to the
Securities and Exchange Law of Japan.
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30, 2004, 2005 and March 31, 2005
Millions of Yen
-------------------------------------------------
September 30, September 30, March 31,
A S S E T S 2004 2005 2005
-------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 214,706 148,010 186,857
Time deposits 853 572 1,454
Marketable securities 51,119 145 138
Trade receivables-
Notes 76,457 71,440 75,233
Accounts 338,870 386,758 396,150
Less- Allowance for doubtful receivables (18,017) (16,887) (17,451)
Current maturities of long-term finance receivables, net 159,407 173,501 166,636
Inventories-
Finished goods 99,438 107,831 109,224
Work in process and raw materials 52,355 59,937 58,141
Deferred income taxes and other 55,161 55,439 53,365
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Total current assets 1,030,349 986,746 1,029,747
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Property, Plant and Equipment, at cost:
Land 43,326 47,371 43,077
Buildings 202,506 210,133 203,537
Machinery and equipment 658,782 627,491 643,386
Construction in progress 11,916 13,642 18,720
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916,530 898,637 908,720
Less- Accumulated depreciation (678,773) (641,780) (661,310)
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237,757 256,857 247,410
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Investments and Other Assets:
Long-term finance receivables, net 377,229 405,788 391,947
Investment securities 20,846 32,315 31,154
Investments in and advances to affiliates 49,281 49,537 49,316
Goodwill 26,549 49,970 47,502
Other intangible assets 45,185 81,766 69,414
Lease deposits and other 90,259 85,608 87,179
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609,349 704,984 676,512
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1,877,455 1,948,587 1,953,669
===================================================================================================================
1
Millions of Yen
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September 30, September 30, March 31,
LIABILITIES AND SHAREHOLDERS' INVESTMENT 2004 2005 2005
-------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Short-term borrowings 79,626 61,769 38,710
Current maturities of long-term indebtedness 128,242 85,541 144,808
Trade payables-
Notes 26,519 31,438 29,686
Accounts 250,032 293,067 306,813
Accrued income taxes 26,994 30,852 24,074
Accrued expenses and other 131,711 124,256 127,423
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Total current liabilities 643,124 626,923 671,514
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Long-term Liabilities:
Long-term indebtedness 227,452 224,444 226,567
Accrued pension and severance costs 87,017 92,458 92,672
Deferred income taxes 39,167 47,327 48,787
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353,636 364,229 368,006
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Minority Interests 50,415 51,761 51,151
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Commitments and Contingent Liabilities (Note 6)
Shareholders' Investment:
Common stock;
Authorized - 993,000,000 shares as of September 30, 2004 and
March 31, 2005, and 1,500,000,000 shares as of
September 30, 2005
Issued - 744,912,078 shares as of September 30, 2004,
September 30, 2005 and March 31, 2005 135,364 135,364 135,364
Additional paid-in capital 186,600 186,450 186,551
Retained earnings 544,581 620,034 584,515
Accumulated other comprehensive income (loss) (24,095) (15,521) (21,963)
Treasury stock at cost; 6,126,488 shares, 10,430,377 shares
and 10,866,199 shares as of September 30, 2004, September
30, 2005 and March 31, 2005, respectively (12,170) (20,653) (21,469)
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Total shareholders' investment 830,280 905,674 862,998
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1,877,455 1,948,587 1,953,669
===================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
2
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the Half Years Ended September 30, 2004, 2005 and Year Ended March 31, 2005
Millions of Yen
-------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
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Net Sales 876,003 923,020 1,814,108
Cost of Sales 512,123 534,767 1,059,531
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Gross profit 363,880 388,253 754,577
Selling, General and Administrative Expenses 306,122 321,346 619,071
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Operating income 57,758 66,907 135,506
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Other (Income) Expenses:
Interest and dividend income 1,073 1,384 2,240
Interest expense (2,316) (2,195) (4,684)
Foreign currency exchange (gain) loss, net 2,757 2,503 1,547
Other, net 792 808 774
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Total 2,306 2,500 (123)
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Income before Income Taxes, Minority Interests and Equity in
Earnings of Affiliates 60,064 69,407 135,383
Provision for Income Taxes:
Current 21,417 25,890 39,281
Deferred 2,362 (1,105) 11,353
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Total 23,779 24,785 50,634
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Minority Interests 1,898 2,690 4,726
Equity in Earnings of Affiliates 1,434 935 3,120
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Net Income 35,821 42,867 83,143
===================================================================================================================
Yen
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Per Share of Common Stock:
Net income 48.48 58.40 112.64
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Cash dividends per share 10.00 12.00 20.00
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Per American Depositary Share, each representing
5 shares of common stock:
Net income 242.40 292.00 563.20
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Cash dividends per share 50.00 60.00 100.00
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The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Half Years Ended September 30, 2004, 2005 and Year Ended March 31, 2005
Millions of Yen
-------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
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Common Stock:
Beginning balance 135,364 135,364 135,364
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Ending balance 135,364 135,364 135,364
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Additional Paid-in Capital:
Beginning balance 186,599 186,551 186,599
Gain (Loss) on disposal of treasury stock 1 (101) (48)
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Ending balance 186,600 186,450 186,551
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Retained Earnings:
Beginning balance 515,372 584,515 513,372
Adjustment for change in fiscal year end of consolidated
subsidiaries 777 -- 777
Net income for the period 35,821 42,867 83,143
Dividends declared and approved (7,389) (7,348) (14,777)
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Ending balance 544,581 620,034 584,515
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Accumulated other comprehensive income (loss):
Beginning balance (30,272) (21,963) (30,272)
Adjustment for change in fiscal year end of consolidated
subsidiaries (1,665) -- (1,665)
Other comprehensive income (loss) for the period, net of tax 7,842 6,442 9,974
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Ending balance (24,095) (15,521) (21,963)
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Treasury stock:
Beginning balance (11,932) (21,469) (11,932)
Purchase of treasury stock (251) (237) (12,178)
Sales of treasury stock 13 52 49
Issuance of treasury stock in exchange for subsidiary's stock -- 1,001 2,592
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Ending balance (12,170) (20,653) (21,469)
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Comprehensive income:
Net income for the period 35,821 42,867 83,143
Other comprehensive income (loss) for the period, net of tax 7,842 6,442 9,974
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Total comprehensive income for the period 43,663 49,309 93,117
===================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Half Years Ended September 30, 2004, 2005 and Year Ended March 31, 2005
Millions of Yen
-------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 35,821 42,867 83,143
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization 36,963 39,812 78,201
Equity in earnings of affiliates, net of dividends
received (631) (110) (1,966)
Deferred income taxes 2,362 (1,105) 11,353
Losses on disposals and sales of property, plant and
equipment 1,569 1,059 4,056
Changes in assets and liabilities, net of effects from
acquisition--
(Increase) decrease in trade receivables 27,001 15,508 (26,429)
(Increase) decrease in inventories (6,122) 1,624 (12,885)
Increase in finance receivables (20,876) (17,194) (30,294)
(Decrease) increase in trade payables (20,386) (12,414) 27,276
Decrease in accrued income taxes and
accrued expenses and other (3,765) (563) (13,719)
(Decrease) increase in accrued pension and severance
costs 1,332 (146) 4,307
Other, net 4,712 4,059 9,737
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Net cash provided by operating activities 57,980 73,397 132,780
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment 578 312 721
Expenditures for property, plant and equipment (37,758) (58,038) (84,076)
Payments for purchases of available-for-sale securities (6,149) (60,213) (79,431)
Proceeds from sales of available-for-sale securities 5 62,788 118,120
(Increase) decrease in time deposits, net 118 910 (511)
Acquisition of subsidiaries, net of cash acquired -- -- (43,214)
Other, net 9,267 (7,675) (7,807)
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Net cash used in investing activities (33,939) (61,916) (96,198)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term indebtedness 24,917 35,776 72,206
Repayment of long-term indebtedness (33,832) (54,169) (60,613)
(Decrease) increase in short-term borrowings, net 9,099 20,654 (38,052)
Proceeds from issuance of long-term debt securities 9,000 -- 18,000
Repayment of long-term debt securities (18,000) (44,000) (22,000)
Dividend paid (7,405) (7,348) (14,793)
Payment for purchase of treasury stock (251) (237) (10,624)
Other, net (434) (471) (563)
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Net cash used in financing activities (16,906) (49,795) (56,439)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 2,057 (533) 1,200
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,192 (38,847) (18,657)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 203,039 186,857 203,039
ADJUSTMENT FOR CHANGE OF FISCAL PERIOD ON CONSOLIDATED
SUBSIDIARIES 2,475 -- 2,475
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CASH AND CASH EQUIVALENTS AT END OF PERIOD 214,706 148,010 186,857
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR-
Interest 2,793 2,850 5,402
Income taxes 20,891 20,958 40,803
===================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
Ricoh Company, Ltd. and Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
According to the article 81 of the "Regulations Regarding Terms, Forms and
Preparation of Interim Consolidated Financial Statements"(Ministry of Finance
Ordinance No.24, 1999), the accompanying consolidated financial statements of
Ricoh (Ricoh Company, Ltd. and its consolidated subsidiaries) have been prepared
in conformity with accounting principles generally accepted in the United States
of America. Significant accounting and reporting policies are summarized below:
The accompanying consolidated financial statements for the half years ended
September 30, 2004, 2005 and for the year ended March 31, 2005 are presented in
Japanese yen, the functional currency of the Company and its domestic
subsidiaries.
The books of the Company and its domestic subsidiaries are maintained in
conformity with Japanese accounting principles and practices, while foreign
subsidiaries maintain their books in conformity with the standards of their
country of domicile.
The accompanying consolidated financial statements reflect necessary
adjustments, not recorded in the books, to present them in conformity with
accounting principles generally accepted in the United States of America.
(A) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Ricoh. Investments in entities in which Ricoh has the ability to exercise
significant influence over the entities' operating and financial policies
(generally 20 to 50 percent ownership) are accounted for on an equity basis. All
significant intercompany balances and transactions have been eliminated in
consolidation.
The accounts of certain consolidated subsidiaries have been included on the
basis of fiscal periods ended within three months prior to September 30.
Certain overseas subsidiaries of the company changed their fiscal year end from
December 31 to March 31, at the beginning of fiscal 2005. As a result, retained
earnings increased by Yen 777 million and other comprehensive income (loss)
decreased by Yen 1,665 million.
(B) REVENUE RECOGNITION
Ricoh generates revenue principally through the sale of equipment, supplies and
related services under separate contractual arrangements for each. Generally,
Ricoh recognizes revenue when (1) it has a firm contract, (2) the product has
been shipped to and accepted by the customer or the service has been provided,
(3) the sales price is fixed or determinable and (4) amounts are reasonably
assured of collection.
Most equipment sales require that Ricoh installs the product. As such, revenue
is recognized at the time of delivery and installation at the customer location.
Service revenues result primarily from maintenance contracts that are normally
entered into at the time the equipment is sold. Ricoh enters into arrangements
with multiple elements, which may include any combination of products,
equipment, installation and maintenance. Ricoh allocates revenue to each element
based on its relative fair value if such element meets the criteria for
treatment as a separate unit of accounting as prescribed in the Emerging Issues
Task Force
6
Issue 00-21("EITF 00-21"), "Revenue Arrangements with Multiple Deliverables."
Pursuant to EITF 00-21, the delivered item in a multiple element arrangement
should be considered a separate unit of accounting if all of the following
criteria are met: (1) a delivered item has value to customers on a stand-alone
basis, (2) there is objective and reliable evidence of fair value of an
undelivered item, and (3) the delivery of the undelivered item must be probable
and controlled by Ricoh if the arrangement includes the right of return. The
price charged when the element is sold separately generally determines fair
value. Otherwise, revenue is deferred until the undelivered elements are
fulfilled as a single unit of accounting.
(C) FOREIGN CURRENCY TRANSLATION
For foreign operations with functional currencies other than the Japanese yen,
assets and liabilities are translated at the exchange rates in effect at each
end of the period, and income and expenses are translated at the average rates
of exchange prevailing during each period. The resulting translation adjustments
are included as a part of accumulated other comprehensive income (loss) in
shareholders' investment.
All foreign currency transaction gains and losses are included in other income
and expense in the period incurred.
(D) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with maturities of
three months or less at the date of purchase such as time deposits and
short-term investment securities which are available-for sale at any time,
present insignificant risk of changes in value due to being readily convertible
into cash and have an original maturity of three months or less, such as money
management funds and free financial funds.
(E) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
As discussed further in Note 5, Ricoh manages its exposure to certain market
risks, primarily foreign currency and interest rate risks, through the use of
derivative instruments. As a matter of policy, Ricoh does not enter into
derivative contracts for trading or speculative purposes.
In accordance with SFAS No.133, Ricoh, when it enters into a derivative
contract, makes a determination as to whether or not for accounting purposes the
derivative is part of a hedging relationship. In general, a derivative may be
designated as either (1) a hedge of the fair value of a recognized asset or
liability or an unrecognized firm commitment ("fair value hedge"), (2) a hedge
of the variability of the expected cash flows associated with an existing asset
or liability or a forecasted transaction ("cash flow hedge"), or (3) a foreign
currency fair value or cash flow hedge ("foreign currency hedge"). Ricoh
formally documents all relationships between hedging instruments and hedged
items, as well as its risk-management objective and strategy for undertaking
various hedge transactions. This process includes linking all derivatives that
are designated as fair value, cash flow, or foreign currency hedges to specific
assets and liabilities on the consolidated balance sheet or to specific firm
commitments or forecasted transactions.
For derivative contracts that are designated and qualify as fair value hedges
including foreign currency fair value hedges, the derivative instrument is
mark-to-market with gains and losses recognized in current period earnings to
offset the respective losses and gains recognized on the underlying exposure.
For derivative contracts that are designated and qualify as cash flow hedges
including foreign currency cash flow hedges, the effective portion of gains and
losses on these contracts is reported as a component of accumulated other
comprehensive income (loss) and reclassified into earnings in the same period
the hedged item or transaction affects earnings. Any hedge ineffectiveness on
cash flow hedges is immediately recognized in earnings. For all derivative
instruments that are not designated as part of a hedging
7
relationship and for designated derivative instruments that do not qualify for
hedge accounting, the contracts are recorded at fair value with the gain or loss
recognized in current period earnings.
(F) ALLOWANCE FOR DOUBTFUL TRADE RECEIVABLES AND FINANCE RECEIVABLES
Ricoh records allowances for doubtful receivables that are based upon historical
experience and specific customer collection issues. The estimated amount of
probable credit losses in its existing receivables is determined from write-off
history adjusted to reflect current economic conditions and specific allowances
for receivables including nonperforming leases, impaired loans or other accounts
of which Ricoh has concluded it will be unable to collect all amounts due
according to original terms of the lease or loan agreement. Account balances net
of expected recovery from available collateral are charged-off against the
allowances when collection is considered remote.
(G) SECURITIES
Ricoh conforms with SFAS No.115, "Accounting for Certain Investments in Debt and
Equity Securities" which requires all investments in debt and marketable equity
securities to be classified as either held-to-maturity, trading, or
available-for-sale securities. As of September 30, 2004, 2005 and March 31,
2005, all of Ricoh's investments in debt and marketable equity securities are
classified as available-for-sale securities. Those available-for-sale securities
are reported at fair value with unrealized gains and losses, net of related
taxes, excluded from earnings and reported in accumulated other comprehensive
income (loss). Available-for-sale securities, which mature or are expected to be
sold in one year, are classified as current assets.
Individual securities classified as available-for-sale securities are reduced to
fair market value by a charge to income for other than temporary declines in
value. Factors considered in assessing whether an indication of other than
temporary impairment exists with respect to available-for-sale securities
include: length of time and extent of decline, financial condition and near term
prospects of issuer and intent and ability of the Company to retain its
investments for a period of time sufficient to allow for any anticipated
recovery in market value.
The cost of the securities sold is computed based on the average cost of each
security held at the time of sale.
Non-marketable equity securities owned by Ricoh primarily relate to less than
20% owned companies and are stated at cost.
(H) INVENTORIES
Inventories are mainly stated at the lower of average cost or net realizable
values. Inventory costs include raw materials, labor and manufacturing
overheads.
(I) PROPERTY, PLANT AND EQUIPMENT
For the Company and its domestic subsidiaries, depreciation of property, plant
and equipment is computed principally by using the declining-balance method over
the estimated useful lives. Most of the foreign subsidiaries have adopted the
straight-line method for computing depreciation, which currently accounts for
approximately 35% of the consolidated depreciation expense. The depreciation
period generally ranges from 5 years to 50 years for buildings and 2 years to 12
years for machinery and equipment.
8
Effective rates of depreciation for the half years ended September 30, 2004,
2005 and for the year ended March 31, 2005 are summarized below:
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
-------------------------------------------------------------------------------
Buildings 4.1% 4.3% 8.5%
Machinery and
equipment 23.1 21.8 43.8
-------------------------------------------------------------------------------
Ordinary maintenance and repairs are charged to expense as incurred. Major
replacements and improvements are capitalized. When properties are retired or
otherwise disposed of, the property and related accumulated depreciation
accounts are relieved of the applicable amounts, and any differences are
included in earnings.
(J) GOODWILL AND OTHER INTANGIBLE ASSETS
Ricoh fully adopted the provision of SFAS No.141, "Business Combinations," and
SFAS No.142, "Goodwill and Other Intangible Assets." SFAS No.141 requires the
use of only the purchase method of accounting for business combinations and
refines the definition of intangible assets acquired in a purchase business
combination. SFAS No.142 eliminates the amortization of goodwill and instead
requires annual impairment testing thereof. SFAS No.142 also requires acquired
intangible assets with a definite useful life to be amortized over their
respective estimated useful lives and reviewed for impairment in accordance with
SFAS No.144. Any acquired intangible asset determined to have an indefinite
useful life is not amortized, but instead is tested for impairment based on its
fair value until its life would be determined to no longer be indefinite.
(K) PENSION AND RETIREMENT ALLOWANCES PLANS
The measurement of pension costs and liabilities is determined in accordance
with SFAS No.87, "Employers' Accounting for Pensions." Under SFAS No.87, changes
in the amount of either the projected benefit obligation or plan assets
resulting from actual results different from that assumed and from changes in
assumptions can result in gains and losses not yet recognized in the
consolidated financial statements. Amortization of an unrecognized net gain or
loss is included as a component of the net periodic benefit plan cost for a year
if, as of the beginning of the year, that unrecognized net gain or loss exceeds
10 percent of the greater of (1) the projected benefit obligation or (2) the
fair value of that plan's assets. In such case, the amount of amortization
recognized is the resulting excess divided by the average remaining service
period of active employees expected to receive benefits under the plan. The
expected long-term rate of return on plan assets used for pension accounting is
determined based on the historical long-term rate of return on plan assets. The
discount rate is determined based on the rates of return of high-quality
fixed-income investments currently available and expected to be available during
the period to maturity of the pension benefits.
(L) INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences and carryforwards are expected
9
to be realized or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date.
(M) RESEARCH AND DEVELOPMENT EXPENSES AND ADVERTISING COSTS
Research and development expenses and advertising costs are expensed as
incurred.
(N) SHIPPING AND HANDLING COSTS
Shipping and handling costs, which mainly include transportation to customers,
are included in selling, general and administrative expenses in the consolidated
statements of income.
(O) IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
Long-lived assets and acquired intangible assets with a definite life are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset or group of assets may not be recoverable.
Recoverability of assets to be held and used is assessed by comparing the
carrying amount of an asset or group of assets to the expected future
undiscounted net cash flows of the asset or group of assets. If an asset or
group of assets is considered to be impaired, the impairment charge to be
recognized is measured as the amount by which the carrying amount of the asset
or group of assets exceeds fair value. Long-lived assets meeting the criteria to
be considered as held for sale are reported at the lower of their carrying
amount or fair value less costs to sell.
(P) EARNINGS PER SHARE
Basic net income per common share is calculated by dividing net income by the
weighted-average number of shares outstanding during the period. The calculation
of diluted net income per common share is similar to the calculation of basic
net income per share, except that the weighted-average number of shares
outstanding includes the additional dilution from potential common stock
equivalents such as convertible bonds.
Ricoh has no dilutive securities outstanding as of September 30, 2004, 2005 and
March 31, 2005 and therefore there is no difference between basic and diluted
net income per share.
(Q) NON-CASH TRANSACTIONS
The following non-cash transactions have been excluded from the consolidated
statements of cash flows for the half years ended September 30, 2004, 2005 and
for the year ended March 31, 2005:
Millions of Yen
--------------------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
------------------------------------------------------------------------------------------------------------
Capital lease obligations incurred 479 130 865
Issuance of treasury stock in exchange for
subsidiary's stock -- 904 2,545
------------------------------------------------------------------------------------------------------------
10
(R) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses,
including impairment losses of long-lived assets and the disclosures of fair
value of financial instruments and contingent assets and liabilities, to prepare
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
The Company has identified four areas where it believes assumptions and
estimates are particularly critical to the consolidated financial statements.
These are determination of the allowance for doubtful receivables, impairment on
long-lived assets and goodwill, realizability of deferred tax assets and pension
accounting.
(S) RECLASSIFICATION TO PRIOR YEAR'S CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated balance sheet for the half year ended September
30, 2004 reflects the reclassification of finance receivables expected to be
collected within one year from the balance sheet date, or the current portion,
previously included in investments and other assets to current assets to conform
with the presentation used for the half year ended September 30, 2005 and the
year ended March 31, 2005. The effect of this reclassification was to increase
total current assets by Yen 159,407 million from Yen 870,942 million to Yen
1,030,349 million at September 30, 2004. This reclassification had no effect on
the consolidated statements of income and cash flows.
2. SECURITIES
Marketable securities and investment securities as of September 30, 2004, 2005
and March 31, 2005 consist of the following:
Millions of Yen
-------------------------------------------------
September 30, September 30, March 31,
2004 2005 2005
-------------------------------------------------------------------------------------------------------------------
Marketable securities:
Available-for-sale securities 51,119 145 138
-------------------------------------------------------------------------------------------------------------------
Investment securities:
Available-for-sale securities 13,799 25,896 24,205
Non-marketable equity securities 7,047 6,419 6,949
-------------------------------------------------------------------------------------------------------------------
20,846 32,315 31,154
-------------------------------------------------------------------------------------------------------------------
The current and noncurrent security types of available-for-sale securities, and
the respective cost, gross unrealized holding gains, gross unrealized holding
losses and fair value as of September 30, 2004, 2005 and March 31, 2005 are as
follows:
11
Millions of Yen
--------------------------------------------------------------------------------------------------------------
September 30, 2004 September 30, 2005 March 31, 2005
------------------------------------ ------------------------------------ ------------------------------------
Gross Gross Gross Gross Gross Gross
unrealized unrealized unrealized unrealized unrealized unrealized
holding holding Fair holding holding Fair holding holding Fair
Cost gains losses value Cost gains losses value Cost gains losses value
-----------------------------------------------------------------------------------------------------------------------------
Current:
Corporate
debt
securities 51,137 2 21 51,118 144 -- -- 144 137 -- -- 137
Other 1 -- -- 1 1 -- -- 1 1 -- -- 1
-----------------------------------------------------------------------------------------------------------------------------
51,138 2 21 51,119 145 -- -- 145 138 -- -- 138
-----------------------------------------------------------------------------------------------------------------------------
Non-current:
Equity
securities 5,088 7,047 52 12,083 6,920 12,041 37 18,924 7,479 9,021 49 16,451
Corporate
debt
securities -- -- -- -- 6,000 30 -- 6,030 6,000 45 -- 6,045
Other 1,309 407 -- 1,716 684 258 -- 942 1,229 480 -- 1,709
-----------------------------------------------------------------------------------------------------------------------------
6,397 7,454 52 13,799 13,604 12,329 37 25,896 14,708 9,546 49 24,205
-----------------------------------------------------------------------------------------------------------------------------
Other non-current securities mainly include investment trusts consisting of
investment in marketable debt and equity securities.
The contractual maturities of debt securities classified as available-for-sale
as of September 30, 2005, regardless of their balance sheet classification, are
as follows:
Millions of Yen
---------------------------------
Cost Fair value
--------------------------------------------------------------------------------
Due within one year 144 144
Due after one year through five years 6,000 6,030
--------------------------------------------------------------------------------
6,144 6,174
--------------------------------------------------------------------------------
Proceeds from the sales of available-for-sale securities were Yen 62,788
million, Yen 118,120 million for the half year ended September 30, 2005 and for
the year ended March 31, 2005, respectively. There were no significant proceeds
from the sales of available-for-sale securities for the half year ended
September 30, 2004.
There were no significant realized gains on sales of available-for-sale
securities for the half years ended September 30, 2004, 2005 and for the year
ended March 31, 2005. There were no significant realized losses on sales of
available-for-sale securities for the half years ended September 30, 2004, 2005
and for the year ended March 31, 2005. There were no significant losses on
securities for the half years ended September 30, 2004, 2005 and for the year
ended March 31, 2005 charged to other expense for declines in market value of
available-for-sale securities where the decline was determined to be other than
temporary.
3. PENSION BENEFIT COSTS
The Company and certain of its subsidiaries have various trusted contributory
and noncontributory employees' pension fund plans covering substantially all of
their employees. Under the plans, employees are entitled to lump-sum payments at
the time of termination or retirement, or to pension payments. The Company and
its subsidiaries are to contribute annually the amounts actuarially determined
for future payments. The amounts of such payments are determined on the basis of
length of service and remuneration at the time of termination. Assets of the
plans are invested primarily in marketable equity securities and fixed-income
securities.
12
The net periodic benefit costs of the pension plans for the half years ended
September 30, 2004, 2005 and for the year ended March 31, 2005 consisted of the
following components:
Millions of Yen
-----------------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
----------------------------------------------------------------------------------------------------
Service cost 6,412 7,295 14,762
Interest cost 4,341 4,565 9,218
Expected return on plan assets (2,804) (3,282) (6,571)
Net amortization 360 664 1,648
Settlement loss (benefit) -- -- (980)
----------------------------------------------------------------------------------------------------
Total net periodic pension cost 8,309 9,242 18,077
====================================================================================================
4. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Policy
Ricoh enters into various derivative financial instrument contracts in the
normal course of business in connection with the management of its assets and
liabilities.
Ricoh uses derivative instruments to reduce risk and protect market value of
assets and liabilities in conformity with the Ricoh's policy. Ricoh does not use
derivative financial instruments for trading or speculative purposes, nor is it
a party to leveraged derivatives.
All derivative instruments are exposed to credit risk arising from the inability
of counterparties to meet the terms of the derivative contracts. However, Ricoh
does not expect any counterparties to fail to meet their obligations because
these counterparties are financial institutions with satisfactory credit
ratings. Ricoh utilizes a number of counterparties to minimize the concentration
of credit risk.
Foreign Exchange Risk Management
Ricoh conducts business on a global basis and holds assets and liabilities
denominated in foreign currencies. Ricoh enters into foreign exchange contracts
and foreign currency options to hedge against the potentially adverse impacts of
foreign currency fluctuations on these assets and liabilities denominated in
foreign currencies.
Interest Rate Risk Management
Ricoh enters into interest rate swap agreements to hedge against the potential
adverse impacts of changes in fair value or cash flow fluctuations on interest
of its outstanding debt.
Fair Value Hedges
Changes in the fair value of derivative instruments and the related hedged items
designated and qualifying as fair value hedges are included in other (income)
expenses in the consolidated statements of income. There is no hedging
ineffectiveness nor are net gains or losses excluded from the assessment of
hedge effectiveness for the half years ended September 30, 2004, 2005 and for
the year ended March 31, 2005 as the critical terms of the interest rate swap
match the terms of the hedged debt obligations.
13
Cash Flow Hedges
Changes in the fair value of derivative instruments designated and qualifying as
cash flow hedges are included in accumulated other comprehensive income (loss)
on the consolidated balance sheets. These amounts are reclassified into earnings
as interest on the hedged loans is paid. There is no hedging ineffectiveness nor
are net gains or losses excluded from the assessment of hedge effectiveness for
the half years ended September 30, 2004, 2005 and for the year ended March 31
2005 as the critical terms of the interest rate swap match the terms of the
hedged debt obligations. Ricoh expects that it will reclassify into earnings
through other (income) expenses during the next 12 months approximately Yen 74
million of the balance of accumulated other comprehensive income as of September
30, 2005.
Undesignated Derivative Instruments
Derivative instruments not designated as hedging instruments are held to reduce
the risk relating to the variability in exchange rates on assets and liabilities
denominated in foreign currencies. Changes in the fair value of these
instruments are included in other (income) expenses in the consolidated
statement of income.
5. CREDIT LINES
The Company and certain of its subsidiaries enter into the contracts with
financial institutions regarding lines of credit and overdrawing, and hold the
issuing programs of commercial paper and medium-term notes. The unused lines of
credit amounted to Yen 665,833 million, Yen 689,993 million and Yen 725,185
million as of September 30, 2004, March 31, 2005 and September 30, 2005,
respectively, of which Yen 332,672 million, Yen 347,637 million and Yen 398,049
million related to commercial paper and medium-term notes programs at prevailing
interest rates.
6. COMMITMENTS AND CONTINGENT LIABILITIES
Ricoh was contingently liable as guarantor for employees' housing loans amounted
to Yen 216 million as of September 30, 2005.
As of September 30, 2005, the Company and certain of its subsidiaries were
parties to litigation involving routine matters, such as patent rights. In the
opinion of management, the ultimate liability, if any, resulting from such
litigation will not materially affect the consolidated financial position or the
results of operations of Ricoh.
7. SECURED LOAN AND COLLATERAL
Certain subsidiaries of the company provide their land, buildings and lease
receivables to banks, insurance companies and other financial institutions as
collateral. Secured loan are amounted to Yen 1,265 million, Yen 1,133 million
and Yen 977 million as of September 30, 2004, March 31, 2005 and September 30,
2005, respectively, which are collateralized by land, buildings and lease
receivables with a book value of Yen 3,352 million, Yen 3,312 million and Yen
3,276 million as of September 30, 2004, March 31, 2005 and September 30, 2005,
respectively.
14
8. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
(A) CASH AND CASH EQUIVALENTS, TIME DEPOSITS, TRADE RECEIVABLES, SHORT-TERM
BORROWINGS, CURRENT MATURITIES OF LONG-TERM INDEBTEDNESS, TRADE PAYABLES
AND ACCRUED EXPENSES
The carrying amounts approximate fair values because of the short maturities of
these instruments.
(B) MARKETABLE SECURITIES AND INVESTMENT SECURITIES
The fair value of the marketable securities and investment securities are
principally based on quoted market price.
(C) INSTALLMENT LOANS
The fair value of installment loans is based on the present value of future cash
flows using the current rate for similar instruments of comparable maturity.
(D) LONG-TERM INDEBTEDNESS
The fair value of each of the long-term indebtedness instruments is based on the
quoted price in the most active market or the present value of future cash flows
associated with each instrument discounted using the current borrowing rate for
similar instruments of comparable maturity.
(E) INTEREST RATE SWAP AGREEMENTS
The fair value of interest rate swap agreements is estimated by obtaining quotes
from brokers.
(F) FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY OPTIONS
The fair value of foreign currency contracts and foreign currency options are
estimated by obtaining quotes from brokers.
The estimated fair value of the financial instruments as of September 30, 2004,
2005 and March 31, 2005 is summarized as follows:
Millions of Yen
--------------------------------------------------------------------------------
September 30, 2004 September 30, 2005 March 31, 2005
-------------------------- -------------------------- --------------------------
Carrying Estimated Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Amount Fair Value
------------------------------------------------------------------------------------------------------------------
Marketable securities and
Investment securities 71,965 71,965 32,460 32,460 31,292 31,292
Installment loans 51,031 51,176 52,103 52,202 50,131 50,292
Long-term indebtedness (227,452) (228,396) (224,444) (224,312) (226,567) (228,839)
Interest rate swap agreements, net 1,864 1,864 1,283 1,283 1,683 1,683
Foreign currency contracts, net 253 253 (917) (917) 181 181
Foreign currency options, net (332) (332) 59 59 (813) (813)
------------------------------------------------------------------------------------------------------------------
15
Limitations
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
9. SEGMENT INFORMATION
The operating segments presented below are the segments of Ricoh for which
separate financial information is available and for which a measure of profit or
loss is evaluated regularly by Ricoh's management in deciding how to allocate
resources and in assessing performance. The accounting policies of the segments
are substantially the same as those described in the summary of significant
accounting policies, as discussed in Note 1.
Ricoh's operating segments are comprised of Office Solution, including copiers
and related supplies, communications and information systems, Industry,
including thermal media and semiconductors, and Other, including optical discs
and digital cameras.
Beginning from this financial period, our business segment is changed into three
categories as mentioned above. It was previously represented as Office Equipment
and Other. Under the 15th medium-term management plan, which has been started
from the current fiscal period, we designated three certain areas for corporate
growth such as "printing", "emerging market" and "industrial sector" in order to
enhance our corporate competitiveness by creating new values for customers in
respective area, and cost-effective corporate management. This segment change
contemplates enhancing further sense of unity in defining the achievements of
operating segments with corporate management.
The following tables present certain information regarding Ricoh's operating
segments and operations by geographic areas for the half years ended September
30, 2004, 2005 and for the year ended March 31, 2005.
16
(A) OPERATING SEGMENT INFORMATION
Millions of Yen
----------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
-------------------------------------------------------------------------------------------------------------------
Sales-
Office Solution Business 734,662 786,281 1,531,428
Industry Business 60,026 59,703 121,914
Other Business 82,581 78,280 163,272
Intersegment transaction (1,266) (1,244) (2,506)
-------------------------------------------------------------------------------------------------------------------
Consolidated 876,003 923,020 1,814,108
-------------------------------------------------------------------------------------------------------------------
Operating Expenses-
Office Solution Business 650,741 695,849 1,335,059
Industry Business 59,245 59,874 121,872
Other Business 83,820 76,152 167,431
Intersegment transaction (1,268) (1,279) (2,475)
Unallocated expense 25,707 25,517 56,715
-------------------------------------------------------------------------------------------------------------------
Consolidated 818,245 856,113 1,678,602
-------------------------------------------------------------------------------------------------------------------
Operating Income-
Office Solution Business 83,921 90,432 196,369
Industry Business 781 (171) 42
Other Business (1,239) 2,128 (4,159)
Elimination 2 35 (31)
Unallocated expense (25,707) (25,517) (56,715)
-------------------------------------------------------------------------------------------------------------------
Consolidated 57,758 66,907 135,506
-------------------------------------------------------------------------------------------------------------------
Other, net 2,306 2,500 (123)
-------------------------------------------------------------------------------------------------------------------
Income before Income Taxes, Minority
Interests and Equity in Earnings of
Affiliates 60,064 69,407 135,383
===================================================================================================================
17
Millions of Yen
----------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
-------------------------------------------------------------------------------------------------------------------
Total Assets-
Office Solution Business 1,196,759 1,394,012 1,358,136
Industry Business 78,910 73,231 72,406
Other Business 130,783 115,397 125,278
Elimination (9,185) (7,536) (10,174)
Corporate assets 480,188 373,483 408,023
-------------------------------------------------------------------------------------------------------------------
Consolidated 1,877,455 1,948,587 1,953,669
-------------------------------------------------------------------------------------------------------------------
Expenditures for segment assets-
Office Solution Business 32,245 51,456 70,638
Industry Business 3,603 4,573 8,509
Other Business 1,240 1,455 3,451
Corporate assets 1,149 684 2,103
-------------------------------------------------------------------------------------------------------------------
Consolidated 38,237 58,168 84,701
-------------------------------------------------------------------------------------------------------------------
Depreciation-
Office Solution Business 25,076 26,320 53,439
Industry Business 3,425 3,150 7,450
Other Business 1,169 1,104 2,635
Corporate assets 1,371 531 3,272
-------------------------------------------------------------------------------------------------------------------
Consolidated 31,041 31,105 66,796
===================================================================================================================
Unallocated expense represents expenses for corporate headquarters.
Intersegment sales are not separated by operating segment because they are
immaterial.
Corporate assets consist primarily of cash and cash equivalents and marketable
securities maintained for general corporate purposes.
18
(B) GEOGRAPHIC INFORMATION
Sales which are attributed to countries based on location of customers and
long-lived assets for the half years ended September 30, 2004, 2005 and for the
year ended March 31, 2005 are as follows:
Millions of Yen
----------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
-------------------------------------------------------------------------------------------------------------------
Sales-
Japan 469,176 480,917 972,975
The Americas 161,330 183,915 325,597
Europe 192,987 201,399 408,906
Other 52,510 56,789 106,630
-------------------------------------------------------------------------------------------------------------------
Consolidated 876,003 923,020 1,814,108
-------------------------------------------------------------------------------------------------------------------
Long-Lived Assets-
Japan 246,166 313,346 298,192
The Americas 64,964 69,318 65,634
Europe 30,728 36,636 34,844
Other 9,934 11,635 10,539
-------------------------------------------------------------------------------------------------------------------
Consolidated 351,792 430,935 409,209
===================================================================================================================
Ricoh's long-lived assets consist property, plant and equipment, goodwill, other
intangible assets and lease deposits and other.
(C) ADDITIONAL INFORMATION
The following information shows net sales and operating income recognized by
geographic origin for the half years ended September 30, 2004, 2005 and for the
year ended March 31, 2005. In addition to the disclosure requirements under SFAS
No.131, "Disclosure about Segments of an Enterprise and Related Information,"
Ricoh discloses this information as supplemental information in light of the
disclosure requirements of the Japanese Securities and Exchange Law, which a
Japanese public company is subject to.
19
Millions of Yen
----------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
-------------------------------------------------------------------------------------------------------------------
Sales-
Japan
External customers 481,473 495,618 994,499
Intersegment 189,951 204,313 392,216
-------------------------------------------------------------------------------------------------------------------
Total 671,424 699,931 1,386,715
-------------------------------------------------------------------------------------------------------------------
The Americas
External customers 159,184 182,319 322,975
Intersegment 4,814 1,753 7,486
-------------------------------------------------------------------------------------------------------------------
Total 163,998 184,072 330,461
-------------------------------------------------------------------------------------------------------------------
Europe
External customers 193,941 199,569 412,333
Intersegment 1,789 2,446 3,310
-------------------------------------------------------------------------------------------------------------------
Total 195,730 202,015 415,643
-------------------------------------------------------------------------------------------------------------------
Other
External customers 41,405 45,514 84,301
Intersegment 43,818 48,019 89,647
-------------------------------------------------------------------------------------------------------------------
Total 85,223 93,533 173,948
-------------------------------------------------------------------------------------------------------------------
Elimination of intersegment sales (240,372) (256,531) (492,659)
-------------------------------------------------------------------------------------------------------------------
Consolidated 876,003 923,020 1,814,108
-------------------------------------------------------------------------------------------------------------------
Operating Expenses-
Japan 631,732 652,681 1,298,640
The Americas 157,865 177,607 316,651
Europe 184,768 192,048 391,271
Other 79,788 86,934 162,042
-------------------------------------------------------------------------------------------------------------------
Elimination of intersegment sales (235,908) (253,157) (490,002)
-------------------------------------------------------------------------------------------------------------------
Consolidated 818,245 856,113 1,678,602
-------------------------------------------------------------------------------------------------------------------
Operating Income-
Japan 39,692 47,250 88,075
The Americas 6,133 6,465 13,810
Europe 10,962 9,967 24,372
Other 5,435 6,599 11,906
-------------------------------------------------------------------------------------------------------------------
Elimination of intersegment profit (4,464) (3,374) (2,657)
-------------------------------------------------------------------------------------------------------------------
Consolidated 57,758 66,907 135,506
-------------------------------------------------------------------------------------------------------------------
Other, net 2,306 2,500 (123)
-------------------------------------------------------------------------------------------------------------------
Income before Income Taxes, Minority
Interests and Equity in Earnings of
Affiliates 60,064 69,407 135,383
-------------------------------------------------------------------------------------------------------------------
Total Assets-
Japan 1,069,762 1,186,255 1,187,190
The Americas 205,198 235,714 206,979
Europe 206,108 226,006 228,568
Other 60,406 73,123 66,319
Elimination (144,207) (145,994) (143,410)
Corporate assets 480,188 373,483 408,023
-------------------------------------------------------------------------------------------------------------------
Consolidated 1,877,455 1,948,587 1,953,669
===================================================================================================================
20
Intersegment sales between geographic areas are made at cost plus profit.
Operating income by geographic area is sales less expense related to the area's
operating revenue.
No single customer accounted for 10% or more of the total revenues for the half
years ended September 30, 2004, 2005 and for the year ended March 31, 2005.
10. SUPPLEMENTARY INFORMATION TO THE STATEMENT OF INCOME
The following amounts were charged to selling, general and administrative
expenses for the half years ended September 30, 2004, 2005 and for the year
ended March 31, 2005:
Millions of Yen
----------------------------------------------------------
Half year Half year Year
ended ended ended
September 30, September 30, March 31,
2004 2005 2005
-----------------------------------------------------------------------------------------
Research and development costs 53,413 54,962 110,478
Advertising costs 8,007 7,802 16,442
Shipping and handling costs 6,783 7,354 14,043
-----------------------------------------------------------------------------------------
21