UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20 - F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 2009
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of event requiring this shell company report
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For the transition period from to
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Commission file number 2 - 68279
KABUSHIKI KAISHA RICOH
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(Exact name of Registrant as specified in its charter)
RICOH COMPANY, LTD.
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(Translation of Registrant's name into English)
Japan
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(Jurisdiction of incorporation or organization)
13-1, Ginza 8-chome, Chuo-ku, Tokyo 104-8222, Japan
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(Address of principal executive offices)
Kunihito Minakawa, (T)+81-3-6278-5241, (F)+81-3-3543-9086
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13-1,Ginza 8-chome, Chuo-ku, Tokyo 104-8222, Japan
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(Name, Telephone, E-mail and/or Facsimile number and Address of
Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the
Act.
Name of each exchange
Title of each class on which registered
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None None
Securities registered or to be registered pursuant to Section 12(g) of the
Act.
None
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(Title of Class)
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act.
Common Stock*
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(Title of Class)
* 1,008,926 American Depositary Shares evidenced by American Depositary
Receipts, each American Depositary Share representing 5 shares of Common
Stock of Ricoh Company, Ltd.
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
Common stock outstanding as of March 31, 2009: 725,679,726shares (excluding
19,232,352 shares of Treasury Stock)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes [X] No [ ].
If this report is an annual or transition report, indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Yes [ ] No [X].
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ].
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted
pursuant to Rule 405 of Regulation S-T ((S)232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).
Yes [ ] No [ ].
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ].
Indicate by check mark which basis of accounting the registrant has used to
prepare the financial statements included in this filing:
U.S. GAAP [X] International Financial Reporting Standards as issued by
the International Accounting Standards Board [ ] Other [ ].
If "Other" has been checked in response to the previous question, indicate
by check mark which financial statement item the registrant has elected to
follow.
Item 17 [ ] Item 18 [ ].
If this is an annual report, indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X].
Defined Terms, Conventions and Presentation of Financial Information
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On June 25, 2009, the noon buying rate for cable transfers in New York
City as certified for customs purposes by the Federal Reserve Board for the
Japanese Yen to the U.S. Dollar was Yen 96.21 = U.S.$1.00.
In this document, the term "Company" refers to Ricoh Company, Ltd.,
the registrant, and "Ricoh" refers to the Company and its consolidated
subsidiaries, unless the context otherwise indicates.
Ricoh's fiscal year end is March 31. In this document "fiscal year
2009" refers to Ricoh's fiscal year ended March 31, 2009, and other fiscal years
of Ricoh are referred to in a corresponding manner.
As used in this annual report, "U.S. GAAP" means U.S. generally
accepted accounting principles.
Cautionary Statement With Respect to Forward-Looking Statements
---------------------------------------------------------------
Statements made in this annual report with respect to Ricoh's current
plans, estimates, strategies and beliefs and other statements that are not
historical facts are or may be deemed to be forward-looking statements, within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, about the future performance of Ricoh. These
forward-looking statements are made in reliance upon the protections provided by
such acts for forward-looking statements. Forward-looking statements include but
are not limited to those using words such as "believe," "expect," "plans,"
"strategy," "prospects," "forecast," "estimate," "project," "anticipate," "may"
or "might" and words of similar meaning in connection with a discussion of
future operations or financial performance. From time to time, oral or written
forward-looking statements may also be included in other materials released to
the public. These statements are based on management's assumptions and beliefs
in light of the information currently available to it. Ricoh cautions you that a
number of important risks and uncertainties could cause actual results to differ
materially from those discussed in the forward-looking statements, and therefore
you should not place undue reliance on them. You also should not rely on any
obligation of Ricoh to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Ricoh disclaims any
such obligation. Risks and uncertainties that might affect Ricoh include, but
are not limited to (i) general economic conditions in Ricoh's markets,
particularly levels of consumer spending; (ii) exchange rates, particularly
between the Japanese Yen and the U.S. Dollar, the Euro, and other currencies in
which Ricoh makes significant sales or in which Ricoh's assets and liabilities
are denominated; (iii) Ricoh's ability to continue to design and develop
products and services, and win acceptance of its products and services which are
offered in highly competitive markets characterized by continual introduction of
new products, rapid development in new technology, and consumer preferences that
are subjective and likely to change; (iv) Ricoh's ability to successfully
implement strategies for its office equipment business, such as further
globalization of its operations to increase account sales to corporate clients,
reinforcement of the color printer line-up to meet growing demand for color
products among its office users, implementation of optimal printing solutions
for customers' digitally networked offices and enhancement of
printing capabilities centered on multi-functional printers ("MFPs"), and
implementation of optimal localization of manufacturing operations so that such
operations are closer to the customer; (v) Ricoh's ability to continuously
devote sufficient resources to research and development, and capital
expenditures for digital and networking equipment, such as digital plain paper
copiers ("PPCs"), MFPs, laser printers, GELJET printers and production printing
products; (vi) the success of Ricoh's alliances with various computer
manufacturers which Ricoh may engage in alliances with in the future; and (vii)
the outcome of contingencies.
Important information regarding risks and uncertainties is also set
forth elsewhere in this annual report, including in "Risk Factors" included in
"Item 3. Key Information," "Item 4. Information on the Company," "Item 5.
Operating and Financial Review and Prospects" and "Item 11. Quantitative and
Qualitative Disclosures About Market Risk."
TABLE OF CONTENTS
PART I
Item 1. Identity of Directors, Senior Management and Advisers.......... 1
Item 2. Offer Statistics and Expected Timetable........................ 1
Item 3. Key Information................................................ 1
Item 4. Information on the Company..................................... 10
Item 4A. Unresolved Staff Comments...................................... 32
Item 5. Operating and Financial Review and Prospects................... 33
Item 6. Directors, Senior Management and Employees..................... 73
Item 7. Major Shareholders and Related Party Transactions.............. 93
Item 8. Financial Information.......................................... 94
Item 9. The Offer and Listing.......................................... 94
Item 10. Additional Information......................................... 97
Item 11. Quantitative and Qualitative Disclosures About Market Risk..... 111
Item 12. Description of Securities Other Than Equity Securities......... 114
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies................ 114
Item 14. Material Modifications to the Rights of Security Holders
and Use of Proceeds............................................ 114
Item 15. Controls and Procedures........................................ 115
Item 16. [RESERVED] .................................................... 116
Item 16A. Audit Committee Financial Expert............................... 116
Item 16B. Code of Ethics................................................. 117
Item 16C. Principal Accountant Fees and Services......................... 117
Item 16D. Exemptions from the Listing Standards for Audit Committees..... 118
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers..................................................... 119
Item 16F. Change in Registrant's Certifying Accountant................... 119
Item 16G. Corporate Governance........................................... 119
PART III
Item 17. Financial Statements........................................... 119
Item 18. Financial Statements........................................... 119
Item 19. Exhibits....................................................... 119
Item 1. Identity of Directors, Senior Management and Advisers
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Not applicable.
Item 2. Offer Statistics and Expected Timetable
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Not applicable.
Item 3. Key Information
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A. Selected Financial Data.
The following selected consolidated financial data have been derived
from the audited consolidated financial statements of Ricoh prepared in
accordance with U.S. generally accepted accounting principles as of each of the
dates and for each of the periods indicated below. This information should be
read in conjunction with Ricoh's audited consolidated balance sheets as of March
31, 2008 and 2009, the related consolidated statements of income, shareholders'
investment and cash flows for the three years ended March 31, 2007, 2008 and
2009 and the notes thereto that appear elsewhere in this annual report.
Millions of Yen except per share amounts and number
of shares Year ended March 31,
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2005 2006 2007 2008 2009
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INCOME STATEMENT DATA:
Net sales: Yen 1,807,406 Yen 1,909,238 Yen 2,068,925 Yen 2,219,989 Yen 2,091,696
Operating income 131,109 148,584 174,380 181,506 74,536
Income from continuing operations 80,537 95,022 106,224 106,463 6,530
Net income 83,143 97,057 111,724 106,463 6,530
PER AMERICAN DEPOSITARY SHARE:(1)
Net income (basic) 563.20 661.65 765.50 730.20 45.10
Net income (diluted) 563.20 661.65 759.45 710.75 43.75
BALANCE SHEET DATA:
Total assets 1,953,669 2,041,183 2,243,406 2,214,368 2,513,495
Shareholders' investment 862,998 960,245 1,070,913 1,080,196 975,373
Common stock 135,364 135,364 135,364 135,364 135,364
Weighted average number of shares outstanding 738,160,042 733,434,414 729,744,656 729,010,475 723,924,525
Cash dividends declared
Per American Depositary Share: (1), (2)
Interim 50.00 60.00 65.00 80.00 90.00
($0.49) ($0.50) ($0.56) ($0.72) ($0.96)
Year-end 50.00 60.00 75.00 85.00 75.00
($0.45) ($0.52) ($0.61) ($0.80) ($0.78)
-1-
Millions of Yen except per share amounts and number
of shares Year ended March 31,
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2005 2006 2007 2008 2009
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At year-end:
Cash and cash equivalents 186,857 187,055 255,737 170,607 258,484
Capital investments 84,699 102,049 85,800 85,215 96,958
Long-term indebtedness,
excluding current installment 226,567 195,626 236,801 225,930 509,403
Notes:
(1) Each American Depositary Share represents five shares of Ricoh
Common Stock.
(2) Cash dividends declared per American Depositary Share for any
given fiscal year consist of interim dividends paid during the
fiscal year and year-end dividends to be paid after the fiscal
year-end for such fiscal year, which are not equal to the
dividends paid during such fiscal year, set forth under "Per
American Depositary Share, each representing 5 shares of common
stock - Cash dividends paid per share" in the Consolidated
Statements of Income appearing elsewhere in this annual report.
In the preceding table, cash dividends declared in U.S. Dollars are
based on the exchange rates at each respective payment date, using the noon
buying rates for cable transfer in Japanese Yen in New York City as certified
for customs purposes by the Federal Reserve Board.
On June 25, 2009, the noon buying rate for cable transfers in New York
City as certified for customs purposes by the Federal Reserve Board for the
Japanese Yen to the U.S. Dollar was Yen 96.21 = U.S.$1.00.
The following table sets forth the exchange rates for the Japanese Yen
and the U.S. Dollar based on the noon buying rate for cable transfers in
Japanese Yen in New York City as certified for customs purposes by the Federal
Reserve Board during the previous six months and prior five fiscal years:
December January February March April May
2008 2009 2009 2009 2009 2009
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High 87.84 87.80 89.09 93.85 96.49 94.45
Low 93.71 94.20 98.55 99.34 100.71 99.24
Year ended March 31,
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2005 2006 2007 2008 2009
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Year-end 107.22 117.48 117.56 99.85 99.15
Average* 107.28 104.64 116.55 113.61 100.85
High 102.26 104.41 110.07 96.88 87.80
Low 114.30 120.93 121.81 124.09 110.48
-2-
* The average Japanese Yen exchange rates represent average noon buying rate
on the last business day of each month during the respective period.
B. Capitalization and Indebtedness.
Not applicable.
C. Reasons for the Offer and Use of Proceeds.
Not applicable.
D. Risk Factors.
Ricoh is a global manufacturer of office equipment and conducts
business on a global scale. As such, Ricoh is exposed to various risks which
include the risks listed below. Although certain risks that may affect Ricoh's
businesses are listed in this section, this list is not exhaustive. Ricoh's
business may in the future also be affected by other risks that are currently
unknown or that are not currently considered significant or material. In
addition, this section contains forward-looking statements that are subject to
the "Cautionary Statement with Respect to Forward-Looking Statements" appearing
elsewhere in this annual report.
RICOH'S SUCCESS WILL DEPEND ON ITS ABILITY TO RESPOND TO RAPID TECHNOLOGICAL
CHANGES IN THE DOCUMENT IMAGING AND MANAGEMENT INDUSTRY
The document imaging and management industry includes products such as
copiers, printers, facsimile machines and scanners. The technology used in this
industry changes rapidly and products in this industry will often require
frequent and timely product enhancements or have a short product life cycle.
Most of Ricoh's products are a part of this industry and as such Ricoh's success
will depend on its ability to respond to such technological changes in the
industry. To remain competitive in this industry, Ricoh invests a significant
amount of resources and capital every year in research and development
activities. Despite this investment, the process of developing new products or
technologies is inherently complex and uncertain and there are a number of risks
that Ricoh is subject to, including the following:
. No assurances can be made that Ricoh will successfully anticipate
whether its products or technologies will satisfy its customers' needs
or gain market acceptance;
. No assurances can be made that the introduction of more advanced
products that also possess the capabilities of existing products will
not adversely affect the sales performance of each such product;
. No assurances can be made that Ricoh will be able to procure raw
materials and parts necessary for new products or technologies from
its suppliers at competitive prices;
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. No assurances can be made that Ricoh will be able to successfully
manage the distribution system for its new products to eliminate the
risk of loss resulting from a failure to take advantage of market
opportunities;
. No assurances can be made that Ricoh will succeed in marketing any
newly developed product or technology; and
. No assurances can be given that Ricoh will be able to respond
adequately to changes in the industry.
Ricoh's failure to respond to any risks associated with this industry,
including those described above, may reduce Ricoh's future growth and
profitability and may adversely affect Ricoh's financial results and condition.
In addition to the above general risks, Ricoh is exposed to the
following specific risks relating to the document imaging and management
industry:
Digital Technology
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Among the various technologies used in the document imaging and
management industry, Ricoh believes the successful development of digital
technology is one of the most essential factors in attaining a competitive
advantage. Ricoh currently is a leader in digital technology and believes that
the importance of digital technology used in office equipment, including
copiers, printers, facsimiles and scanners, will continue to grow in the future.
While most of Ricoh's PPCs sold in Japan and overseas are already digital, Ricoh
believes that the digital technology used in connection with digital copiers and
other digital products will continue to develop and that competition with
respect to digital products will intensify. There is no assurance that Ricoh
will continue to be in the forefront of digital technology despite its
commitment to invest in research and development activities in this area.
Failure of Ricoh to adequately develop digital technology may adversely affect
Ricoh's financial results and condition.
Multi-Functional Equipment
--------------------------
Ricoh believes that the document imaging and management industry is
moving towards a multi-functional office environment where various office
equipment (including copiers, facsimile machines, printers, scanners and
personal computers) become more interdependent on each other due to the
increasing use of digital technology and initiatives taken by many offices to
eventually become a "paperless office." As a result, certain existing office
equipment may either be consolidated into multi-functional equipment or may be
linked together electronically to perform various office functions. Although
Ricoh already manufactures certain multi-functional equipment, as a result of
this trend towards multi-functional equipment, some of Ricoh's products may
become obsolete while other products may require substantial product
enhancements, requiring technologies currently unavailable within Ricoh. No
assurances can be made that Ricoh will be able to successfully adjust to such
changes.
-4-
RICOH MUST SUCCESSFULLY OPERATE IN HIGHLY COMPETITIVE MARKETS
The document imaging and management industry, including the copier
industry, is intensely competitive. Ricoh expects to face increased competition
in the various markets in which it operates. Currently, Ricoh's competitors
include other large manufacturers and distributors of office equipment. In
addition, as digital and other new technology develops and as new office
equipment products using these newly developed technologies gain increased
market acceptance, Ricoh may find itself competing with new competitors that
develop such new technologies, including computer software and hardware
manufacturers and distributors. Accordingly, it is possible that new competitors
or alliances among existing and new competitors may emerge and rapidly acquire
significant market share. While Ricoh believes it is a leading manufacturer and
distributor in the document imaging and management industry and it intends to
maintain its position, no assurances can be made that it will continue to
compete effectively in the future. Pricing pressures or loss of potential
customers resulting from Ricoh's failure to compete effectively may adversely
affect Ricoh's financial results and condition.
RICOH IS SUBJECT TO THE RISKS OF INTERNATIONAL OPERATIONS AND THE RISKS OF
OVERSEAS EXPANSION
A substantial portion of Ricoh's manufacturing and marketing activity
is conducted outside of Japan, including in the United States, Europe, and in
developing and emerging markets such as China. There are a number of risks
inherent in doing business in such overseas markets, including the following:
. unfavorable political or economical factors;
. fluctuations in foreign currency exchange rates;
. potentially adverse tax consequences;
. unexpected legal or regulatory changes;
. lack of sufficient protection for intellectual property rights;
. difficulties in recruiting and retaining personnel, and managing
international operations; and
. less developed infrastructure.
Ricoh's inability to manage successfully the risks inherent in its
international activities could adversely affect its business, financial
condition and operating results. In addition, while Ricoh plans to continue to
expand its business worldwide and increase overseas sales, because of the risks
associated with conducting an international operation (including the risks
listed above), there can be no assurances that Ricoh's overseas expansion will
be successful or have a positive effect on Ricoh's financial results and
condition.
ECONOMIC TRENDS IN RICOH'S MAJOR MARKETS MAY ADVERSELY AFFECT RICOH'S SALES
Demand for Ricoh's products is affected by cyclical changes in the
economies of Ricoh's major markets, including Japan, the United States and
Europe. Economic
-5-
downturns and declines in consumption in Ricoh's major markets may adversely
affect Ricoh's financial results and condition.
FOREIGN EXCHANGE FLUCTUATIONS AFFECT RICOH'S RESULTS
Local currency-denominated financial results in each of the Company's
subsidiaries around the world are translated into Japanese Yen by applying the
average market rate during each financial period and recorded on Ricoh's
consolidated statements of income. Local currency-denominated assets and
liabilities are translated into Japanese Yen by applying the market rate at the
end of each financial period and recorded on Ricoh's consolidated balance
sheets. Accordingly, the financial results, assets and liabilities are subject
to foreign exchange fluctuations.
In addition, operating profits and losses are highly sensitive to the
fluctuations in the value of the Japanese Yen because the high volume of Ricoh's
production and sales activities in the Americas, Europe and Other, such as
China, results in a large proportion of revenues and costs denominated in local
currencies. Although Ricoh engages in hedging transactions such as forward
contracts with several financial institutions having credit ratings satisfactory
to Ricoh to minimize the negative effects of short-term fluctuations in foreign
exchange rates among major currencies such as the U.S. Dollar, the Euro and
Japanese Yen, mid-to-long-term volatile changes in the exchange rate levels make
it difficult for Ricoh to execute planned procurement, production, logistics,
and sales activities and may adversely affect Ricoh's financial results and
condition.
CRUDE OIL PRICE FLUCTUATIONS AFFECT RICOH'S RESULTS
Many of the parts or materials used in manufacturing Ricoh's products
are made from oil. If the price of crude oil rises, the purchase price of such
product parts or materials may increase as well. Furthermore, a rise in the
price of crude oil may lead to an increase in shipping and handling costs due in
part to a rise in the cost of fuel and the cost of utilities. Ricoh may not be
able to pass these incremental costs onto the sales price of its products. Such
fluctuations in crude oil prices may therefore adversely affect Ricoh's
financial position and results of operations.
RICOH IS SUBJECT TO GOVERNMENT REGULATION THAT CAN LIMIT ITS ACTIVITIES OR
INCREASE ITS COST OF OPERATIONS
Ricoh is subject to various governmental regulations and approval
procedures in the countries in which it operates. For example, Ricoh may be
required to obtain approvals for its business and investment plans, be subject
to export regulations and tariffs, as well as rules and regulations relating to
commerce, antitrust, patent, consumer and business taxation, exchange control,
and environmental and recycling laws. Ricoh has established a Corporate Social
Responsibility Office to heighten awareness of the importance of corporate
social responsibility. Through this office, Ricoh involves its employees in
various activities designed to ensure compliance with applicable regulations as
part of its overall risk management and compliance program. However, if Ricoh is
unable to comply with any of these regulations or fails to obtain the requisite
approvals,
-6-
Ricoh's activities in such countries may be restricted. In addition, even if
Ricoh is able to comply with these regulations, compliance can result in
increased costs. In either event, Ricoh's financial results and condition may be
adversely affected.
RICOH IS SUBJECT TO INTERNAL CONTROL EVALUATIONS AND ATTESTATION OVER FINANCIAL
REPORTING UNDER THE SARBANES-OXLEY ACT OF 2002 OF THE UNITED STATES AND THE
FINANCIAL INSTRUMENTS AND EXCHANGE ACT OF JAPAN
The United States Securities and Exchange Commission (the "SEC"), as
required by Section 404 of the Sarbanes-Oxley Act of 2002 of the United States,
adopted rules requiring every company that files reports with the SEC to include
a management report on such company's internal control over financial reporting
in its annual report. In addition, the company's independent registered public
accounting firm must publicly attest to the effectiveness of the company's
internal control over financial reporting. Furthermore, the Financial
Instruments and Exchange Act of Japan requires Japanese companies whose shares
are listed on the Japanese stock exchanges to submit a report which evaluates
internal control over financial reporting to the commissioner of the financial
bureau of Japan. Ongoing compliance with these requirements is complex, costly
and time-consuming. If Ricoh were to fail to maintain effective internal control
over financial reporting, Ricoh's management were to fail to assess on a timely
basis the adequacy of such internal control, or Ricoh's independent registered
public accounting firm were to fail to attest on a timely basis to the
effectiveness of such internal control or issue a qualified opinion, Ricoh could
be subject to regulatory sanctions or could face adverse reactions in the
financial markets due to loss of investor confidence.
RICOH'S BUSINESS DEPENDS ON PROTECTING ITS INTELLECTUAL PROPERTY RIGHTS
Ricoh owns or licenses a number of intellectual property rights in the
field of office equipment automation and, when Ricoh believes it is necessary or
desirable, obtains additional licenses for the use of other parties'
intellectual property rights. If Ricoh fails to protect, maintain or obtain such
rights, its performance and ability to compete may be adversely affected. Ricoh
has a program in place under which company employees are compensated for any
valuable intellectual property rights arising out of any inventions developed by
them during the course of their employment with Ricoh. While unlikely,
management believes that there could arise instances in the future where Ricoh
may become the subject of legal actions or proceedings where claims alleging
inadequate compensation are asserted by company employees.
RICOH IS DEPENDENT ON SECURING AND RETAINING SPECIALLY SKILLED PERSONNEL
Ricoh believes that it can continue to remain competitive by securing
and retaining additional personnel who are highly skilled in the fields of
management and information technology. However, the number of skilled personnel
is limited and the competition for attracting and retaining such personnel is
intense, particularly in the information technology industry. Securing and
retaining skilled personnel in the information technology industry is especially
important for Ricoh to compete effectively with its competitors as expectations
and market standards for office equipment become
-7-
more technologically advanced. Ricoh cannot assure that it will be able to
successfully secure and retain additional skilled personnel.
RICOH MAY BE ADVERSELY AFFECTED BY ITS EMPLOYEE BENEFIT OBLIGATIONS
With respect to its employee benefit obligations and plan assets,
Ricoh accrues the cost of such benefits based on applicable accounting policies
and funds such benefits in accordance with governmental regulations. Currently,
there is no immediate and significant funding requirement; however, if returns
from investment assets continue to decrease and/or turn to be negative due to
market conditions, such as the fluctuations in the stock or bond markets,
additional funding and accruals may be required. Such additional funding and
accruals may adversely affect Ricoh's financial position and results of
operations.
RICOH'S OPERATIONS ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS
Ricoh's operations are subject to many environmental laws and
regulations governing, among other things, air emissions, wastewater discharges,
the use and handling of hazardous substances, waste disposal, product recycling,
and soil and ground-water contamination. Ricoh faces risks of environmental
liability in our current and historical manufacturing activities. Costs
associated with future additional environmental compliance or remediation
obligations could adversely affect Ricoh's business, operating results, and
financial condition.
RISKS ASSOCIATED WITH RICOH'S EQUIPMENT FINANCING BUSINESS MAY ADVERSELY AFFECT
RICOH'S FINANCIAL CONDITION
Ricoh provides financing to some of its customers in connection with
its equipment sales and leases. Ricoh evaluates the creditworthiness and the
amount of credit extended to a customer prior to the financing arrangement and
during the financing term on a regular basis. Depending on such evaluations,
Ricoh makes adjustments to such extensions of credit as it deems necessary to
minimize any potential risks of concentrating credit risk or non-payment of
credit. Despite the application of these monitoring procedures, no assurances
can be made that Ricoh will be able to fully collect on such extensions of
credit due to unforeseeable defaults by its customers.
In addition, these financing arrangements that Ricoh enters into with
its customers result in long-term receivables bearing a fixed rate of interest.
However, Ricoh finances these financing arrangements primarily with short-term
borrowings subject to a variable interest rate. Although Ricoh engages in
hedging activities, Ricoh is not able to fully hedge this interest rate
mismatch.
If Ricoh is unable to successfully manage these risks associated with
its equipment financing business, Ricoh's financial results and condition may be
adversely affected.
-8-
RICOH MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT COULD SIGNIFICANTLY AFFECT
ITS FINANCIAL CONDITION
Ricoh may be held responsible for any defects that occur with respect
to its products and services. Based on the defect, Ricoh may be liable for
significant damages, which may adversely affect its financial results and
condition. Furthermore, as Ricoh increasingly provides products and services
utilizing sophisticated and complex technologies, such defects may occur more
frequently. Such potential increase in defects, which could result in an
increase in Ricoh's liability, may adversely affect its financial results and
condition.
In addition, negative publicity concerning these defects could make it
more difficult for Ricoh to attract and maintain customers to purchase Ricoh
products and services. As a result, Ricoh's financial results and condition may
be adversely affected.
RICOH'S PERFORMANCE CAN BE AFFECTED BY ALLIANCE WITH, AND STRATEGIC
INVESTMENTS IN, OTHER ENTITIES
Ricoh engages in alliances with other entities to create various
products and services to fulfill customer demands. Ricoh believes that an
alliance is an effective method for timely development of new technology and
products using management resources of both parties. However, if Ricoh's
interest differs from other parties' interests due to financial or other
reasons, Ricoh may be unable to maintain the alliance. Ricoh also makes
strategic investments to acquire interests in companies that Ricoh believes
would support existing businesses and/or lead to new businesses. Such strategic
investments may not necessarily lead to the expected outcome or performance and
may result in increased time and expenses being incurred due to the integration
of businesses, technologies, products and/or personnel necessitated by such
investments. Accordingly, these types of management decisions may have a
significant impact on the future performance of Ricoh. Failure to maintain an
on-going alliance, establish a necessary alliance or make a strategic investment
to acquire an interest in a company may adversely affect Ricoh's future
financial position and results of operations.
INADVERTENT OR ACCIDENTAL LEAKAGE OR DISCLOSURE OF CONFIDENTIAL OR SENSITIVE
INFORMATION MAY ADVERSELY AFFECT RICOH'S OPERATIONS
Ricoh obtains confidential or sensitive information from various
sources, including its customers, in the ordinary course of its business. Ricoh
also holds trade secrets regarding its technologies and other confidential or
sensitive information relating to marketing. To prevent unauthorized access
and/or fraudulent leakage or disclosure of such confidential or sensitive
information, Ricoh has implemented an internal management system, which includes
measures to improve security and access to its internal database, as well as
employee training programs to educate its employees with respect to compliance
with applicable regulations relating to information security and data access.
Despite Ricoh's efforts, however, confidential or sensitive information may be
inadvertently or accidentally leaked or disclosed and any such leakage or
disclosure may result in Ricoh incurring damages, which may adversely affect
Ricoh's reputation.
-9-
In addition, Ricoh may incur significant expenses for defending any lawsuits
that may arise from such claims. Furthermore, the leakage or disclosure of
Ricoh's confidential or sensitive marketing and technological information to a
third party may adversely affect Ricoh's financial results and condition.
RICOH MAY SUFFER LOSS AS A RESULT OF CATASTROPHIC DISASTER, INFORMATION
TECHNOLOGY PROBLEMS OR INFECTIOUS DISEASES
Several of Ricoh's manufacturing facilities in Japan could be subject
to a catastrophic loss caused by earthquakes as such facilities are located in
areas with above average seismic activity. If any of these facilities were to
experience a catastrophic loss, Ricoh could experience disruptions in its
operations and delays in its production and shipments. If such occurred, Ricoh
would likely record a decrease in revenue, and require large expenditures to
repair or replace the damaged facility, which is likely to affect Ricoh's
financial position and results of operations.
As Ricoh becomes increasingly dependent on information technology,
software and hardware defects, computer viruses, as well as internal database
problems (e.g., falsifications or disappearance of information relating to our
customers) pose a greater risk to its operations. Although Ricoh has taken
various precautionary measures, such as installing firewalls and anti-virus
software to detect and eliminate computer viruses, Ricoh may not be able to
completely prevent or mitigate the effects of such problems, which may affect
Ricoh's performance.
In addition, the Ricoh is continually expanding its worldwide
operations to set in place a global supply chain of its products and services so
that we can satisfy our local customer needs faster, more effectively and on a
regular basis. As Ricoh expands its operations worldwide, additional risks, such
as infectious diseases (e.g., a new strain of influenza) and epidemics, may
adversely affect Ricoh's operations and financial positions.
Item 4. Information on the Company
--------------------------
A. History and Development of the Company
The Company was incorporated as a joint stock corporation (kabushiki
kaisha) on February 6, 1936 in accordance with Japanese law under the name Riken
Kankoshi Co., Ltd. as a manufacturer and distributor of sensitized paper for use
in copiers. Since its incorporation, Ricoh has expanded its business into
related businesses in the office equipment field. It now manufactures and
markets copiers (such as PPCs), MFPs, laser printers, GELJET printers,
production printing products, facsimile machines, personal computers and
servers, network related software and other equipment, including semiconductors,
measuring equipment and cameras.
Historical Highlights
---------------------
February 1936 Riken Kankoshi Co., Ltd. is formed in Kita-kyushu to
manufacture and market sensitized paper.
-10-
March 1938 The Company's name is changed to Riken Optical Co., Ltd., and
starts manufacturing and selling optical devices and equipment.
May 1949 The Company lists its securities on the Tokyo and Osaka Stock
Exchanges.
April 1954 The Company establishes an optical device and equipment plant
in Ohmori, Ohta-ku, Tokyo (now known as the Ohmori plant).
May 1955 The Company begins manufacturing and selling desktop copiers.
May 1961 The Company establishes a sensitized paper plant in Ikeda,
Osaka (now known as the Ikeda plant).
October 1961 The Company lists its securities on the First Sections of the
Tokyo and Osaka Stock Exchanges.
June 1962 The Company starts operations of a paper plant in Numazu,
Shizuoka, which featured a fully-integrated sensitized paper
production system (now known as the Numazu plant).
December 1962 The Company establishes Ricoh of America, Inc. (a subsidiary,
later known as Ricoh Corporation and now known as Ricoh
Americas Corporation).
April 1963 The Company changes its corporate name to Ricoh Company, Ltd.
July 1967 The Company establishes Tohoku Ricoh Co., Ltd. (a subsidiary)
in Shibata-gun, Miyagi.
May 1971 The Company completes its manufacturing facility in Atsugi,
Kanagawa (now known as the Atsugi plant), to which it transfers
some of its office equipment production from the Ohmori plant.
June 1971 The Company establishes Ricoh Nederland B.V. (a subsidiary,
later known as Ricoh Europe B.V. and now known as Ricoh Europe
Holdings B.V.) in the Netherlands.
January 1973 The Company establishes Ricoh Electronics, Inc. (a subsidiary)
in the United States.
September 1973 The Company lists its securities on the Amsterdam Stock
Exchange(now known as Euronext Amsterdam; Ricoh no longer lists
its securities on this exchange).
December 1976 The Company forms Ricoh Credit Co., Ltd. (a subsidiary, now
known as Ricoh Leasing Co., Ltd.).
March 1977 The Company relocates its headquarters to Minato-ku, Tokyo.
July 1978 The Company lists its securities on the Frankfurt Stock
Exchange (Ricoh no longer lists its securities on this
exchange).
December 1978 The Company establishes Ricoh Business Machines, Ltd. (a
subsidiary, now known as Ricoh Hong Kong Ltd.).
March 1981 The Company builds the Ricoh Electronics Development Center at
the Ikeda plant to develop and manufacture electronic devices.
-11-
October 1981 The Company lists its securities on the Paris Stock
Exchange(now known as Euronext Paris).
May 1982 The Company establishes sensitized paper production facilities
in Fukui (now known as the Fukui plant), which takes over some
of the sensitized paper production from the Osaka plant (now
known as the Ikeda plant).
July 1982 The Company launches its information technology equipment
facility in Hatano, Kanagawa (now known as the Hatano plant).
December 1983 The Company establishes Ricoh UK Products Ltd. (a subsidiary).
October 1985 The Company builds a copier manufacturing plant in Gotenba,
Shizuoka (now known as the Gotenba plant).
April 1986 The Company opens a research and development ("R&D") facility
in Yokohama, Kanagawa (now known as the Ricoh Research and
Development Center) in commemoration of Ricoh's 50th
anniversary, to which it transfers some of its R&D operations
from the Ohmori plant.
April 1987 The Company establishes Ricoh Industrie France S.A. (a
subsidiary, now known as Ricoh Industrie France S.A.S.).
April 1989 The Company sets up an electronic devices facility in
Yashiro-cho, Kato-gun, Hyogo (now known as the Yashiro plant).
January 1991 The Company establishes Ricoh Asia Industry (Shenzhen) Ltd. (a
subsidiary) in China.
March 1995 Ricoh Corporation acquires Savin Corporation, an American
office equipment sales company.
September 1995 The Company acquires Gestetner Holdings PLC (now known as NRG
Group PLC), a British office equipment sales company.
January 1996 Ricoh Leasing Co., Ltd. lists its securities on the Second
Section of the Tokyo Stock Exchange (currently listed on the
First Section of the Tokyo Stock Exchange).
December 1996 The Company establishes Ricoh Asia Pacific Pte Ltd (a
subsidiary) in Singapore.
March 1997 The Company establishes Ricoh Silicon Valley, Inc. (now known
as Ricoh Innovations, Inc.) in the United States.
August 1999 Ricoh Hong Kong Ltd. acquires Inchcape NRG Ltd., a Hong
Kong-based office equipment sales company.
March 2000 Tohoku Ricoh Co., Ltd. lists its securities on the Second
Section of the Tokyo Stock Exchange (now a wholly-owned
subsidiary of the Company).
January 2001 Ricoh Corporation acquires Lanier Worldwide, Inc., an American
office equipment sales company.
October 2002 The Company establishes Ricoh China Co., Ltd. (a subsidiary).
-12-
April 2003 Tohoku Ricoh Co., Ltd. becomes a wholly-owned subsidiary of the
Company.
October 2004 The Company acquires Hitachi Printing Solutions, Ltd. (now
known as Ricoh Printing Systems, Ltd.) in Japan.
August 2005 The Company opens Ricoh Technology Center in Ebina, Kanagawa to
integrate its domestic R&D facilities and offices.
November 2005 The Company relocates its headquarters to Chuo-ku, Tokyo.
January 2007 Ricoh Europe B.V. acquires the European operations of Danka
Business Systems PLC.
June 2007 InfoPrint Solutions Company, LLC ("InfoPrint Solutions
Company"), a joint venture company of Ricoh and International
Business Machines Corporation ("IBM"), commences its
operations.
August 2008 Ricoh Elemex Corporation becomes a wholly-owned subsidiary of
the Company.
October 2008 Ricoh Americas Corporation acquires all of the outstanding
shares of IKON Office Solutions, Inc. ("IKON"), an American
office equipment sales and service company, for approximately
Yen 172.1 billion based on a cash offer of US$17.25 per share.
The Company's registered head office and executive office are as
follows:
Address Telephone number
---------------------------------------- ----------------
Registered Head office 3-6, Naka Magome 1-chome, Ohta-ku, Tokyo +81-3-3777-8111
143-8555, Japan
Executive office 13-1, Ginza 8-chome, Chuo-ku, Tokyo +81-3-6278-2111
104-8222, Japan
Principal Capital Investments
-----------------------------
Ricoh's capital investments for fiscal years 2007, 2008 and 2009 were
Yen 85.8 billion, Yen 85.2 billion and Yen 96.9 billion, respectively. Ricoh
directed a significant portion of its capital investments for fiscal years 2007,
2008 and 2009 towards digital and networking equipment, such as digital
PPCs/MFPs, laser printers and production printing products, and manufacturing
facilities to maintain or enhance its competitiveness in the industry. Ricoh
projects that for fiscal year 2010, its capital investments will amount to
approximately Yen 95.0 billion, which will principally be used for investments
in manufacturing facilities of digital and networking equipment with new
engines, toners, semiconductors and thermal media. For example, during fiscal
year 2010, Ricoh plans to complete the construction of a manufacturing plant in
Thailand for MFPs and laser printers to reinforce its manufacturing network in
Asia. Ricoh intends to finance the construction of this new plant with
internally generated funds. This new manufacturing
-13-
plant will allow the Company to improve its production capabilities and to hedge
against the risk of over-dependence on its manufacturing plants located in
China. In addition, one of Ricoh's subsidiaries, Tohoku Ricoh Co., Ltd is
expected to establish a manufacturing plant in Japan during fiscal year 2010 for
PxP toners, which are toners that are capable of producing higher quality
images. The construction of this plant is expected to be financed with
internally generated funds.
B. Business Overview
Ricoh is a leading manufacturer of office automation equipment.
Ricoh's principal products include copiers(such as PPCs), printers(MFPs, laser
printers and GELJET printers), production printing products and facsimile
machines. Ricoh is also a prominent manufacturer of digital and advanced
electronic devices such as semiconductor devices. In recent years, Ricoh has
been rapidly building a solid presence globally as a comprehensive document
solutions provider that helps its customers streamline their businesses and
decrease operating costs. More specifically, Ricoh supports its office and
production printing equipment businesses by offering customers various
"solution" systems that work with personal computers and servers, and related
product support and after-sales services to assist customers in fully utilizing
the Ricoh products that they purchase. Ricoh's support services include
assisting customers in setting up their information technology environment or
network administration. Ricoh also offers various supplies and peripheral
products to be used with its products and systems.
PRODUCTS
--------
Starting with fiscal year 2009, Ricoh's operating segments consisted
of "Imaging and Solutions," "Industrial Products" and "Other."
Ricoh's management determined that it was appropriate to rename the
"Office Solutions" operating segment to "Imaging and Solutions" starting with
fiscal year 2009 in light of the fact that InfoPrint Solutions Company's
products, which are distinguishable from office equipment due to the fact that
they primarily consist of production printing products that print images in
large quantities and are often used in central reproduction departments or data
centers, have been incorporated in the Office Solutions operating segment.
Management decided to rename the "Office Solutions" operating segment starting
with fiscal year 2009 since fiscal year 2009 was the first fiscal year in which
InfoPrint Solutions Company's financial information was consolidated with
Ricoh's financial information for the full fiscal year. This renaming of the
operating segment, however, did not result in any reclassification among Ricoh's
other operating segments or adjustments in financial data.
Ricoh's management analyzes its business operations and performance
based on these segments.
-14-
The following table sets forth Ricoh's sales by products for fiscal
years 2007, 2008 and 2009.
SALES BY PRODUCT
Millions of Yen (except for percentages)
For the Year Ended March 31,
---------------------------------------------------------------------------------------------------
2007 2008 2009
---------------------------------------------------------------------
IMAGING AND SOLUTIONS
Imaging Solutions Yen 1,580,155 76.4% Yen 1,709,491 77.0% Yen 1,598,614 76.4%
Network System Solutions 194,312 9.4 200,082 9.0 234,484 11.2
INDUSTRIAL PRODUCTS 133,387 6.4 144,340 6.5 115,550 5.5
OTHER 161,071 7.8 166,076 7.5 143,048 6.9
---------------------------------------------------------------------------------------------------
Total Yen 2,068,925 100.0% Yen 2,219,989 100.0% Yen 2,091,696 100.0%
---------------------------------------------------------------------------------------------------
Notes:
(1) During fiscal year 2007, a subsidiary of the Company sold its content
distribution business. As a result of such sale, the operating results of
such business were reclassified as a discontinued operation and excluded
from the above segment data for fiscal year 2007 in accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
(2) The above consolidated financial data set forth net sales to external
customers by product.
IMAGING AND SOLUTIONS
---------------------
This segment consists of products that are widely used in the office
and production printing environments and are categorized as follows:
(1) Imaging Solutions
For fiscal year 2009, the Imaging Solutions product category accounted
for 76.4% of Ricoh's net sales.
The primary functions of products in this category are (1) to produce
copies and (2) to print or produce images using a network. Stand-alone PPCs are
representative of products in the first group, and MFPs and laser printers are
representative of products in the second group.
The principal products in the Imaging Solutions product category
include monochrome and color digital PPCs/MFPs, laser printers, GELJET printers
and production printing products.
Ricoh continues to be a global leader in PPCs/MFPs and has been a
pioneer in the development of digital machines. Ricoh manufactures a wide range
of PPCs/MFPs with a variety of copying speeds and functions such as double-sided
printing, sorting, reducing and enlarging, and zoom adjustment based on copy
sizes. Ricoh has strengthened its digital PPC/MFP product lineup recently with
new product offerings that range from low-end models (regular print speed models
for low volume copying or printing) to high-end models (high print speed models
for large volume copying or printing). PPCs/MFPs use a drum or other medium
coated with a photo conductive material on which an image of the original
document is projected optically and developed by applying a dry powder-based
toner. The application of this printing process enables, higher picture quality
and is environmentally friendly. Ricoh's PPCs/MFPs are designed to provide
information technology support for all types of office environments by
delivering enhanced basic features (i.e., reduction, enlargements), simpler
operation, reduced paper consumption
-15-
through electronic storage, and better connectivity with document distribution
and storage systems. Ricoh also manufactures a wide range of laser printers that
print in monochrome or color and in a variety of print speeds, are able to
connect to a network and are multifunctional in that they have scanning, faxing
and copying capabilities as well as advanced finishing capabilities. GELJET
printers utilize "GELJET technology" developed by Ricoh, which allows ultra-fine
particle pigment dispersion to produce higher image qualities. All GELJET
printers are color printers. In addition, Ricoh manufactures production printing
products that are high-speed laser printers designed to be used as a central
printing device to satisfy customers' needs to print-on-demand and print large
volumes. Production printing products are often used in data processing
environments (such as central reproduction departments within companies and data
centers) and the commercial professional printing market (i.e., market comprised
of businesses offering high-quality printing services)
More specifically, in response to customer demand, Ricoh has focused
in recent years on designing a wide-range of products that enhance productivity,
have improved security features, are user friendly and are environmentally
friendly.
For example, during fiscal year 2009, Ricoh released its imagio MP
C5000/C4000/C3300/C2800/C2200 Series (also known as Aficio MP
C5000/C4000/C3300/C2800/C2200 Series when sold overseas) as part of its color
MFP product lineup. This new color MFP series (1) decreases typical energy
consumption compared to that of earlier models due to the use of
energy-efficient "color PxP toners" developed by Ricoh and an improved fusing
system, which enables stable printing of images on paper by anchoring toner
particles, (2) has security features such as a user authentication system to
prevent unauthorized access and an encryption system that encrypts user names
and passwords, (3) is suitable for use not only as the main color MFP in an
office but also as one of several pieces of printing equipment in a central
reproduction department of a company and (4) has the capacity to respond to high
quality printing demands. During fiscal year 2009, Ricoh also introduced imagio
Neo 300RC/250RC, which are reconditioned monochrome MFPs (1) whose environmental
impact has been decreased by 29% as compared to earlier models at the
manufacturing stage resulting in it having a recycled parts mass ratio of 89%
(where such ratio represents the percentage of recycled parts used in a
particular piece of equipment), (2) that have achieved both user-friendliness
and energy conservation through the installation on reconditioned machines of
the "QSU (Quick Start-Up)" technology, which enable shorter warm-up and recovery
times and (3) that have security features such as a user authentication system
to prevent unauthorized access and a function that prints documents with
security watermarks that become visible when copied. The QSU technology enables
imagio Neo 300RC/250RC to use less than the maximum recommended power
consumption level prescribed by the Law Concerning the Promotion of Eco-friendly
Goods and Services by the State and Other Entities (Law on Promoting Green
Purchasing) of Japan and the regulations promulgated thereunder. In addition,
Ricoh introduced during fiscal year 2009 other MFP products that are
environmentally friendly and have security features of the type discussed above,
such as the imagio MP 1600/1300 Series (low-end monochrome digital MFPs that are
equipped with a user authentication system) and the imagio MP 6001/7501/9001
Series (high-end monochrome digital MFPs that are equipped with "HYBRID QSU"
technology (a
-16-
technology that integrates the next generation electrical storage device
"capacitor" (which stores power during the standby mode and uses such power to
restore heat to the fusing roller and transfers images to paper during printing,
thereby enabling high-speed printing)) and Ricoh's QSU technology). By enhancing
the environmental features, incorporating advanced security functions and
maintaining higher image quality in these new products, Ricoh has been able to
capture a larger market share in the MFP market in Japan and overseas. For the
second consecutive year, Ricoh was named first place for customer satisfaction
in the color categories with respect to copier/multifunction products in fiscal
year 2009 based on a survey conducted by J.D. Power Asia Pacific, Inc.
Ricoh also developed and introduced during fiscal year 2009 low- to
high-end laser printers that improve productivity and user friendliness, such as
the IPSiO SP 4210 (also known as Aficio SP 4210DN when sold overseas), which is
a low-end monochrome laser printer featuring (1) improved productivity due to
shorter warm-up times and a print speed of less than seven seconds for the first
page and (2) enhanced user friendliness as a result of the use of the all-in-one
print cartridge system that can be easily replaced by the user, thereby saving
time and money spent on service calls. Ricoh also released other printers that
improved productivity and user friendliness, such as the IPSiO SP 8200 Series
(also known as Aficio SP 8200DN when sold overseas), which is a high-end
monochrome laser printer featuring a high print speed of 50 pages per minute on
A4-size paper fed horizontally, the IPSiO SP C310 (also known as Aficio SP C310
when sold overseas), which is a low-end color laser printer featuring (1) a high
print speed of 25 pages per minute for both color and monochrome printing on
A4-size paper fed horizontally, (2) a space-saving compact size comparable to
that of a monochrome printer in a stylish design and (3) adaptability for
various environments ranging from small office use to use as a desk-side printer
in a large office, and the IPSiO SP C821/820 Series (also known as Aficio SP
C821/820dn when sold overseas), which is a mid- and high-end color laser printer
featuring energy-efficient "color PxP toners" and "color QSU" technology.
Furthermore, in May 2008, Ricoh released a new series called the
"RICOH Pro" for the production printing market. This series was introduced to
satisfy the business needs to print-on-demand and to print in large volumes,
such as in central reproduction departments within companies and in data
centers. As part of this series, Ricoh introduced during fiscal year 2009 the
RICOH Pro C900/C900S, which are color laser printers with high print speeds (90
pages per minute for both monochrome and color printing on A4-size paper fed
horizontally) and the ability to capture images in high resolutions to reproduce
higher quality images, and the RICOH Pro 1357EX/1107EX/907EX, which are
monochrome printers with high print speeds of 90 to 135 pages per minute.
(2) Network System Solutions
For fiscal year 2009, the Network System Solutions product category
accounted for 11.2% of Ricoh's net sales.
The primary function of products in this category is to assist
customers in establishing a networked environment and provide customized
printing solutions that
-17-
satisfy customers' individual needs. The principal products in the Network
System Solutions category include personal computers and servers, network
systems, application software, and related services and support.
In fiscal year 2008, Ricoh launched its new solutions brand "Operius"
in Japan, which is focused on providing solutions to customers to optimize their
office environment. Operius is comprised of three key components: (1) hardware,
(2) software and (3) support and services. By identifying and utilizing the most
appropriate hardware and software to address customers' needs, and supplementing
such products with a comprehensive support and service team (such as a 24-hour
IT monitoring center, and an expert team of hardware and software engineers),
Ricoh is striving to assist its customers in creating a working environment that
is more efficient and effective. For example, storage and management solutions
can be developed that address the customers' need to organize and keep track of
both paper and digital files, and that provide a secure centralized electronic
document storage system that enables easy retrieval. Through the seamless
integration of hardware and software, customers can utilize and benefit from
streamlined document scanning, indexing and electronic document distribution. As
part of Operius, Ricoh delivers total cost of ownership ("TCO") consulting that
begins with analyzing the customers' document workflow, output devices and
document processes. Through support services, Ricoh has been able to lower the
total printing costs of its customers by assisting them in the set up of their
information technology or networks in various environments in Japan (where
physical space is costly) and thereby increasing the efficiency of their
printing process.
During fiscal year 2009, Ricoh continued its efforts to expand its
"Operius" business in Japan, and as a result strengthened its relationships with
136 partner companies to develop customized solutions by combining its partners'
applications with Ricoh's "Operius," which culminated in the development of 41
solution models by the end of fiscal year 2009. Meanwhile, outside of Japan,
Ricoh entered into a global strategic alliance with IBM in January 2009 through
which Ricoh and IBM will launch the document security and management services
("DSMS") in the U.S. This solution builds upon Ricoh's experience and expertise
in helping customers improve their document workflow, security and compliance
frameworks, while reducing their TCO of office equipment and advancing their
environmental sustainability practices.
INDUSTRIAL PRODUCTS
-------------------
The Industrial Products segment consists of products that are used in
the industrial sector. For fiscal year 2009, this segment accounted for 5.5% of
Ricoh's net sales. Principal products in this segment include thermal media,
optical equipment, semiconductor devices, electronic components and measuring
equipment.
Through technological enhancements in its thermal media business,
Ricoh has been able to expand its business from the production of thermal paper
for use in facsimiles to a variety of business areas, including the production
of POS sheets, logistics management sheets, reward cards, identification cards,
medical films and rewritable cards
-18-
that utilize thermo-chromic printing technology which can be used to erase and
update text and graphics up to 500 times.
Ricoh's optical equipment business utilizes technology originally
developed by Ricoh for its copiers and cameras. This business supplies optical
equipment and optical supply parts, such as lens units, to third parties.
Ricoh also manufactures various types of semiconductor devices. Such
devices include application-specific integrated circuits ("ASICs") and
application-specific standard products ("ASSPs") that are often used in digital
copiers, printers, personal computers, PC card and cellular phones. For fiscal
year 2009, Ricoh released the RP200x Series (voltage regulator ICs with high
output voltage accuracy, low dropout voltage and low supply current) that are
suitable as a power source for portable communication equipment and electronic
devices, such as cameras, VCRs and camcorders, and the R3119N Series (an input
voltage detector with high detector threshold accuracy and ultra-low supply
current) that are suitable for central processing unit and logic circuit resets,
and battery back-up circuits.
The electronic components business consists of components supplied to
Ricoh's manufacturing plants in connection with the production of its own
products, such as copiers and printers, as well as components supplied to third
parties.
In addition, Ricoh is one of the leading manufacturers of measuring
equipment in Japan. Ricoh offers a wide range of measuring equipment, such as
gas meters and gas leak detectors. Sales in the measuring equipment category are
greatly affected by the cyclical nature of market demand for this equipment.
OTHER
-----
The Other segment, which accounted for 6.9% of Ricoh's net sales for
fiscal year 2009, includes digital cameras, financing and logistics services.
Ricoh is one of the pioneers in commercializing digital cameras, which
have tremendous potential as "image capturing devices." As digital cameras may
be used in a variety of ways to capture and input images, Ricoh expects that the
digital camera market will continue to grow in the future. During fiscal year
2009, Ricoh released new digital cameras under the names "G600," "CX1," "RICOH
R10" and "GX200". The "G600" is a compact digital camera with a tough body that
can withstand the outdoors, including water, dirt and impact. The "CX1" is a
digital camera featuring a 9.29 mega pixel CCD and a 7.1x optical zoom lens, and
is able to process images at high speed since it is equipped with a highly
evolved image processing engine called "Smooth Imaging Engine IV" and a CMOS
sensor. Ricoh also introduced during fiscal year 2009 the "RICOH R10," a
standard digital camera model. The "GX200" is a high-performance compact digital
camera that is equipped with a 24mm (35mm film camera equivalent) 3x wide-angle
zoom lens and a removable LCD viewfinder, which has been well-received by
customers since its introduction. In December 2008, the "GX200" was awarded the
"iF product design award 2009" gold award for its innovative design along with
the "GR DIGITAL II," which is a compact digital camera that Ricoh introduced
during fiscal year 2008 that is made to exacting standards featuring high image
quality.
-19-
Ricoh provides certain financing services through Ricoh Leasing Co.,
Ltd., which leases industrial equipment and medical equipment as well as office
equipment, and offers loans, such as support loans, to small businesses and
independent doctors.
Ricoh Logistics System Co. Ltd. offers logistics services in the
delivery, distribution and storage of products, such as electronic products,
office equipment, and electronic and machinery parts.
GROUP VISION AND MANAGEMENT PLANS
---------------------------------
With "Winner in the 21st Century (Build a strong global RICOH brand)"
as its group vision, Ricoh strives to continue growing and developing as a
global company by gaining the trust of its customers. Ricoh intends to gain the
trust of its customers by continuously working towards achieving greater
customer productivity and knowledge management. Accordingly, Ricoh plans to
conduct its business activities in a way that provides innovative products and
services to all of its customers (including those who use information at work
and in their lives outside of work) based on Ricoh's three core values of
"harmonizing with the environment (i.e., reducing and minimizing environmental
impact)," "simplifying your life and work (i.e., enhancing user friendliness and
striving towards simplification)," and "supporting knowledge management (i.e.,
offering solutions to process information)."
In addition to this overall group vision, management has established
medium-term goals. Fiscal year 2009 was the first fiscal year of the 16th
Medium-Term Management Plan, which covers the period from fiscal year 2009
through fiscal year 2011, and Ricoh made efforts to lay the groundwork to
achieve the objectives of this plan. Under the 16th Medium-Term Management Plan,
Ricoh's objectives are to earn even greater trust from its customers by placing
greater emphasis on customer viewpoints and continuing to provide products and
services which meet and exceed customer expectations. To achieve the objectives
of the 16th Medium-Term Management Plan, Ricoh has established the following
five basic group management strategies: (1) become the market leader in each of
the targeted business areas (such as the production printing business and the
solution business), (2) strengthen and accelerate its environmental management
(which encompasses environment-related technological development, such as the
development of products like color PxP toners (tin-free eco-toners that anchor
toner particles at low temperatures), the management of resources and energy
used in the entire lifecycles of Ricoh products and the delivery to customers of
Ricoh's environmental philosophy and activities), (3) promote "Ricoh Quality"
(which means to accelerate the innovation processes to achieve greater customer
satisfaction), (4) create new business lines and (5) build a strong global RICOH
brand.
More specifically, in the Imaging and Solutions segment, Ricoh is
utilizing its strengths, such as customer contacts, broad product lines, image
processing technologies, ability to propose solutions and ability to conduct
business globally, to respond to the increasingly diverse needs of a greater
number of customers, and further solidify its business foundation. Ricoh
understands that "work flow," "security," "TCO," "compliance" and the
"environment" are important considerations for customers. By
-20-
focusing on these considerations, Ricoh intends to provide greater value to its
customers using its products. For example, to contribute to the overall
productivity increase of its customers, Ricoh is working to develop (1) printing
solutions that efficiently network multiple copiers and printers and (2)
document solutions that construct and manage a file server system that saves,
searches and outputs documents. Furthermore, Ricoh is striving to create new
service businesses, such as a service in which customers outsource their
business processing to Ricoh, by utilizing its strengths. To achieve the above
goals, Ricoh will continue to focus its efforts on developing solution platforms
and enhancing its solution sales organization. Ricoh also has plans to expand in
fiscal years 2010 and 2011 its business in the printing market by (1) expanding
its low-end printing business by offering better color laser printers and color
GELJET printers, and (2) stabilizing and expanding its production printing
business. In the Industrial Products segment, Ricoh is working to identify new
business areas where large growth can be expected, and allocate and direct its
resources to such business areas. Ricoh is also making an effort to strengthen
cooperation among personnel in the technical fields and the other business areas
in order to develop new businesses that combine diverse fields.
In addition, Ricoh plans to take further steps to develop business in
the emerging markets in the Imaging and Solutions segment and the Industrial
Products segment. For example, during fiscal year 2010, Ricoh plans to complete
the construction of a manufacturing plant in Thailand for MFPs and laser
printers to reinforce its manufacturing network in Asia. This new manufacturing
plant will allow Ricoh to improve its production capabilities in this region and
to hedge against the risk of over-dependence on its manufacturing plants located
in China. In addition, Ricoh expects that this new plant will lead to increased
business in the Asia region since locating manufacturing plants close to sales
subsidiaries customarily increases coordination and enables Ricoh to develop and
manufacture products that satisfy the specific demands of customers in such
region.
SALES AND DISTRIBUTION
----------------------
Ricoh continues to utilize the following three marketing and sales
channels for the distribution of its products to end-user customers in Japan:
(1) direct sales by Ricoh to end-user customers through 9 domestic subsidiaries
and affiliates, (2) sales through independent dealers of office equipment and
(3) sales through independent office supply wholesalers and retailers. Ricoh
estimates that over one-half of its domestic copier sales by revenue are derived
from its direct sales channels to end-user customers, with the remaining balance
being divided between sales through independent dealers of office equipment and
independent office supply wholesalers and retailers. These marketing and sales
channels are coordinated by Ricoh's seven regional sales subsidiaries located in
the Hokkaido, Tohoku, Kanto, Chubu, Kansai, Chugoku and Kyushu areas. During
fiscal year 2009, in an effort to consolidate its operations, Ricoh merged 33
sales subsidiaries in Japan into five sales subsidiaries to enhance the
efficiency of its domestic sales activities. As a result, as of the end of
fiscal year 2009, Ricoh has seven domestic sales subsidiaries, which include
Hokkaido Ricoh Inc. and Ricoh Sales Inc.
-21-
Ricoh has organized marketing and sales channels to accommodate its
four operating regions outside of Japan: (1) the Americas, (2) Europe, Africa,
and the Middle East, (3) Asia and Oceania and (4) China. One of Ricoh's
strategies in expanding its overseas marketing and sales channels has been to
acquire office equipment sales companies in various locations around the world
through which it can sell its products. Accordingly, in addition to selling
Ricoh brand name products through its overseas sales subsidiaries, affiliates
and independent dealers (similar to the marketing and sales channels used for
the distribution of products in Japan), Ricoh also sells its products through
the following two marketing and sales channels in the overseas market: (1) sales
of products under brand names which Ricoh purchased through acquisitions (i.e.,
the "Savin" brand, the "Lanier" brand and the "Infotec" brand) and (2) sales of
Ricoh's products by other companies under their brand names where Ricoh is the
original equipment manufacturer ("OEM"). Savin and Lanier were originally
Ricoh's OEM distributors prior to their acquisition. During fiscal year 2009,
Ricoh acquired the U.S.-based IKON and its subsidiaries, who supply and service
a wide range of office equipment in the U.S., Canada and the Western European
markets. With this acquisition, Ricoh aims to strengthen and broaden its
business opportunities and infrastructure in the U.S., Canada and Europe by
capitalizing on IKON's broad sales and service network and gaining access to
IKON's customer relationships, which includes large private corporations as well
as U.S. government and public sector entities/organizations.
Ricoh recognizes revenue for sales upon the delivery and installation
of equipment to its end-user customers. Revenue from the sales of equipment
under sales-type leases is recognized as product sales at the inception of the
lease. Information regarding the methods by which Ricoh recognizes revenue is
also set forth in Item 5. Critical Accounting Policies and Note 2 to the
Consolidated Financial Statements which are included in this annual report.
AFTER-SALES SERVICE
-------------------
Ricoh provides repair and maintenance services for its products to
Ricoh's end-user customers based on the belief that periodic and timely
maintenance services are essential in preserving Ricoh's market share in the
relevant products. These maintenance services are provided to customers pursuant
to maintenance service contracts customarily entered into at the time the
equipment is originally sold.
In Japan, repair and maintenance services are generally provided by
Ricoh's service specialists. Ricoh's service network in Japan includes service
centers operated by Ricoh and its affiliates and service outlets operated by
other companies. Ricoh's Customer Support System is available on a nationwide
basis in Japan in order to enhance customer satisfaction and service efficiency.
This system allows Ricoh to remotely monitor copiers that are in operation and
provide prompt service to such copiers. The total number of Ricoh's sales and
service personnel in Japan is approximately 23,100. Similar to Japan, Ricoh
employees and contracted maintenance providers provide repair and maintenance
services to end-user customers in the overseas market who purchase Ricoh
products. The total number of Ricoh's overseas sales and service personnel is
approximately 46,500.
-22-
Additional information regarding the manner in which Ricoh accounts
for its after-sales services is set forth in Item 5. Critical Accounting
Policies and Note 2 to the Consolidated Financial Statements which are included
in this annual report.
PRINCIPAL MARKETS
-----------------
Ricoh distributes its products and competes in the following four
geographic areas: Japan, the Americas, Europe and Other. In the aggregate,
Ricoh's sales decreased in fiscal year 2009. As noted below, for fiscal year
2009, net sales in Japan, the Americas, Europe and Other as a percentage of
total net sales were 44.9%, 24.0%, 25.0% and 6.1%, respectively. The table below
breaks down for each geographic area the total net sales amount and percentage
of such net sales amount as compared against total net sales for each of the
last three fiscal years.
SALES BY GEOGRAPHIC AREA
Millions of Yen (except for percentages to net sales)
For the Year Ended March 31,
---------------------------------------------------------------------
2007 2008 2009
--------------------- --------------------- ---------------------
JAPAN Yen 1,002,251 48.4% Yen 1,016,034 45.8% Yen 938,331 44.9%
THE AMERICAS 426,453 20.6 434,799 19.6 502,862 24.0
EUROPE 507,158 24.5 603,219 27.2 523,407 25.0
OTHER 133,063 6.5 165,937 7.4 127,096 6.1
------------------------------------------------------------------------------------
Total Yen 2,068,925 100.0% Yen 2,219,989 100.0% Yen 2,091,696 100.0%
------------------------------------------------------------------------------------
Notes:
(1) Sales amounts set forth in the above table are based on the location of the
purchaser (external customer) of the product. For example, if the product
is manufactured in Japan and sold to an external customer located in the
United States, such sale would be recorded as a sale in the Americas.
(2) During fiscal year 2007, a subsidiary of the Company sold its content
distribution business. As a result of such sale, the operating results of
such business were reclassified as a discontinued operation and excluded
from the above segment data for fiscal year 2007 in accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
(1) Japan
As the economic crisis spread across the world during fiscal year
2009, the Japanese economy suffered an overall decline in demand and corporate
performance worsened. In light of such economic situation, customers reduced
their capital investments in office equipment and focused on reducing printing
costs by reducing printing volume. Furthermore, competition in the type of
products that Ricoh manufactures and markets continued to intensify. As a
result, sales in Japan for fiscal year 2009 decreased by 7.6% compared to fiscal
year 2008. Despite such environment, Ricoh continued to change its product
lineup from analog stand-alone equipment and monochrome products to value-added
digital equipment with network capabilities and color products in order to
respond to customers' preferences. To assist customers in managing their Total
Document Volume ("TDV") effectively and efficiently in the office environment,
Ricoh also offered various business solutions to create a networked environment
that meets customers' needs. In addition, by using its "Operius" business that
launched in fiscal year 2008, Ricoh assisted its customers by developing a more
efficient and effective work environment.
-23-
(2) The Americas
Despite sluggish economic conditions in the Americas as a result of
the economic recession in the United States, Ricoh continued to introduce new
color MFPs to meet customers' demands for color and high-speed printing products
with networking capabilities.
During fiscal year 2009, Ricoh acquired the U.S.-based IKON and its
subsidiaries, who supply and service a wide range of office equipment in the
U.S., Canada and the Western European markets. With this acquisition, Ricoh aims
to strengthen and broaden its business opportunities and infrastructure in the
U.S., Canada and Europe by capitalizing on IKON's broad sales and service
network and gaining access to IKON's customer relationships, which includes
large private corporations as well as U.S. government and public sector
entities/organizations.
(3) Europe
As turmoil in the financial market triggered by the U.S. subprime
mortgage crisis spread to Europe, customer demand for office equipment declined.
As a result, sales of PPCs/MFPs decreased despite Ricoh's efforts to introduce
new products in such product lines. Despite such economic situation, Ricoh
continued to enhance and introduce new products in the Imaging and Solutions
segment so that customers are able to fulfill more of their office equipment
needs through Ricoh.
After acquiring IKON to further enhance its sales and service network,
Ricoh consolidated the European business operations of IKON into Ricoh Europe
PLC's operations during fiscal year 2009. The purpose of this consolidation was
to optimize the operational structure in each country in this geographic region
to respond promptly to new customer demands and to enhance the effectiveness of
its business by eliminating duplicative functions.
(4) Other
The Other geographic area includes China, South East Asia and Oceania.
Sales in this geographic area decreased due to slower demand in office products
during the second half of fiscal year 2009 as a result of the global financial
crisis. Despite this decrease in sales in fiscal year 2009, Ricoh still believes
that this geographic area will expand in the future. Accordingly, Ricoh
continues to view this geographic area as strategically important not only as a
production site but also as a potential market within which to increase future
sales of its products. Consistent with such view, Ricoh commenced the
construction of a new manufacturing plant in Thailand during fiscal year 2009.
Ricoh expects to complete the construction of this plant and commence operations
during fiscal year 2010. Ricoh expects this new manufacturing plant will secure
sufficient production capacity and reduce its dependence on its production
facilities in China. In addition, Ricoh continues to strengthen its
relationships with its customers in this geographic area by working closely with
its regional sales network.
-24-
COMPETITION
-----------
The office equipment industry in which Ricoh primarily competes
remains highly competitive and Ricoh continues to encounter intense competition
in its Imaging and Solutions segment. Furthermore, competition in each of the
product categories in the Imaging and Solutions segment is expected to increase
in the future as Ricoh's competitors enhance and expand their product and
service offerings. This increase in competition may result in price reductions
and decreases in profitability as well as market share in these products. Ricoh
cannot provide assurance that it will be able to compete successfully against
existing or future competitors. Moreover, Ricoh may face competition from some
of its current customers and companies with which Ricoh has strategic business
relationships.
The size and number of our competitors vary across our product
categories, as do the resources allocated by our competitors to the markets
Ricoh targets. Ricoh's competitors may have greater financial, personnel and
other resources than Ricoh has in a particular market or overall. These
competitors may have greater resources available to them to respond quickly to
new technologies and may be able to undertake more extensive marketing campaigns
than Ricoh. Competitors may also adopt more aggressive pricing policies for
their products and make more attractive offers to potential customers,
employees, and strategic partners. These competitors may also make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties to increase their ability to gain market share.
Despite this intense competition in the office equipment industry,
Ricoh's management believes that Ricoh will be able to maintain and enhance its
position in the global market because of its experience, expertise and technical
capabilities as a leading provider of office and production printing equipment,
and dedication to meet customers' needs.
SEASONALITY
-----------
Sales in the Imaging and Solutions segment generally increase in March
of each year, which is the end of the fiscal year for most Japanese companies.
This is due to the increase in demand for these products as many Japanese
companies and government entities try to expend their allotted capital
expenditure budget for the fiscal year. Sales generated during the month of
March each year due to this seasonality accounts for approximately 12.8% of
Ricoh's domestic sales in Japan. However, the effect of this seasonality on a
consolidated basis is minimal, as only approximately 3.7% of Ricoh's total
consolidated sales are generated from domestic sales in Japan during the month
of March.
SOURCES OF SUPPLY
-----------------
The raw materials, parts and components used in the production of
Ricoh's products, such as plastics, rubber and chemicals are procured on a
global basis. Prices of
-25-
some raw materials that Ricoh uses fluctuate according to the market and prices
of some parts and components that Ricoh uses fluctuate as well. Generally, Ricoh
maintains multiple suppliers for the most significant categories of raw
materials, parts and components to address such fluctuations. Because very few
of the raw materials required by Ricoh in manufacturing its products can be
procured in Japan, most of the raw materials used by Ricoh come from outside of
Japan. Ricoh monitors the availability of raw materials on a regular basis to
ensure that it will not encounter any shortages. Ricoh has not experienced any
significant difficulty in obtaining the raw materials, parts and components
necessary for it to manufacture its products and believes that it will be able
to continue to obtain necessary raw materials, parts and components in
sufficient quantities to meet its manufacturing needs in the future. A rise in
crude oil prices may lead to an increase in the overall cost of procuring raw
materials, parts and components. This is due to the fact that the cost of
oil-based parts and components, the processing costs of raw materials and fuel
costs of shipping and distributing such raw materials, parts and components may
increase as a result of higher crude oil prices. However, Ricoh believes that it
will be able to adequately manage the impact of any such price volatility in
connection with the raw materials, parts and components that are required for
the manufacturing of its products.
INTELLECTUAL PROPERTY
---------------------
Ricoh holds a large number of patents and trademark rights. While
Ricoh considers such intellectual property rights to be valuable assets and
important for its operations, it believes that its business is not dependent to
any material extent upon any single patent or trademark right, or any related
group of rights it holds.
Ricoh also has many licenses and technical assistance agreements
covering a wide variety of products. Such agreements grant Ricoh the right to
use certain Japanese and foreign patents or the right to receive certain
technical information. However, Ricoh is not materially dependent on any such
single license or agreement.
In addition, Ricoh has granted licenses and technical assistance to
various companies located in and outside of Japan. In certain instances, Ricoh
has entered into cross-licensing agreements with other major international
electronics and electrical equipment manufacturers. None of these agreements are
likely to materially affect Ricoh's business or profitability. See Item 5.C.
Patents and Licenses.
GOVERNMENT REGULATIONS
----------------------
Ricoh's business activities are subject to various government
regulations in the various countries in which it operates, including regulations
relating to business and investment approvals, export regulations, tariffs,
antitrust, intellectual property, consumer and business taxation, exchange
controls, and environmental and recycling requirements. Ricoh is also subject to
environmental regulations in the jurisdictions in which it operates,
particularly those jurisdictions in which it has manufacturing, research or
similar operations.
-26-
Four environmental regulations which may affect Ricoh's businesses are
the European Union Directive on Waste Electrical and Electronic Equipment (the
"WEEE Directive"), the European Union Directive on the Restriction on the Use of
Certain Hazardous Substances in Electrical and Electronic Equipment (the "RoHS
Directive"), the European Union Regulation on the Registration, Evaluation,
Authorisation and Restriction of Chemicals (the "REACH Regulation") and the
European Union Directive on Energy-Using Products (the "EuP Directive", also
commonly known as Directive 2005/32/EC). Beginning in August 2005, the WEEE
Directive, as enacted by individual European Union countries, made manufacturers
or importers of electrical and electronic equipment in the European Union
financially responsible for the collection, recycling, treatment, recovery and
legitimate disposal of collected electrical and electronic equipment. The RoHS
Directive prohibits more than specific levels of lead, mercury, cadmium,
hexavalent chromium, polybrominated biphenyls (PBB) or polybrominated diphenyl
ethers (PBDE) to be contained in electrical and electronic equipment that is to
be sold in the European Union market from July 2006. The REACH Regulation was
entered into force in June 2007 to improve and protect human health and the
environment through the identification of intrinsic properties of chemical
substances and, among other things, requires the registration of chemical
substances manufactured or used in products that are sold in the European Union.
This regulation covers almost all forms of chemicals (that is, products in
gaseous, liquid, paste or powdery form) and "articles" (as defined in the REACH
Regulation) manufactured in or imported into the European Union. The EuP
Directive sets forth a framework for establishing eco-design requirements for
energy-using products by systematically integrating environmental aspects at
early stages of the product design. One of the important goals of the EuP
Directive is to improve the overall environmental performance of products
throughout their life-cycle. A variety of similar environmental regulations have
been or are expected to be enacted in other regions where Ricoh operates.
While Ricoh's businesses may be affected by various government
regulations, Ricoh currently operates, and expects to continue operating, its
business without significant difficulty in complying with applicable government
regulations.
C. Organizational Structure
As of March 31, 2009, the Ricoh group includes the Company, 302
subsidiaries and 9 affiliates located worldwide.
The Company is the parent of the Ricoh group. The Company heads the
R&D activities of Ricoh products with assistance from its subsidiaries. The
Company and its subsidiaries and affiliates maintain an integrated domestic and
international manufacturing and distribution structure.
The following is a list of the principal subsidiaries of the Company.
None of the Company's 9 affiliates are considered material affiliates of Ricoh.
-27-
Proportion
Country of of ownership
Company Name Formation interest Main businesses
---------------------------------------------------------------------------------------------------------------------------------
(SUBSIDIARIES)
Ricoh Optical Industries Co., Ltd. Japan 100.0 Manufacturing optical equipment
Tohoku Ricoh Co., Ltd. Japan 100.0 Manufacturing office equipment
Ricoh Unitechno Co., Ltd. Japan 100.0 Manufacturing parts for office equipment
Ricoh Elemex Corporation Japan 100.0 Manufacturing and sales of office equipment and minuteness
equipment
Ricoh Microelectronics Co., Ltd. Japan 100.0 Manufacturing parts for office equipment
Ricoh Keiki Co., Ltd. Japan 100.0 Manufacturing parts for office equipment
Ricoh Printing Systems, Ltd. Japan 100.0 Manufacturing and sale of office equipment
Ricoh Tohoku Co., Ltd. Japan 100.0 Sale of office equipment
Ricoh Chubu Co., Ltd. Japan 100.0 Sale of office equipment
Ricoh Kansai Co., Ltd. Japan 100.0 Sale of office equipment
Ricoh Chugoku Co., Ltd. Japan 100.0 Sale of office equipment
Ricoh Kyushu Co., Ltd. Japan 100.0 Sale of office equipment
Hokkaido Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
Ricoh Sales Co., Ltd. Japan 100.0 Sale of office equipment
Ricoh Technosystems Co., Ltd. Japan 100.0 Maintenance, service and sale of office equipment
Ricoh Logistics System Co., Ltd. Japan 100.0 Logistics services and custom clearances
Ricoh Leasing Co., Ltd. Japan 51.1 General leasing
Ricoh Electronics, Inc. U.S.A. 100.0 Manufacturing office equipment and related supplies
Ricoh UK Products Ltd. U.K. 100.0 Manufacturing office equipment
Ricoh Industrie France S.A.S. France 100.0 Manufacturing office equipment and related supplies
Ricoh Asia Industry (Shenzhen) Ltd. China 100.0 Manufacturing office equipment and related supplies
Shanghai Ricoh Digital Equipment Co., Ltd. China 100.0 Manufacturing and sale of office equipment
Ricoh Americas Corporation U.S.A. 100.0 Sale of office equipment
InfoPrint Solutions Company, LLC U.S.A. 79.5 Sale of office equipment
IKON Office Solutions, Inc. U.S.A. 100.0 Sale of office equipment
Ricoh Europe Holdings PLC U.K. 100.0 Sale of office equipment
Ricoh Asia Industry Ltd. Hong Kong, 100.0 Sale of office equipment
China
-28-
Proportion
Country of of ownership
Company Name Formation interest Main businesses
---------------------------------------------------------------------------------------------------------------------------------
Ricoh Asia Pacific Pte Ltd Singapore 100.0 Sale of office equipment
Ricoh China Co., Ltd. China 100.0 Sale of office equipment
Ricoh Finance Nederland B.V. Netherlands 100.0 Corporate finance
And 272 other subsidiaries
(AFFILIATES)
9 affiliates (none of which are material
affiliates)
Notes:
(1) Proportion of ownership interest includes indirect ownership.
(2) Figures in parentheses indicate portion of voting power if different from
portion of ownership interest.
(3) Ricoh Leasing Co., Ltd. and NRG Group PLC are the only subsidiaries of the
Company that are a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X.
D. Property, Plant and Equipment
Ricoh manufactures its products primarily in fifteen plants in Japan and
six plants overseas. Ricoh owns all of the buildings and the land on which its
plants are located, with the exception of certain leases of land and floor space
of certain of its subsidiaries. None of these leased land and floor spaces have
major encumbrances on them. The following table gives certain information as of
March 31, 2009 regarding the Company's and its subsidiaries' principal
manufacturing and other facilities. With the exceptions of Shanghai Ricoh
Digital Equipment Co., Ltd. and GR Advanced Materials Ltd., the manufacturing
and other facilities listed below have floor space exceeding 10,000 square
meters.
Name (Location) Floor space Principal activities and products manufactured
----------------------------------------------------------- ----------------- ----------------------------------------------------
(in thousands
of square meters)
Japan:
Ricoh Company, Ltd.
Ohmori Plant (Tokyo) 54 Parts relating to copiers
Atsugi Plant (Kanagawa) 73 Office equipment and other products
Numazu Plant (Shizuoka) 122 Paper and toner
Ikeda Plant (Osaka) 27 Electronic devices
Hatano Plant (Kanagawa) 15 Printed circuit boards and electronic components
Fukui Plant (Fukui) 34 Papers and toner
Gotenba Plant (Shizuoka) 70 Office equipment
Yashiro Plant (Hyogo) 34 Electronic devices
Ricoh Technology Center (Kanagawa) 71 R&D
Head Office (Tokyo) 21 Head office and marketing of office equipment
-29-
Name (Location) Floor space Principal activities and products manufactured
----------------------------------------------------------- ----------------- ----------------------------------------------------
(in thousands
of square meters)
Research & Development Center 17 R&D
(Kanagawa)
System Center (Tokyo) 10 Information system center, marketing of office
equipment and other business
Ginza Office (Tokyo) 11 Marketing of office equipment and other business
Shin-Yokohama office (Kanagawa) 40 Marketing of office equipment, other business and
related services
Katsuta office (Ibaraki) 54 R&D of production printing products
Subsidiaries:
Ricoh Optical Industries Co., Ltd. (Iwate) 23 Photographic equipment
Tohoku Ricoh Co., Ltd. (Miyagi) 55 Office equipment, parts relating to copiers and
duplicators
Hasama Ricoh, Inc. (Miyagi) 14 Parts relating to copiers and data processing
equipment
Ricoh Unitechno Co., Ltd. (Saitama) 18 Office equipment
Ricoh Elemex Corporation. (Aichi) 47 Office equipment and measuring equipment
Ricoh Microelectronics Co., Ltd. (Tottori) 12 Printed circuit boards and electronic components
Ricoh Keiki Co., Ltd. (Saga) 10 Printed circuit boards and parts relating to copiers
Ricoh Printing Systems, Ltd. (Ibaraki) 54 Printers and production printing products
Overseas:
Ricoh Electronics, Inc. 81 Copiers, parts relating to copiers, toner and
(Irvine, Santa Ana and Tustin, California and thermal paper
Lawrenceville, Georgia, U.S.A.)
-30-
Name (Location) Floor space Principal activities and products manufactured
----------------------------------------------------------- ----------------- ----------------------------------------------------
(in thousands
of square meters)
Ricoh UK Products Ltd. 34 Copiers, parts relating to copiers and toner
(Telford, United Kingdom)
Ricoh Industries France S.A.S. 42 Copiers, parts relating to copiers and thermal paper
(Colmar, France)
Ricoh Asia Industry (Shenzhen) Ltd. (Shenzhen, China) 42 Copiers, parts relating to copiers, and toner
Ricoh Components Asia (Shenzhen) Co., Ltd. 35 Printed circuit boards and electronic components
(Shenzhen, China)
Shanghai Ricoh Facsimile Co., Ltd (Shanghai, China) 27 Facsimile equipment
Ricoh Thermal Media (Wuxi) Co., Ltd. 25 Direct thermal paper and thermal transfer ribbon
(Shenzhen, China)
Shanghai Ricoh Digital Equipment Co., Ltd. 6 Copiers, facsimile equipment and parts relating to
(Shanghai, China) copiers
GR Advanced Materials Ltd. 7 Supplies relating to duplicators
(Scotland, United Kingdom)
As discussed in this Item 4, during fiscal year 2010, Ricoh plans to
complete the construction of a manufacturing plant in Thailand for MFPs and
laser printers to reinforce its manufacturing network in Asia. This new
manufacturing plant will allow the Company to improve its production
capabilities and to hedge against the risk of over-dependence on its
manufacturing plants located in China. In addition, one of Ricoh's subsidiaries,
Tohoku Ricoh Co., Ltd is expected to establish a manufacturing plant in Japan
during fiscal year 2010 for PxP toners, which are toners that are capable of
producing higher quality images.
Ricoh considers its manufacturing facilities to be well maintained and
believes its plant capacity is adequate for its current needs, though successive
investments in manufacturing facilities are being made for its long-term
success.
-31-
Item 4A. Unresolved Staff Comments
-------------------------
Not applicable.
-32-
Item 5. Operating and Financial Review and Prospects
--------------------------------------------
OVERVIEW
Ricoh is engaged primarily in the development, manufacturing, sales
and servicing of office automation equipment, such as PPCs/MFPs, laser printers,
GELJET printers, production printing products and facsimile machines, as well as
digital cameras, semiconductor devices and thermal media. Ricoh supports its
office and production printing equipment business by offering customers various
"solution" systems that work with personal computers and servers, and related
product support and after-sales services to assist customers in fully utilizing
the Ricoh products that they purchase. Ricoh's support services include
assisting customers in setting up their information technology environment or
network administration. Ricoh also offers various supplies and peripheral
products to be used with its products and systems.
Ricoh distributes its products and competes in the following four
geographic areas: (1) Japan, (2) the Americas, (3) Europe and (4) Other, which
includes China, South East Asia and Oceania. For additional details on Ricoh's
business, see Item 4.B. Information on the Company - Business Overview.
Because of the global nature of Ricoh's operations, Ricoh's results of
operations and financial conditions are affected both by economic and political
developments in Japan and the rest of the world, as well as by demand and
competition in its lines of business. Furthermore, competition in the businesses
Ricoh operates has increased significantly and is likely to continue increasing
in the future. The two most significant trends in the office equipment market
continue to be the movement towards digital networking systems from stand-alone
models and the shift in customers' demands toward color products from monochrome
products. In response to these trends, Ricoh's competitors are introducing color
products and digital networking systems, thereby increasing the level of
competition in these products. Ricoh seeks to prevail over the intense
competition in the office equipment market by continuing to provide customers
with equipment that optimizes the TCO of such equipment and enhancing office
productivity and efficiency.
Historically, Ricoh's revenues have been derived mainly from the
manufacturing and sale of equipment (such as copiers and printers). In recent
years, the key factor to achieve revenue growth has been the expansion of
available product lines and areas of services to address the increase in
customer demand for digitization, color printing and high volume printing, which
became possible upon the introduction of printers with high-speed printing
capabilities. Notwithstanding the effect of the current global economic
recession, Ricoh remains focused on achieving sustained growth in the current
competitive environment. To achieve such growth, Ricoh has striven to broaden
its revenue and earnings base by increasing the total copying or printing volume
of its customers (which Ricoh refers to as "Building Total Document Volume") and
the amount of revenue per copy or printed page. More specifically, Ricoh's
strategies continue to include (1) replacing monochrome products with color
models at prices comparable to those of monochrome models, (2) expanding sales
of high-speed models and (3)
-33-
deploying printing solutions so that customers can optimize the total output
costs of their copiers and printers. In support of such strategies, Ricoh has
been placing a high priority on creating products that add value for customers
in new ways (e.g., higher print speeds, easier network connectivity, enhanced
user-friendliness and improved security features). To this end, Ricoh continued
to reinforce its technological strengths during fiscal year 2009 by making
capital expenditures and investments in R&D to create products and services that
can provide new value for its customers.
To increase the sale of its products to corporations with global
operations, Ricoh has been expanding its sales structure in the Imaging and
Solutions segment through various means during the last few fiscal years,
including the acquisition of the European sales and service companies of Danka
Business Systems PLC and the acquisition of the U.S.-based IKON and its
subsidiaries, who supply and service a wide range of office equipment in the
U.S., Canada and the Western European markets.
In addition to its continuing efforts to strengthen its printing and
copying business, Ricoh and IBM formed a joint venture company, InfoPrint
Solutions Company (which commenced its operations in June 2007), to enter into
the production printing business. At the time this company commenced its
operations, Ricoh owned 51 percent of this company. Based on the agreement
entered into with IBM, Ricoh's ownership percentage is expected to gradually
increase up to 100 percent by July 2010. As of March 31, 2009, Ricoh owned 79.5
percent of InfoPrint Solutions Company. Ricoh expects that this company will
strengthen its capabilities in output solutions, including large volume
production printing products.
Furthermore, Ricoh continued to steadily increase its operational
efficiency through cost-cutting measures across its business units, which
included the reduction of production costs and the streamlining of its business
structure, as well as supply chain management. As part of its strict cost
management policy, Ricoh continued to analyze the cost structure of its products
at the design phase for the purpose of minimizing production costs.
In terms of fiscal year 2009, Ricoh's consolidated net sales decreased
by 5.8% to Yen 2,091.6 billion, from Yen 2,219.9 billion for fiscal year 2008,
due primarily to the decrease in net sales in all of its operating segments in
Japan and overseas. This decrease was due mainly to the global economic
recession stemming from the global financial crisis, which caused a decrease in
customer demand for Ricoh products as customers decreased their capital
spending. The decrease in net sales was also attributable to the depreciation of
the U.S. Dollar and the Euro against the Japanese Yen. While net sales generated
by IKON, which became a consolidated subsidiary in fiscal year 2009 (whose net
sales were reflected for part of the fiscal year), as well as InfoPrint
Solutions Company, which became a consolidated subsidiary in fiscal year 2008
(whose net sales were reflected for the full fiscal year for the first time),
contributed to the increase in overall net sales in the Americas for fiscal year
2009, such increase was not sufficient to fully offset the decrease in net sales
of Ricoh's other businesses and the appreciation of the Japanese Yen. While cost
of sales decreased by 4.3% for fiscal year 2009, such percentage decrease was
less than the percentage decrease of net sales because Ricoh lowered the sales
price for certain products to stimulate sales in the sluggish and competitive
market, and Ricoh was not able to fully absorb certain fixed costs as a result
of the decrease in production
-34-
volume. As a result, gross profit decreased by 7.9% for fiscal year 2009 as
compared to fiscal year 2008. In terms of its selling, general and
administrative expenses, while the group-wide cost reduction efforts contributed
to a decline in ongoing operating expenditures, Ricoh incurred additional
strategic expenses in connection with its efforts to (1) enhance its sales and
service structures, such as through the IKON acquisition, (2) expand its
production printing business and (3) make structural changes aimed at improving
its operational efficiency on a worldwide basis of all aspects of its R&D,
manufacturing and sales operations. Consequently, selling, general and
administrative expenses increased by 4.5% from fiscal year 2008. As a result,
Ricoh's operating income for fiscal year 2009 decreased by 58.9%, with operating
income as a percentage of net sales decreasing from 8.2% to 3.6% as compared to
fiscal year 2008.
KEY PERFORMANCE INDICATORS
The following table shows changes for the last three fiscal years in the key
performance indicators that Ricoh's management uses in assessing its
performance. Ricoh's management considers these indicators to be important in
monitoring and evaluating its performance to meet the expectation of its
shareholders.
For the year ended March 31,
----------------------------
2007 2008 2009
------- ------- -------
Net Sales (in billions of Yen) 2,068.9 2,219.9 2,091.6
Operating income to net sales ratio/(1)/ 8.4% 8.2% 3.6%
Return on assets/(2)/ 5.2% 4.8% 0.3%
Inventory turnover within months/(3)/ 1.83 1.78 1.86
Interest-bearing debt (in billions of Yen) 415.6 384.3 779.1
Notes:
/(1)/ Operating income to net sales ratio = Operating income divided by net
sales.
/(2)/ Return on assets = Net income divided by average total assets for the
fiscal year.
/(3)/ Inventory turnover within months = Inventory divided by average monthly
cost of sales.
In fiscal year 2009, Ricoh's consolidated net sales decreased by 5.8% to Yen
2,091.6 billion, from Yen 2,219.9 billion for fiscal year 2008, due primarily to
the decrease in net sales in all of its operating segments. Operating income to
net sales ratio decreased by 4.6 percentage points to 3.6% from 8.2% for fiscal
year 2008 due primarily to the decrease in operating income resulting from the
decrease in net sales. Return on assets decreased by 4.5 percentage points to
0.3% from 4.8% for fiscal year 2008 due mainly to the consolidation of IKON's
assets with Ricoh's assets as a result of its acquisition. Inventory turnover
within months increased by 0.08 points. Interest-bearing debt increased by Yen
394.8 billion due primarily to the consolidation of IKON's interest bearing debt
with Ricoh's interest bearing debt as a result of its acquisition and the
increase in interest-bearing debt of the Company as it borrowed additional funds
from third parties to finance the IKON acquisition.
-35-
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements of Ricoh are prepared in
conformity with U.S. generally accepted accounting principles. The preparation
of these financial statements requires the use of estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the periods presented. On an ongoing basis, Ricoh evaluates its
estimates which are based on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances. The
results of these evaluations form the basis for making judgments about the
carrying values of assets and liabilities and the reported amounts of expenses
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions. Ricoh considers an accounting
policy to be critical if it is important to its financial condition and results,
and requires significant judgments and estimates on the part of management in
its application. Ricoh believes that the following represent the critical
accounting policies of the Company. For a summary of the significant accounting
policies, including the critical accounting policies discussed below, see Note 2
to the Consolidated Financial Statements.
Revenue Recognition
-------------------
Ricoh believes that revenue recognition is critical for its financial
statements because net income is directly affected by the timing of 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 install the product. As such,
revenue is recognized at the time of delivery and installation at the customer
location. Equipment revenues are based on established prices by product type and
model and are net of discounts. A sales return is accepted only when the
equipment is defective and does not meet Ricoh's product performance
specifications. Other than installation, there are no customer acceptance
clauses in the sales contract.
Service revenues result primarily from maintenance contracts that are
normally entered into at the time the equipment is sold. Standard service fee
prices are established depending on equipment classification and include a cost
value for the estimated services to be performed based on historical experience
plus a profit margin thereon. As a matter of policy, Ricoh does not discount
such prices. On a monthly basis, maintenance service revenues are earned and
recognized by Ricoh and billed to the customer in accordance with the contract
and include a fixed monthly fee plus a variable amount based on usage. The
length of the contract ranges up to five years; however, most contracts can be
cancelled at any time by the customer upon a short notice period.
-36-
Ricoh enters into contractual 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 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.
Allowance for Doubtful Receivables
----------------------------------
Ricoh performs ongoing credit evaluations of its customers and adjusts
credit limits based upon payment history and the customer's current
creditworthiness, as determined by Ricoh's review of the customers' credit
information. Ricoh continuously monitors collections and payments from its
customers and maintains a provision for estimated credit losses based upon its
historical experience and any specific customer collection issues that Ricoh has
identified. While such credit losses have historically been within Ricoh's
expectations and the provisions established, Ricoh cannot guarantee that it will
continue to experience the same credit loss rates that it has in the past.
Changes in the underlying financial condition of our customers could result in a
material impact on Ricoh's consolidated results of operation and financial
position.
Pension Accounting
------------------
The total costs for employees' severance payments and pension plans
represented approximately 0.9%, 0.8% and 0.9% of Ricoh's total costs and
expenses for fiscal years 2007, 2008 and 2009, respectively. The amounts
recognized in the consolidated financial statements relating to employees'
severance payments and pension plans are determined on an actuarial basis
utilizing certain assumptions in the calculation of such amounts. The
assumptions used in determining net periodic costs and liabilities for
employees' severance payments and pension plans include expected long-term rate
of return on plan assets, discount rate, rate of increase in compensation
levels, average remaining years of service and other factors. Among these
assumptions, the expected long-term rate of return on assets and the discount
rate are two critical assumptions. Assumptions are evaluated at least annually,
and events may occur or circumstances may change that may have a significant
effect on the critical assumptions. In accordance with U.S. GAAP, actual results
that differ from the assumptions are accumulated and amortized over future
periods, thereby reducing the year-to-year volatility in pension expenses. As of
March 31, 2009, Ricoh recognized and reflected in its consolidated balance
sheets the funded status
-37-
of its pension plans (equal to the difference between the fair value of plan
assets and the projected benefit obligations) in the total amount of Yen 153.2
billion.
For fiscal years 2007, 2008 and 2009, Ricoh used expected long-term
rates of return on pension plan assets of 3.1%, 3.2% and 3.5%, respectively. In
determining the expected long-term rate of return on pension plan assets, Ricoh
considers the current and projected asset allocations, as well as expected
long-term investment returns and risks for each category of the plan assets
based on Ricoh's analysis of historical results. The projected allocation of the
plan assets is developed in consideration of the expected long-term investment
returns for each category of the plan assets. To moderate the level of
volatility in pension plan asset returns and to reduce risks, approximately 35%,
40%, 15% and 10% of the plan assets will be allocated to equity securities, debt
securities, life insurance company general accounts and other financial
instruments, respectively. As of March 31, 2009, the actual allocation of assets
was generally consistent with the projected allocation stated above. The actual
returns for fiscal years 2007, 2008 and 2009 were approximately 2.3% (gain),
6.4% (loss) and 15.7% (loss), respectively. The actual returns on pension plan
assets may vary in future periods, depending on market conditions. The
market-related value of plan assets is measured using fair values on the plan
measurement date.
With respect to the discount rate used in the annual actuarial
valuation of the pension benefit obligations, the other critical assumption,
Ricoh's weighted average discount rates for fiscal years 2007, 2008 and 2009
were 3.1%, 3.1% and 3.6%, respectively. In determining the appropriate discount
rate, Ricoh considers available information about the current yield on
high-quality fixed-income investments that are currently available and are
expected to be available during the period corresponding to the expected
duration of the pension benefit obligations.
The following table illustrates the sensitivity to changes in the
discount rate and the expected return on pension plan assets, while holding all
other assumptions constant, for Ricoh's pension plans as of March 31, 2009.
CHANGE IN CHANGE IN PRE-
PENSION BENEFIT TAX PENSION
CHANGE IN ASSUMPTION OBLIGATIONS EXPENSES
--------------------------------------------------------------- --------------- --------------
(Billions of Yen)
50 basis point increase / decrease in discount rate - / + Yen 25.6 - / + Yen 2.3
50 basis point increase / decrease in expected return on assets -- - / + Yen 1.3
Purchase Accounting
-------------------
Ricoh accounts for acquired businesses using the purchase method of
accounting which requires that the assets acquired and liabilities assumed be
recorded at the date of the acquisition at their respective estimated fair
values. The judgments made in determining the estimated fair value assigned to
each class of assets acquired, as well as the estimated life of each asset, can
materially impact the net income of the periods subsequent to the acquisition
through depreciation and amortization, and in certain instances through
impairment charges, if the asset becomes impaired in the future. In determining
the estimated fair value for intangible assets, Ricoh typically utilizes the
income approach, which discounts the projected future net cash flow using an
appropriate
-38-
discount rate that reflects the risks associated with such projected future cash
flow. Determining the useful life of an intangible asset also requires judgment,
as different types of intangible assets will have different useful lives and
certain assets may even be considered to have indefinite useful lives.
Intangible assets determined to have an indefinite useful life have been
reassessed periodically based on the factors prescribed in SFAS No. 142
including, but not limited to, the expected use of the asset by us, legal or
contractual provisions that may affect the useful life or renewal or extension
of the asset's contractual life without substantial cost, and the effects of
demand, competition and other economic factors.
Impairment of Long-Lived Assets and Goodwill
--------------------------------------------
As of March 31, 2009, the aggregate of Ricoh's property, goodwill and
intangible assets was Yen 684.7 billion, which accounted for 27.2% of the total
assets. Ricoh believes that impairment of long-lived assets and goodwill are
critical to Ricoh's financial statements because the recoverability of the
amounts or lack thereof, could significantly affect its results of operations.
Ricoh periodically reviews the carrying value of its goodwill for
continued appropriateness. This review is based upon Ricoh's projections of
anticipated future cashflows and estimated fair value of the reporting units for
which goodwill is assigned. Ricoh reviews long-lived assets and acquired
intangible assets with a definite life for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset or asset group
may not be recoverable. The recoverability of assets to be held and used is
assessed by comparing the carrying amount of an asset or asset group to the
expected future undiscounted net cashflows of the asset or asset group. If an
asset or asset group 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 asset group 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.
While Ricoh believes that its estimates of future cashflows are
reasonable, different assumptions regarding such cashflows could materially
affect Ricoh's evaluations.
Impairment of Securities
------------------------
Individual securities classified as available-for-sale securities are
reduced to their fair market value by a charge to income for declines in value
that are not temporary. Factors considered in assessing whether an impairment
other than a temporary impairment exists include: (1) the length of time and
extent of decline, (2) the financial condition and near term prospects of the
issuer and (3) the intent and ability of Ricoh to retain such investment for a
period of time sufficient to allow for any anticipated recovery in market value.
Ricoh believes that impairment of securities is critical for its financial
statements because it holds significant amounts of securities, the
recoverability of which or lack thereof, could significantly affect its results
of operations.
-39-
Realizability of Deferred Tax Assets
------------------------------------
Ricoh records deferred tax assets and liabilities using the effective
tax rate taking into consideration the effect of temporary differences between
the book and tax bases of assets and liabilities. If the effective tax rate were
to change, Ricoh would adjust its deferred tax assets and liabilities, through
the provision for income taxes in the period of change, to reflect the effective
tax rate expected to be in effect when the deferred tax items reverse.
Ricoh records a valuation allowance to reduce Ricoh's deferred tax
assets to an amount that is more likely than not to be recoverable. Ricoh
considers future market conditions, forecasted earnings, future taxable income,
the mix of earnings in the jurisdictions in which Ricoh operates, and prudent
and feasible tax planning strategies in determining the need for a valuation
allowance. In the event Ricoh were to determine that Ricoh would not be able to
recover any portion of Ricoh's net deferred tax assets in the future, the
unrecoverable portion of the deferred tax assets would be charged to earnings
during the period in which such determination is made. Likewise, if Ricoh were
to later determine that it is more likely than not that the net deferred tax
assets would be recoverable, the previously recovered valuation allowance would
be reversed. In order to recover its deferred tax assets, Ricoh must be able to
generate sufficient taxable income in the tax jurisdictions in which the
deferred tax assets are located.
See Note 2 to the Consolidated Financial Statements for "New
Accounting Standards."
-40-
A. Operating Results
The following table sets forth selected consolidated financial data,
including data expressed as a percentage of total consolidated net sales for the
periods indicated, and the change in each consolidated financial line item
between the indicated fiscal years:
Thousands
Millions of Yen (except percentages) of U.S. % Change
----------------------------------------------------------------- Dollars -----------
2007 2008 2009 2009/(2)/ 2008 2009
-------------------------------------------------------------------------------------------
Net sales
Products Yen 1,189,548 Yen 1,292,228 Yen 1,027,694 $10,380,747 8.6 (20.5)
Post sales and rentals 768,965 817,230 955,490 9,651,414 6.3 16.9
Other revenue 110,412 110,531 108,512 1,096,081 0.1 (1.8)
--------------------------------------------------------------------------------------------------------------------------------
Total 2,068,925 100.0% 2,219,989 100.0% 2,091,696 100.0% 21,128,242 7.3 (5.8)
--------------------------------------------------------------------------------------------------------------------------------
Cost of sales
Products 783,681 855,852 710,892 7,180,727 9.2 (16.9)
Post sales and rentals 335,444 346,945 440,510 4,449,596 3.4 27.0
Other revenue 87,394 89,465 85,908 867,758 2.4 (4.0)
--------------------------------------------------------------------------------------------------------------------------------
Total 1,206,519 58.3% 1,292,262 58.2% 1,237,310 59.1% 12,498,081 7.1 (4.3)
--------------------------------------------------------------------------------------------------------------------------------
Gross profit 862,406 41.7% 927,727 41.8% 854,386 40.8% 8,630,162 7.6 (7.9)
Selling, general and
administrative expenses 688,026 33.3% 746,221 33.6% 779,850 37.2% 7,877,273 8.5 4.5
--------------------------------------------------------------------------------------------------------------------------------
Operating income 174,380 8.4% 181,506 8.2% 74,536 3.6% 752,889 4.1 (58.9)
--------------------------------------------------------------------------------------------------------------------------------
Other (income) expenses:
Interest and dividend
income (5,501) (6,341) (5,227) (52,798)
Interest expense 7,350 4,835 5,863 59,222
Foreign currency exchange
(gain) loss, net 1,199 10,901 15,576 157,333
Loss on impairment of securities 270 142 26,837 271,081
Other, net (3,457) (2,700) 549 5,546
--------------------------------------------------------------------------------------------------------------------------------
Total (139) (0.0%) 6,837 0.3% 43,597 2.0% 440,374 -- 537.7
--------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes, minority
interests and equity in earnings
of affiliates 174,519 8.4% 174,669 7.9% 30,939 1.5% 312,515 0.1 (82.3)
--------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes: 64,326 3.1% 63,396 2.9% 22,158 1.1% 223,818 (1.4) (65.0)
--------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before minority interests and
equity in earnings of affiliates 110,193 111,273 8,781 88,697
Minority interests 5,508 6,057 2,322 23,455
Equity in earnings of affiliates 1,539 1,247 71 717
--------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 106,224 5.1% 106,463 4.8% 6,530 0.3% 65,960 0.2 (93.9)
--------------------------------------------------------------------------------------------------------------------------------
Income from discontinued
operations, net of tax /(1)/ 5,500 0.3% -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Net income 111,724 5.4% 106,463 4.8% 6,530 0.3% 65,960 (4.7) (93.9)
--------------------------------------------------------------------------------------------------------------------------------
-41-
YEN Change
----------------------------------------------------------------- -----------------------
Reference: Exchange Rates* 2007 2008 2009 2008 2009
-------------------------------------------------------------------------------------------------------------------------------
US$ 1 Yen 117.02 Yen 114.40 Yen 100.55 Yen (2.62) Yen (13.85)
EURO 1 Yen 150.08 Yen 161.69 Yen 143.74 Yen 11.61 Yen (17.95)
* These rates are the annual average exchange rate of the daily average TTM
rates published by The Bank of Tokyo-Mitsubishi UFJ, Ltd. These rates are
used when consolidating the financial results of Ricoh's overseas
subsidiaries with those of the Company.
Notes:
/(1)/ During fiscal year 2007, a subsidiary of the Company sold its content
distribution business. As a result of such sale, the operating results of
such business were reclassified as a discontinued operation. Accordingly,
sales derived from such business were excluded from the above consolidated
financial data for fiscal year 2007 in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."
/(2)/ The above consolidated financial data set forth under the heading
"Thousands of U.S. Dollars 2009," which have been translated from Japanese
Yen to U.S. Dollar for the year ended March 31, 2009, are included solely
for the convenience of readers outside of Japan and have been calculated
using the exchange rate of Yen 99 to US$1, the approximate rate of
exchange prevailing at the Federal Reserve Board on March 31, 2009.
-42-
SALES BY PRODUCT
Thousands
Millions of Yen (except for percentages) of U.S. % Change
---------------------------------------------------------------- Dollars -----------
2007 2008 2009 2009/(2)/ 2008 2009
-----------------------------------------------------------------------------------------------------------------------
IMAGING AND SOLUTIONS
Imaging Solutions Yen 1,580,155 76.4% Yen 1,709,491 77.0% Yen 1,598,614 76.4% $16,147,616 8.2 (6.5)
Network System Solutions 194,312 9.4 200,082 9.0 234,484 11.2 2,368,525 3.0 17.2
INDUSTRIAL PRODUCTS 133,387 6.4 144,340 6.5 115,550 5.5 1,167,172 8.2 (19.9)
OTHER 161,071 7.8 166,076 7.5 143,048 6.9 1,444,929 3.1 (13.9)
Total Yen 2,068,925 100.0% Yen 2,219,989 100.0% Yen 2,091,696 100.0% $21,128,242 7.3 (5.8)
-----------------------------------------------------------------------------------------------------------------------
Notes:
/(1)/ During fiscal year 2007, a subsidiary of the Company sold its content
distribution business. As a result of such sale, the operating results of
such business were reclassified as a discontinued operation. Accordingly,
sales derived from such business were excluded from the above consolidated
financial data for fiscal year 2007 in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."
/(2)/ The above consolidated financial data set forth under the heading
"Thousands of U.S. Dollars 2009," which have been translated from Japanese
Yen to U.S. Dollar for the year ended March 31, 2009, are included solely
for the convenience of readers outside of Japan and have been calculated
using the exchange rate of Yen 99 to US$1, the approximate rate of
exchange prevailing at the Federal Reserve Board on March 31, 2009.
/(3)/ The above consolidated financial data set forth net sales to external
customers by product.
FISCAL YEAR 2009 COMPARED TO FISCAL YEAR 2008
Net sales. Consolidated net sales of Ricoh for fiscal year 2009
decreased by 5.8% (or Yen 128.3 billion) to Yen 2,091.6 billion from Yen 2,219.9
billion for fiscal year 2008. For fiscal year 2009, Ricoh recorded a decrease in
net sales in all of its operating segments. This decrease was due primarily to
the decrease in customer demand for Ricoh products resulting from the global
economic recession stemming from the global financial crisis.
More specifically, the 5.8% decrease was due primarily to the 20.5%
decrease in sale of products, which was partially offset by an increase in sale
of post sales services.
The net effect of the depreciation of the U.S. Dollar and the Euro in
relation to the Japanese Yen also adversely affected Ricoh's consolidated net
sales in fiscal year 2009 as compared to fiscal year 2008 in Japanese Yen. Had
the foreign currency exchange rates remained the same as in fiscal year 2008,
Ricoh's consolidated net sales would have increased by 1.1%.
Products. The 20.5% decrease in net sales derived from products was
--------
due primarily to the decrease in net sales of PPCs/MFPs and laser printers
resulting primarily from the sharp decrease in capital spending by customers due
to the global economic recession which started with the global financial crisis,
and the appreciation of the Japanese Yen. In addition, Ricoh lowered the sales
price of certain products to stimulate sales in the sluggish and competitive
market, which contributed to the decrease in net sales. Despite such
environment, Ricoh continued to introduce new product models with advanced
features during fiscal year 2009 and Ricoh recorded an increase in the number of
color MFP units sold as such products were favorably received by customers who
wished to expand their office digital color networking capacity. While net sales
generated by products sold by IKON and InfoPrint Solutions Company during fiscal
year 2009 contributed to net sales, such increase was not sufficient to fully
offset the decrease in net sales of PPCs/MFPs and laser printers.
Post sales and rentals. Net sales derived from post sales services and
----------------------
rentals of equipment increased 16.9% compared to the previous fiscal year due
primarily to an
-43-
increase in sales from post sale services, such as maintenance services, as well
as an increase in sales of supplies for PPCs/MFPs, laser printers and GELJET
printers. This increase in sales of post sale services and supplies was
generated primarily by the increase in the number of equipment in operation
(commonly known as machines-in-field, which include new equipment) and the
increase in sales of value-added supplies for color products (as opposed to
monochrome products). In addition, sales in the network solutions business, such
as support services that assist customers establish networked environments in
connection with Ricoh's imaging solutions products, solution software and IKON's
document outsourcing services (such as on-site printing services), also
contributed to the increase in sales of post sales and rentals.
Other revenue. Net sales derived from other sources (such as financing
-------------
and logistics) decreased mainly due to decreased net sales from financing
services, which decreased as sales of products decreased.
Cost of sales. Consolidated cost of sales for fiscal year 2009
decreased by 4.3% (or Yen 54.9 billion) to Yen 1,237.3 billion from Yen 1,292.2
billion for fiscal year 2008. This decrease was due primarily to the decrease in
sales of products in both of the operating segments as well as the net effect of
the depreciation of the U.S. Dollar and the Euro in relation to the Japanese
Yen.
Products. Cost of sales derived from products decreased by 16.9% due
--------
primarily to the decrease in sales of products in both of the operating segments
as well as the net effect of the depreciation of the U.S. Dollar and the Euro in
relation to the Japanese Yen. In addition, because Ricoh reduced its production
volume in response to the decrease in demand, Ricoh was not able to fully absorb
certain fixed.
Post sales and rentals. Cost of sales derived from post sales services
----------------------
and rentals of equipment increased by 26.9%due primarily to the increase in
sales from post sale services, such as maintenance services, as well as an
increase in sales of supplies for PPCs/MFPs, laser printers and GELJET printers.
Other revenue. Cost of sales derived from other sources (such as
-------------
financing and logistics) decreased by 3.9% due mainly to decreased net sales
from financing services, which decreased as sales of products decreased.
Gross profit. Consolidated gross profit for fiscal year 2009 decreased
by 7.9% (or Yen 73.3 billion) to Yen 854.3 billion from Yen 927.7 billion for
fiscal year 2008. This decrease in gross profit primarily reflects the decrease
in net sales in Ricoh's operating segments as well as the net effect of the
depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. In
addition, net sales decreased at a higher percentage rate than cost of sales due
to the fact that Ricoh lowered the sales price of certain products to stimulate
sales in the sluggish and competitive market, and Ricoh was not able to fully
absorb certain fixed costs as a result of the decrease in production volume.
Selling, general and administrative expenses. Consolidated selling,
general and administrative expenses for fiscal year 2009, increased by 4.5% (or
Yen 33.6 billion) to Yen 779.8 billion from Yen 746.2 billion for fiscal year
2008. While group-wide cost reduction efforts partially decreased ongoing
operating expenditures, Ricoh incurred additional
-44-
strategic expenses in connection with its efforts to (1) enhance its sales and
service structures, such as through the IKON acquisition, (2) expand its
production printing business and (3) make structural changes aimed at improving
its operational efficiency on a worldwide basis of all aspects of its R&D,
manufacturing and sales operations. Fiscal year 2009 was also the first year in
which selling, general and administrative expenses of IKON (for part of the
fiscal year) and InfoPrint Solutions Company (for the full fiscal year) were
reflected in Ricoh's consolidated financial statements, which contributed to the
increase in selling, general and administrative expenses. Ricoh invested Yen
124.4 billion in R&D activity during fiscal year 2009 (which was Yen 1.6 billion
less than fiscal year 2008) for purposes of developing PPCs/MFPs, laser
printers, GELJET printers and production printing products with new capabilities
to maintain Ricoh's large market share position in these products in the current
competitive marketplace. While the net effect of the depreciation of the U.S.
Dollar and the Euro in relation to the Japanese Yen resulted in a decrease in
selling, general and administrative expenses of approximately Yen 49.9 billion,
and the R&D expenses decreased by Yen 1.6 billion as mentioned above, such
decreases were not sufficient to fully offset the various items discussed above
that increased selling, general and administrative expenses.
Operating income. Consolidated operating income for fiscal year 2009
decreased by 58.9% (or Yen 106.9 billion) to Yen 74.5 billion from Yen 181.5
billion for fiscal year 2008. Operating income as a percentage of net sales
decreased by 4.6 percentage points from 8.2% for fiscal year 2008 to 3.6% for
fiscal year 2009. This significant decrease in operating income compared to
fiscal year 2008 was due primarily to the decrease in gross profit resulting
from the decrease in net sales and to the increase in selling, general and
administrative expenses, as Ricoh incurred certain expenses during fiscal year
2009 to expand its business and improve its operational efficiency as discussed
above, and the expenses of IKON and InfoPrint Solutions Company were reflected
in Ricoh's consolidated financial statements.
Interest and dividend income. Consolidated interest and dividend
income for fiscal year 2009 decreased by Yen 1.1 billion to Yen 5.2 billion from
Yen 6.3 billion for fiscal year 2008. This decrease in interest and dividend
income was attributable to lower interest rates reflecting the adverse financial
market conditions on a global basis.
Interest expense. Consolidated interest expense for fiscal year 2009
increased by Yen 1.0 billion to Yen 5.8 billion from Yen 4.8 billion for fiscal
year 2008. This increase in interest expense reflected the increase in the
amount of outstanding interest-bearing debt that Ricoh borrowed from third
parties in fiscal year 2009 in connection with its acquisition of IKON.
Loss on impairment of securities. Consolidated loss on impairment of
securities for fiscal year 2009 increased by Yen 26.6 billion to Yen 26.8
billion from Yen 0.1 billion for fiscal year 2008. This increase in loss on
impairment of securities was attributable to the decrease in the stock markets.
Foreign currency exchange (gain) loss, net. Consolidated foreign
currency exchange loss, net included in other (income) expenses for fiscal year
2009 increased by Yen 4.6 billion to Yen 15.5 billion from Yen 10.9 billion for
fiscal year 2008. For additional
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information on Ricoh's foreign exchange hedging activities, see Item 11.
Quantitative and Qualitative Disclosures About Market Risk.
Other, net. Consolidated other, net included in other (income)
expenses changed to a loss of Yen 0.5 billion for fiscal year 2009 from an
income of Yen 2.7 billion for fiscal year 2008.
Provision for income taxes. Total consolidated provision for income
taxes for fiscal year 2009 decreased by Yen 41.2 billion to Yen 22.1 billion
from Yen 63.3 billion for fiscal year 2008. The effective tax rate was 71.6% for
fiscal year 2009 compared to 36.3% for fiscal year 2008. The effective tax rate
was higher than the Japanese statutory tax rate of approximately 40%. See Note 9
to the Consolidated Financial Statements for additional information.
Minority interests. Consolidated minority interests for fiscal year
2009 decreased by Yen 3.7 billion to Yen 2.3 billion from Yen 6.0 billion for
fiscal year 2008. This decrease was due primarily to the fact that Ricoh no
longer recorded earnings for Ricoh Elemex, which became a wholly-owned
subsidiary during fiscal year 2009 through a share exchange that was completed
in August 2008.
Equity in earnings of affiliates. Consolidated equity in earnings of
affiliates for fiscal year 2009 decreased by Yen 1.1 billion to Yen 0.0 billion
from Yen 1.2 billion for fiscal year 2008. This decrease was due primarily to
the fact that Ricoh no longer recorded any earnings for a company that ceased to
be an affiliate as of October 2007 due to certain restructuring initiatives
undertaken by such company. See Note 7 to the Consolidated Financial Statements
for additional information.
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OPERATING SEGMENTS
Millions of Yen (except for percentages) Thousands of
--------------------------------------------- U.S. Dollars
2008 2009 2009/(2)/ % Change
----------------------------------------------------------------------------------------------------
IMAGING AND SOLUTIONS
Net sales Yen 1,909,573 100.0% Yen 1,833,098 100.0% $18,516,141 (4.0)
Operating expenses 1,674,940 87.7 1,687,732 92.1% 17,047,798 0.8
Operating income Yen 234,633 12.3% Yen 145,366 7.9% $ 1,468,343 (38.0)
INDUSTRIAL PRODUCTS
Net sales Yen 148,883 100.0% Yen 119,671 100.0% $ 1,208,798 (19.6)
Operating expenses 144,708 97.2 124,597 104.1 1,258,556 (13.9)
Operating income (loss) Yen 4,175 2.8% Yen (4,926) (4.1)% $ (49,758) --
OTHER
Net sales Yen 166,076 100.0% Yen 143,048 100.0% $ 1,444,929 (13.9)
Operating expenses 163,529 98.5 142,690 99.7 1,441,313 (12.7)
Operating income Yen 2,547 1.5% Yen 358 0.3% $ 3,616 (85.9)
CORPORATE AND ELIMINATION
Net sales Yen (4,543) Yen (4,121) $ (41,626)
Operating expenses 55,306 62,141 627,687
Operating income (loss) Yen (59,849) Yen (66,262) $ (669,313)
CONSOLIDATED
Net sales Yen 2,219,989 100.0% Yen 2,091,696 100.0% $21,128,242 (5.8)
Operating expenses 2,038,483 91.8 2,017,160 96.4 20,375,354 (1.0)
Operating income Yen 181,506 8.2% Yen 74,536 3.6% $ 752,889 (58.9)
Notes:
/(1)/ During fiscal year 2007, a subsidiary of the Company sold its content
distribution business. As a result of such sale, the operating
results of such business were reclassified as a discontinued
operation. Accordingly, sales derived from such business were
excluded from the above segment data for fiscal year 2007 in
accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."
/(2)/ The above consolidated financial data set forth under the heading
"Thousands of U.S. Dollars 2009," which have been translated from
Japanese Yen to U.S. Dollar for the year ended March 31, 2009, are
included solely for the convenience of readers outside of Japan and
have been calculated using the exchange rate of Yen 99 to US$1, the
approximate rate of exchange prevailing at the Federal Reserve Board
on March 31, 2009.
/(3)/ The above consolidated financial data, which set forth net sales,
operating expenses and operating income (loss) for each operating
segment, include both transactions with external customers as well as
intersegment transactions. Notwithstanding the foregoing, all net
sales recorded in the Imaging and Solutions operating segment and the
Other operating segment reflect sales to external customers only, as
none of the products in the Imaging and Solutions operating segment
or the Other operating segment were sold to other Ricoh group
companies that conduct businesses in the other operating segments.
Accordingly, the consolidated net sales figure for the Imaging and
Solutions operating segment set forth in the above table is the
aggregate of the sales figures for the Imaging Solutions product
category and the Network System Solutions product category set forth
in the "SALES BY PRODUCT" table included under Item 5.A. Operating
Results.
Consolidated net sales of Ricoh for fiscal year 2009 decreased by
5.8% (or Yen 128.3 billion) to Yen 2,091.6 billion from Yen 2,219.9 billion for
fiscal year 2008.
This 5.8% percent decrease was due primarily to the 4.0% decrease in
sales in the Imaging and Solutions segment which accounted for 87.6% of
consolidated net sales. The 4.0% decrease in sales in the Imaging and Solutions
segment was in turn due primarily to the 6.5% decrease in sales in the Imaging
Solutions category, which accounted for 76.4% of consolidated net sales. The
6.5% decrease in sales in the Imaging Solutions category was partially offset by
the 17.2% increase in net sales in the Network System Solutions category.
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Imaging and Solutions
Net sales in the Imaging and Solutions segment for fiscal year 2009
decreased by 4.0% (or Yen 76.4 billion) to Yen 1,833.0 billion from Yen 1,909.5
billion for fiscal year 2008. This decrease was due primarily to lower sales
recorded in the Imaging Solutions category.
More specifically, sales in the Imaging Solutions category for fiscal
year 2009 decreased by 6.5% (or Yen 110.8 billion) to Yen 1,598.6 billion from
Yen 1,709.4 billion for fiscal year 2008. This decrease was due primarily to the
decrease in net sales of monochrome PPCs/MFPs and the net effect of the
depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen.
The decrease in net sales of monochrome PPCs/MFPs was due primarily to the
effects of the global economic recession and the shift in customer demand from
monochrome products to products with color capabilities. Color PPCs/MFPs still
remained popular among customers, especially overseas, as these products are
equipped with advanced digital and networking technologies, which address
customers' needs for conducting business operations effectively and efficiently
by digitalizing and colorizing documents and enabling the handling of large
volumes of information. Accordingly, due to their popularity, net sales of
value-added supplies for color PPCs/MFPs remained strong and together with the
net sales generated by IKON and InfoPrint Solutions Company contributed to the
overall net sales in this category. Nonetheless, the contributions these factors
made to net sales were not sufficient to fully offset the decrease in net sales
of monochrome PPCs/MFPs resulting from the global economic recession and the
sharp decrease in customer demand for monochrome PPCs/MFPs. In addition, Ricoh
lowered the sales price of certain products to stimulate sales in the sluggish
and competitive market, which contributed to the decrease in net sales.
Sales in the Network System Solutions category for fiscal year 2009
increased by 17.2% (or Yen 34.4 billion) to Yen 234.4 billion from Yen 200.0
billion for fiscal year 2008. Sales in the solutions business, such as support
services that assist customers establish networked environments in connection
with Ricoh's imaging solutions products and solutions with software to optimize
total printing costs, continued to increase in the overseas markets in fiscal
year 2009. Sales in the printing solutions business increased because customers
sought products that streamlined the process of document scanning, indexing and
distribution by integrating hardware and software. In addition, IKON's document
outsourcing services (such as on-site printing services) also contributed to the
increase in sales in this category.
Excluding the net effect of the foreign currency exchange rate
fluctuations, sales in the Imaging and Solutions segment would have increased by
3.7% (or Yen 70.9 billion) for fiscal year 2009 as compared to fiscal year 2008.
For fiscal year 2009, the cost of sales in the Imaging and Solutions
segment decreased due primarily to the decrease in net sales and the net effect
of the appreciation of the Japanese Yen in relation to the U.S. Dollar and the
Euro. In addition, because Ricoh reduced its production volume in response to
the decrease in demand, Ricoh was not able to fully absorb certain fixed costs.
In terms of selling, general and administrative
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expenses, while the group-wide cost reduction efforts contributed to a decline
in ongoing operating expenditures, Ricoh incurred additional strategic expenses
in connection with its efforts to (1) enhance its sales and service structures,
such as through the IKON acquisition, (2) expand its production printing
business and (3) make structural changes aimed at improving its operational
efficiency in this segment. As a result, operating expenses in the Imaging and
Solutions segment for fiscal year 2009 increased by 0.8% (or Yen 12.7 billion)
to Yen 1,687.7 billion from Yen 1,674.9 billion for fiscal year 2008.
Operating income for the Imaging and Solutions segment for fiscal year
2009 decreased by 38.0% (or Yen 89.2 billion) to Yen 145.3 billion from Yen
234.6 billion for fiscal year 2008. Operating income as a percentage of net
sales for fiscal year 2009 decreased by 4.4 percentage points to 7.9% from 12.3%
as compared to fiscal year 2008, due primarily to the decrease in net sales and
increase in selling, general and administrative expenses as discussed above.
Industrial Products
Net sales in the Industrial Products segment for fiscal year 2009
decreased by 19.6% (or Yen 29.2 billion) to Yen 119.6 billion from Yen 148.8
billion for fiscal year 2008. This decrease was due primarily to the decrease in
sales of semiconductors devices, thermal media and electronic components, which
experienced a sharp decline in demand due primarily to the global economic
recession.
Operating expenses in this segment for fiscal year 2009, decreased by
13.9% (or Yen 20.1 billion) to Yen 124.5 billion from Yen 144.7 billion for
fiscal year 2008. This decrease was due primarily to the decrease in cost of
sales resulting from the decrease in net sales. Selling, general and
administrative expenses decreased slightly due mainly to the decrease in net
sales and in ongoing operating expenditures as a result of group-wide cost
reduction efforts.
As a result, operating income (loss) for the Industrial Products
segment for fiscal year 2009 decreased by Yen 9.1 billion to an operating loss
of Yen 4.9 billion from an operating income of Yen 4.1 billion for fiscal year
2008.
Other
Net sales in the Other segment for fiscal year 2009 decreased by 13.9%
(or Yen 23.0 billion) to Yen 143.0 billion from Yen 166.0 billion for fiscal
year 2008. During fiscal year 2009, sales of digital cameras decreased due
primarily to weak demand for new digital camera products that Ricoh introduced.
In addition, net sales from the financing business conducted by Ricoh Leasing
Co., Ltd. decreased due mainly to the sharp decline in corporate demand for
capital investments as a result of the economic recession in Japan.
Operating expenses in this segment for fiscal year 2009 decreased by
12.7% (or Yen 20.8 billion) to Yen 142.6 billion from Yen 163.5 billion for
fiscal year 2008. This decrease was due primarily to the decrease in cost of
sales resulting from the decrease in net sales. Selling, general and
administrative expenses decreased slightly due mainly to the
-49-
decrease in net sales and in ongoing operating expenditures as a result of
group-wide cost reduction efforts.
As a result, operating income for the Other segment for fiscal year
2009 decreased by Yen 2.1 billion to Yen 0.3 billion as compared to Yen 2.5
billion for fiscal year 2008. Operating income as a percentage of net sales for
fiscal year 2009 decreased by 1.2 percentage points to 0.3% from 1.5 % as
compared to fiscal year 2008.
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GEOGRAPHIC SEGMENTS BY GEOGRAPHIC ORIGIN
Millions of Yen (except for percentages) Thousands of
------------------------------------------- U.S. Dollars
2008 2009 2009/(2)/ % Change
-------------------------------------------------------------------------------------------------
JAPAN
Net sales Yen 1,535,513 100.0% Yen 1,393,196 100.0% $14,072,687 (9.3)
Operating expenses 1,427,575 93.0 1,331,638 93.0 13,450,889 (6.7)
Operating income Yen 107,938 7.0% Yen 61,558 7.0% $ 621,798 (43.0)
THE AMERICAS
Net sales Yen 435,783 100.0% Yen 506,789 100.0% $ 5,119,081 16.3
Operating expenses 433,429 99.5 532,734 99.5 5,381,152 22.9
Operating income (loss) Yen 2,354 0.5% Yen (25,945) 0.5% $ (262,071) --
EUROPE
Net sales Yen 604,809 100.0% Yen 523,539 100.0% $ 5,288,273 (13.4)
Operating expenses 565,736 93.5 504,116 96.3 5,092,081 (10.9)
Operating income Yen 39,073 6.5% Yen 19,423 3.7% $ 196,192 (50.3)
OTHER
Net sales Yen 317,598 100.0% Yen 265,644 100.0% $ 2,683,273 (16.4)
Operating expenses 291,141 91.7 252,951 95.2 2,555,061 (13.1)
Operating income Yen 26,457 8.3% Yen 12,693 4.8% $ 128,212 (52.0)
CORPORATE AND ELIMINATION
Net sales Yen (673,714) Yen (597,472) $(6,035,071)
Operating expenses (679,398) (604,279) (6,103,828)
Operating income Yen 5,684 Yen 6,807 $ 68,758
CONSOLIDATED
Net sales Yen 2,219,989 100.0% Yen 2,091,696 100.0% $21,128,242 (5.8)
Operating expenses 2,038,483 91.8 2,017,160 96.4 20,375,354 (1.0)
Operating income Yen 181,506 8.2% Yen 74,536 3.6% $ 752,889 (58.9)
Notes:
/(1)/ During fiscal year 2007, a subsidiary of the Company sold its content
distribution business. As a result of such sale, the operating results of
such business were reclassified as a discontinued operation. Accordingly,
sales derived from such business were excluded from the above segment data
for fiscal year 2007 in accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."
/(2)/ The above consolidated financial data set forth under the heading
"Thousands of U.S. Dollars 2009," which have been translated from Japanese
Yen to U.S. Dollar for the year ended March 31, 2009, are included solely
for the convenience of readers outside of Japan and have been calculated
using the exchange rate of Yen 99 to US$1, the approximate rate of
exchange prevailing at the Federal Reserve Board on March 31, 2009.
/(3)/ The above consolidated financial data, which set forth net sales,
operating expenses and operating income (loss) for each geographic segment
by geographic origin, include both transactions with external customers as
well as intersegment transactions.
Japan
Sales in Japan for fiscal year 2009 decreased by 9.3% (or Yen 142.3
billion) to Yen 1,393.1 billion from Yen 1,535.5 billion for fiscal year 2008.
This decrease was due primarily to decreased sales of PPCs/MFPs, which decrease
was partially offset by the increase in sales of laser printers. The decrease in
sales of PPCs/MFPs was primarily attributable to (1) the deterioration of
customer demand in office equipment during fiscal year 2009 due mainly to the
global economic recession as customers reduced their capital investment in
office equipment and focused on reducing printing costs by reducing printing
volume, and (2) the appreciation of the Japanese Yen against the U.S. Dollar and
the Euro. The increase in sales of laser printers, which partially offset the
decrease in sales of PPCs/MFPs, was due primarily to increased sales of post
sales services such as maintenance services and supplies. Sales of solutions
products, such as support services, document management applications and other
software, decreased in Japan due to the
-51-
overall depressed market despite Ricoh's efforts to expand the "Operius"
business. In addition, decreased sales of semiconductor devices as well as
digital cameras also contributed to the overall decrease in sales in Japan.
Furthermore, Ricoh lowered the sales price of certain products to stimulate
sales in the sluggish and competitive market, which contributed to the decrease
in net sales.
Operating expenses in Japan for fiscal year 2009 decreased by 6.7% (or
Yen 95.9 billion) to Yen 1,331.6 billion from Yen 1,427.5 billion for fiscal
year 2008. This decrease was due primarily to the decrease in cost of sales
resulting from the decrease in net sales. Selling, general and administrative
expenses also decreased due mainly to the decrease in net sales and in ongoing
operating expenditures as a result of Ricoh's group-wide cost reduction efforts.
As a result, operating income for fiscal year 2009 decreased by 43.0%
(or Yen 46.3 billion) to Yen 61.5 billion from Yen 107.9 billion for fiscal year
2008.
The Americas
Net sales in the Americas for fiscal year 2009 increased by 16.3% (or
Yen 71.0 billion) to Yen 506.7 billion from Yen 435.7 billion for fiscal year
2008. Despite sluggish economic conditions in the Americas due to the economic
recession in the United States and the net effect of the depreciation of the
U.S. Dollar relative to the Japanese Yen, Ricoh recorded increased sales of
value-added color PPCs/MFPs and laser printers in the Americas for fiscal year
2009. This increase in sales was due mainly to the fact that (1) Ricoh
introduced new models that responded to the diverse range of customer needs for
color, networking and high-speed products in this geographic segment and (2)
fiscal year 2009 was the first fiscal year in which net sales generated by IKON
for part of the fiscal year was consolidated into Ricoh, as IKON became a
consolidated subsidiary during fiscal year 2009, and net sales generated by
InfoPrint Solutions Company for the full fiscal year was consolidated into
Ricoh, as InfoPrint Solutions Company became a consolidated subsidiary during
fiscal year 2008.
Operating expenses in the Americas for fiscal year 2009 increased by
22.9% (or Yen 99.3 billion) to Yen 532.7 billion from Yen 433.4 billion for
fiscal year 2008. Despite the increase in sales of value-added color PPCs/MFPs
and laser printers, operating expenses increased at a higher percentage of
increase than the increase in net sales due primarily to the increasingly
competitive business environment in the Americas which required Ricoh to
increase its strategic sales promotions and incur greater marketing related
expenses. In addition, the consolidation of expenses of IKON and InfoPrint
Solutions Company contributed to the increase in operating expenses in the
Americas.
As a result, operating income (loss) for fiscal year 2009 decreased by
Yen 28.2 billion to an operating loss of Yen 25.9 billion from an operating
income of Yen 2.3 billion for fiscal year 2008.
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Europe
Sales in Europe for fiscal year 2009 decreased by 13.4% (or Yen 81.2
billion) to Yen 523.5 billion from Yen 604.8 billion for fiscal year 2008. This
decrease in sales was due primarily to a decrease in sales of PPCs/MFPs
reflecting a decrease in demand for such products as a result of the global
financial crisis and the net effect of the depreciation of the Euro relative to
the Japanese Yen. While Ricoh continued to introduce new products that met
customer demand, such efforts were not sufficient to fully offset the decrease
in demand. In addition, Ricoh lowered the sales price of certain products to
stimulate sales in the sluggish and competitive market, which contributed to the
decrease in net sales.
Operating expenses in Europe for fiscal year 2009 decreased by 10.9%
(or Yen 61.6 billion) to Yen 504.1 billion from Yen 565.7 billion for fiscal
year 2008. This decrease was due primarily to the decrease in cost of sales
resulting from the decrease in net sales. Selling, general and administrative
expenses also decreased due mainly to the decrease in net sales.
As a result, operating income for fiscal year 2009 decreased by 50.3%
(or Yen 19.6 billion) to Yen 19.4 billion from Yen 39.0 billion for fiscal year
2008.
Other
Net sales in the Other geographic segment, which includes China, South
East Asia and Oceania, decreased for fiscal year 2009 by 16.4% (or Yen 51.9
billion) to Yen 265.6 billion from Yen 317.5 billion for fiscal year 2008. This
decrease was due primarily to the decrease in exports to other geographic
segments, reflecting decreased demand for Ricoh's products resulting from the
global economic recession stemming from the global financial crisis.
Operating expenses in the Others geographic segment for fiscal year
2009 decreased by 13.1% (or Yen 38.1 billion) to Yen 252.9 billion from Yen
291.1 billion for fiscal year 2008. This decrease was due primarily to the
decrease in cost of sales resulting from the decrease in exports to other
geographic segments. Selling, general and administrative expenses also decreased
due mainly to the decrease in net sales.
As a result, operating income for fiscal year 2009 decreased by 52.0%
(or Yen 13.7 billion) to Yen 12.6 billion from Yen 26.4 billion for fiscal year
2008.
FISCAL YEAR 2008 COMPARED TO FISCAL YEAR 2007
Net sales. Consolidated net sales of Ricoh for fiscal year 2008
increased by 7.3% (or Yen 151.0 billion) to Yen 2,219.9 billion from Yen 2,068.9
billion for fiscal year 2007. The increase in net sales in the Imaging and
Solutions segment and the Industrial Products segment primarily contributed to
this increase in net sales.
Net sales from the Imaging and Solutions segment accounted for
86.0% of Ricoh's consolidated net sales for fiscal year 2008. Net sales of
PPCs/MFPs, laser
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printers and GELJET printers, particularly those with color capabilities,
continued to increase during fiscal year 2008. In addition, net sales generated
by InfoPrint Solutions Company (whose net sales were reflected for part of the
fiscal year) and the European sales and service companies (formerly known as
Danka Business Systems PLC) acquired in fiscal year 2007 (whose net sales were
reflected for the full fiscal year for the first time) contributed to the
increase in net sales for the Imaging and Solutions segment for fiscal year
2008. More specifically, a significant portion of the net sales from the Imaging
and Solutions segment was derived from the Imaging Solutions category, which
accounted for 77.0% of Ricoh's total consolidated net sales, up 0.6 percentage
points from fiscal year 2007. The increase in net sales from the Imaging
Solutions category was due primarily to the increase in net sales of color
PPCs/MFPs, color and monochrome laser printers and GELJET printers. Net sales
derived from InfoPrint Solutions Company's production printing products as well
as Ricoh's ability to respond to its customers' demands by offering solutions
aimed at increasing management and workflow efficiencies and tailored to meet
their printing needs ranging from office network printers and mission-critical
business printers to high-speed, on-demand printing environments also
contributed to the increase in net sales in the Imaging Solutions category for
fiscal year 2008.
Sales of color PPCs/MFPs continued to grow in double-digit percentage
figures in both Japan and the overseas markets due in part to the introduction
of new value-added products that featured higher printing quality and enhanced
security functions. Compared to fiscal year 2007, net sales of color PPCs/MFPs
increased by 11.3% in Japan and 35.8% in the overseas markets as customer demand
in both Japan and the overseas markets continued to shift from monochrome to
color products. Similar to fiscal year 2007, sales of color and monochrome laser
printers and GELJET printers continued to grow in double-digit percentage
figures in fiscal year 2008 in Japan and the overseas markets. Compared to
fiscal year 2007, net sales of laser printers and GELJET printers increased by
8.9% in Japan and 88.8% in the overseas markets. These increases in laser
printers and GELJET printers were due primarily to the continuous release of new
value added products that adequately addressed customer needs in terms of
printing quality and speed in both Japan and the overseas markets. For example,
in fiscal year 2008, Ricoh introduced a new product lineup of low-end GELJET
printers, such as the IPSiO GX3000SF/GX3000S Series (also known as Aficio
GX3000SF/GX3000S/3050sfn when sold overseas), which were favorably received in
Japan and the overseas markets.
In addition to the increase in net sales in the Imaging Solutions
category, the increase in net sales in the Network System Solutions category,
which accounted for 9.0% of Ricoh's total consolidated net sales for fiscal year
2008, also contributed to the increase in net sales in the Imaging and Solutions
segment. Sales of information technology support services and software, which
are focused on enhancing customers' office printing environment, increased in
line with the increase in sales of Ricoh's solutions business (comprised not
only of sales of hardware but also sales of software and services). In Japan,
Ricoh focused on providing greater support services that assisted customers in
developing networked environments to optimize their printing costs and that lead
to increased sales of both hardware and software particularly following the
launch of its new solutions brand "Operius." As a result of these factors, net
sales in the Network
-54-
System Solutions category increased by 3.0% in fiscal year 2008 as compared to
fiscal year 2007.
In the Industrial Products segment, net sales increased by 8.2% in
fiscal year 2008 as compared to fiscal year 2007. This increase was due
primarily to the increase in sales of semiconductors and thermal media resulting
from stable market demand for such products. In particular, sales of
semiconductors increased due primarily to an increase in demand for Ricoh's
integrated circuits by manufacturers of electronic devices such as cellular
phones and PC card. The increase in sales in these products, however, was
partially offset by the decrease in sales of optical equipment due to lower
demand for rear projection products.
In the Other segment, net sales increased by 3.1% mainly due to the
continuous increase in sales of digital cameras and financing services.
The net effect of the depreciation of the U.S. Dollar and the
appreciation of the Euro in relation to the Japanese Yen also contributed to the
increase in consolidated net sales in fiscal year 2008 as compared to fiscal
year 2007 in Japanese Yen. Had the foreign currency exchange rates remained the
same as in fiscal year 2007, Ricoh's consolidated net sales would have increased
by 5.4%.
Products. The increase in net sales derived from products was due
primarily to the increase in net sales of color PPCs/MFPs, color and monochrome
laser printers and GELJET printers resulting from Ricoh's introduction of new
high- to low-end product models with advanced features, which were favorably
received by customers who wished to expand their office digital color networking
capacity. The increase in net sales of color PPCs/MFPs, color and monochrome
laser printers and GELJET printers completely offset the decrease in net sales
of optical equipment. In addition, net sales generated by products sold by
InfoPrint Solutions Company and the European sales and service companies
acquired in fiscal year 2007 contributed to the growth in net sales derived from
products.
Post sales and rentals. Net sales derived from post sales services and
rentals of equipment increased mainly due to an increase in revenue from post
sale services such as maintenance services as well as increased sales of
supplies for PPCs/MFPs, laser printers and GELJET printers. Ricoh continued to
direct its marketing and promotional efforts of its equipment rental services
towards major corporate clients in Japan and overseas.
Other revenue. Net sales derived from other sources increased mainly
due to an increase in revenue from financing services.
Cost of sales. Consolidated cost of sales for fiscal year 2008
increased by 7.1% (or Yen 85.7 billion) to Yen 1,292.2 billion from Yen 1,206.5
billion for fiscal year 2007. This increase was due primarily to the increase in
net sales of color PPCs/MFPs, color and monochrome laser printers and GELJET
printers. The increase in cost of sales was also attributable to the fact that
fiscal year 2008 was the first year in which (1) cost of sales incurred by
InfoPrint Solutions Company, which commenced its operation in June 2007
-55-
and (2) cost of sales for the full fiscal year incurred by the European sales
and service companies (formerly known as Danka Business Systems PLC) acquired in
fiscal year 2007, were reflected in Ricoh's financial statements. While overall
cost of sales increased due to the above factors, Ricoh was able to achieve
certain production efficiencies as a result of the increase in net sales of the
above products.
Gross profit. Consolidated gross profit for fiscal year 2008 increased
by 7.6% (or Yen 65.3 billion) to Yen 927.7 billion from Yen 862.4 billion for
fiscal year 2007. This increase in gross profit primarily reflects the increase
in net sales derived from new value-added products, such as color PPCs/MFPs,
color and monochrome laser printers and GELJET printers, as well as production
efficiencies achieved by Ricoh as a result of increased sale of some of its
products. Gross profit recorded by InfoPrint Solutions Company (for part of the
fiscal year) and the European sales and service companies (formerly known as
Danka Business Systems PLC) acquired in fiscal year 2007 (for the full fiscal
year) in Europe also contributed to the increase in consolidated gross profit
for fiscal year 2008.
Selling, general and administrative expenses. Consolidated selling,
general and administrative expenses for fiscal year 2008, increased by 8.5% (or
Yen 58.1 billion) to Yen 746.2 billion from Yen 688.0 billion for fiscal year
2007. Ricoh invested Yen 126.0 billion in R&D activity during fiscal year 2008
for purposes of developing more advanced PPCs/MFPs, laser printers and GELJET
printers with new capabilities to maintain Ricoh's large market share position
in these products in the current competitive marketplace. In addition Ricoh
incurred certain expenses relating to (1) investments in information
technologies in connection with the development of its core operating systems in
its offices in Japan and overseas and (2) the commencement of operations of
InfoPrint Solutions Company. Fiscal year 2008 was also the first year in which
selling, general and administrative expenses of InfoPrint Solutions Company (for
part of the fiscal year) and the European sales and service companies (formerly
known as Danka Business Systems PLC) acquired in fiscal year 2007(for the full
fiscal year) were reflected in Ricoh's consolidated financial statements.
Expenses relating to the consolidation of certain other sales and service
companies in Japan and overseas to improve operational efficiency, such as the
consolidation of sales and services companies in Europe, also contributed to the
increase in consolidated selling, general and administrative expenses for fiscal
year 2008. Furthermore, the net effect of the appreciation of the Euro and the
depreciation of the U.S. Dollar in relation to the Japanese Yen resulted in an
increase in selling, general and administrative expenses of approximately Yen
10.9 billion.
Operating income. Consolidated operating income for fiscal year 2008
increased by 4.1% (or Yen 7.1 billion) to Yen 181.5 billion from Yen 174.3
billion for fiscal year 2007. Operating income as a percentage of net sales
decreased by 0.2 percentage points from 8.4% for fiscal year 2007 to 8.2% for
fiscal year 2008. Despite the increase in sales of value-added products such as
color PPCs/MFPs, color and monochrome laser printers and GELJET printers, the
percentage of increase in gross profit was lower than the percentage of increase
in selling, general and administrative expenses due to certain expenses that
Ricoh incurred during fiscal year 2008 to expand its business and to improve its
operational efficiency as discussed above.
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Interest and dividend income. Consolidated interest and dividend
income for fiscal year 2008 increased by Yen 0.8 billion to Yen 6.3 billion from
Yen 5.5 billion for fiscal year 2007. This increase was attributable to the
increase in dividend income derived from equity investments in Japanese
companies reflecting the favorable financial market conditions and the positive
change in economic conditions in Japan.
Interest expense. Consolidated interest expense for fiscal year 2008
decreased by Yen 2.5 billion to Yen 4.8 billion from Yen 7.3 billion for fiscal
year 2007. This decrease in interest expense was attributable to the decrease in
the amount of outstanding interest-bearing debt owed to third parties, which
reflects Ricoh's continuing efforts to utilize funds available within Ricoh
rather than borrowing from third parties.
Foreign currency exchange (gain) loss, net. Consolidated foreign
currency exchange loss, net included in other (income) expenses for fiscal year
2008 increased by Yen 9.7 billion to Yen 10.9 billion from Yen 1.1 billion for
fiscal year 2007. For additional information on Ricoh's foreign exchange hedging
activities, see Item 11. Quantitative and Qualitative Disclosures About Market
Risk.
Other, net. Consolidated other, net included in other (income)
expenses decreased by Yen 0.7 billion to an income of Yen 2.7 billion for fiscal
year 2008 from an income of Yen 3.4 billion for fiscal year 2007. This decrease
in income of other, net in fiscal year 2008 was due to the decrease in income
derived from the sale of marketable securities as compared to fiscal year 2007.
Provision for income taxes. Total consolidated provision for income
taxes for fiscal year 2008 decreased by 1.4% (or Yen 0.9 billion) to Yen 63.3
billion from Yen 64.3 billion for fiscal year 2007. The effective tax rate was
36.3% for fiscal year 2008 compared to 36.9% for fiscal year 2007. The effective
tax rate was lower than the Japanese statutory tax rate of approximately 40%.
See Note 9 to the Consolidated Financial Statements for additional information.
Minority interests. Consolidated minority interests for fiscal year
2008 increased by Yen 0.5 billion to Yen 6.0 billion from Yen 5.5 billion for
fiscal year 2007. This increase was due primarily to improved performance of
Ricoh Elemex Corporation for fiscal year 2008.
Equity in earnings of affiliates. Consolidated equity in earnings of
affiliates for fiscal year 2008 decreased by Yen 0.2 billion to Yen 1.2 billion
from Yen 1.5 billion for fiscal year 2007. This decrease was due primarily to
the fact that Ricoh no longer recorded earnings for a company that ceased to be
an affiliate as of October 2007 due to certain restructuring initiatives
undertaken by such company. See Note 7 to the Consolidated Financial Statements
for additional information.
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OPERATING SEGMENTS
Millions of Yen (except for percentages) Thousands of
--------------------------------------------- U.S. Dollars
2007 2008 2008/(2)/ % Change
----------------------------------------------------------------------------------------------------
OFFICE SOLUTIONS
Net sales Yen 1,774,467 100.0% Yen 1,909,573 100.0% $19,095,730 7.6
Operating expenses 1,549,156 87.3 1,674,940 87.7 16,749,400 8.1
Operating income Yen 225,311 12.7% Yen 234,633 12.3% $ 2,346,330 4.1
INDUSTRIAL PRODUCTS
Net sales Yen 138,112 100.0% Yen 148,883 100.0% $ 1,488,830 7.8
Operating expenses 135,164 97.9 144,708 97.2 1,447,080 7.1
Operating income Yen 2,948 2.1% Yen 4,175 2.8% $ 41,7504 1.6
OTHER
Net sales Yen 161,071 100.0% Yen 166,076 100.0% $ 1,660,760 3.1
Operating expenses 158,868 98.6 163,529 98.5 1,635,290 2.9
Operating income Yen 2,203 1.4% Yen 2,547 1.5% $ 25,4701 5.6
CORPORATE AND ELIMINATION
Net sales Yen (4,725) Yen (4,543) $ (45,430)
Operating expenses 51,357 55,306 553,060
Operating income (loss) Yen (56,082) Yen (59,849) $ (598,490)
CONSOLIDATED
Net sales Yen 2,068,925 100.0% Yen 2,219,989 100.0% $22,199,890 7.3
Operating expenses 1,894,545 91.6 2,038,483 91.8 20,384,830 7.6
Operating income Yen 174,380 8.4% Yen 181,506 8.2% $ 1,815,060 4.1
Notes:
/(1)/ During fiscal year 2007, a subsidiary of the Company sold its content
distribution business. As a result of such sale, the operating
results of such business were reclassified as a discontinued
operation. Accordingly, sales derived from such business were
excluded from the above segment data for all periods in accordance
with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."
/(2)/ The above consolidated financial data set forth under the heading
"Thousands of U.S. Dollars 2008," which have been translated from
Japanese Yen to U.S. Dollar for the year ended March 31, 2008, are
included solely for the convenience of readers outside of Japan and
have been calculated using the exchange rate of Yen 100 to US$1, the
approximate rate of exchange prevailing at the Federal Reserve Board
on March 31, 2008.
/(3)/ The above consolidated financial data, which set forth net sales,
operating expenses and operating income (loss) for each operating
segment, include both transactions with external customers as well as
intersegment transactions.
Office Solutions
Net sales in the Imaging and Solutions segment for fiscal year
2008 increased by 7.6% (or Yen 135.1 billion) to Yen 1,909.5 billion from Yen
1,774.4 billion for fiscal year 2007. This increase was due primarily to the
growth recorded in the Imaging Solutions category. More specifically, sales in
the Imaging Solutions category for fiscal year 2008 increased by 8.2% (or Yen
129.3 billion) to Yen 1,709.4 billion from Yen 1,580.1 billion for fiscal year
2007. This increase was due primarily to the increase in net sales of
value-added color PPCs/ MFPs, color and monochrome laser printers and GELJET
printers in both Japan and the overseas markets. Color PPCs/MFPs remained
popular among customers as these products are equipped with advanced digital and
networking technologies, which address customers' needs for conducting business
operations effectively and efficiently by digitalizing and colorizing documents
and enabling the handling of large volumes of information. The increase in sales
of color and monochrome laser printers in fiscal year 2008 was due primarily to
the fact that the net sales of InfoPrint Solutions Company, which primarily
sells production printing products, were reflected in Ricoh's financial
statements. Production printing products are high-end laser
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printers that are primarily used in environments that require high-volume
printing, such as offices and data centers. The increase in sales derived from
production printing products contributed to the increase in sales in this
segment. In addition, Ricoh continued to release products with enhanced security
features and products that are friendly to the environment. Furthermore, Ricoh
continued to offer solutions to optimize the total printing costs of its
customers in fiscal year 2008 to assist customers manage their TDV more
effectively and efficiently. On the other hand, sales of monochrome PPCs/MFPs
decreased in fiscal year 2008 due primarily to the shift in customer demand from
monochrome products to products with color capabilities.
Sales in the Network System Solutions category for fiscal year 2008
increased by 3.0% (or Yen 5.7 billion) to Yen 200.0 billion from Yen 194.3
billion for fiscal year 2007. Sales in the solutions business, such as support
services that assist customers establish networked environments in connection
with Ricoh's imaging solutions products and solutions with software to optimize
total printing costs, continued to increase in both Japan and the overseas
markets in fiscal year 2008. Sales in the printing solutions business increased
because customers sought products that streamlined the process of document
scanning, indexing and distribution by integrating hardware and software.
Excluding the net effect of the foreign currency exchange rate
fluctuations, sales in the Imaging and Solutions segment would have increased by
5.5% (or Yen 98.1 billion) for fiscal year 2008 as compared to fiscal year 2007.
For fiscal year 2008, cost of sales of the Imaging and Solutions segment
increased due primarily to the increase in net sales. Fiscal year 2008 was also
the first fiscal year in which the cost of sales and selling, general and
administrative expenses of InfoPrint Solutions Company (for part of the fiscal
year) and the European sales and service companies (formerly known as Danka
Business Systems PLC) acquired in fiscal year 2007 (for the full fiscal year)
were reflected in Ricoh's consolidated financial statements. In addition, Ricoh
incurred expenses relating to the increase of research and development
investments in its core products, such as PPCs/MFPs in the Imaging Solutions
category. Furthermore, Ricoh incurred certain selling, general and
administrative expenses in fiscal year 2008 in connection with the consolidation
of a number of sales and service companies in Europe. As a result, operating
expenses in the Imaging and Solutions segment for fiscal year 2008 increased by
8.1% (or Yen 125.7 billion) to Yen 1,674.9 billion from Yen 1,549.1 billion for
fiscal year 2007.
Operating income for the Imaging and Solutions segment for fiscal year 2008
increased by 4.1% (or Yen 9.3 billion) to Yen 234.6 billion from Yen 225.3
billion for fiscal year 2007. Operating income as a percentage of net sales for
fiscal year 2008 decreased by 0.4 percentage points to 12.3% from 12.7% as
compared to fiscal year 2007 primarily because the percentage increase in
operating expenses was greater than the percentage increase in net sales for the
same period.
Industrial Products
Net sales in the Industrial Products segment for fiscal year 2008 increased
by 7.8% (or Yen 10.7 billion) to Yen 148.8 billion from Yen 138.1 billion for
fiscal year 2007. Sales
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of semiconductors and thermal media increased due to stable market demand. In
particular, sales of semiconductors increased due primarily to an increase in
demand for Ricoh's integrated circuits by manufacturers of electronic devices
such as cellular phones and PC card. While sales in the optical equipment
business decreased from the previous fiscal year due primarily to the decrease
in demand for rear projection products, such decrease in sales was fully offset
by the increase in sales of the semiconductor and thermal media businesses.
Operating expenses in this segment for fiscal year 2008, increased by 7.1%
(or Yen 9.5 billion) to Yen 144.7 billion from Yen 135.1 billion for fiscal year
2007. This increase was due primarily to the increase in sales of products in
this segment.
As a result, operating income for the Industrial Products segment for
fiscal year 2008 increased by 41.6% (or Yen 1.2 billion) to Yen 4.1 billion from
Yen 2.9 billion for fiscal year 2007. Operating income as a percentage of net
sales for fiscal year 2008 increased by 0.7 percentage points to 2.8% from 2.1%
as compared to fiscal year 2007.
Other
Net sales in the Other segment for fiscal year 2008 increased by 3.1% (or
Yen 5.0 billion) to Yen 166.0 billion from Yen 161.0 billion for fiscal year
2007. During fiscal year 2008, sales of digital cameras increased due primarily
to the favorable response by customers to new digital camera products that Ricoh
introduced. The steady performance of the financing business by Ricoh Leasing
Co., Ltd. also contributed to the increase in net sales in this segment.
Operating expenses in this segment for fiscal year 2008, increased by 2.9%
(or Yen 4.6 billion) to Yen 163.5 billion from Yen 158.8 billion for fiscal year
2007.
As a result, operating income for the Other segment for fiscal year 2008
increased by Yen 0.3 billion to Yen 2.5 billion as compared to Yen 2.2 billion
for fiscal year 2007. Operating income as a percentage of net sales for fiscal
year 2008 increased by 0.1 percentage points to 1.5% from 1.4 % as compared to
fiscal year 2007.
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GEOGRAPHIC SEGMENTS BY GEOGRAPHIC ORIGIN
Millions of Yen (except for percentages) Thousands of
--------------------------------------------- U.S. Dollars
2007 2008 2008/(2)/ % Change
---------------------------------------------------------------------------------------------------
JAPAN
Net sales Yen 1,521,967 100.0% Yen 1,535,513 100.0% $15,355,130 0.9
Operating expenses 1,411,653 92.8 1,427,575 93.0 14,275,750 1.1
Operating income Yen 110,314 7.2% Yen 107,938 7.0% $ 1,079,380 (2.2)
THE AMERICAS
Net sales Yen 429,262 100.0% Yen 435,783 100.0% $ 4,357,830 1.5
Operating expenses 408,150 95.1 433,429 99.5 4,334,290 6.2
Operating income Yen 21,112 4.9% Yen 2,354 0.5% $ 23,540 (88.8)
EUROPE
Net sales Yen 511,795 100.0% Yen 604,809 100.0% $ 6,048,090 18.2
Operating expenses 478,380 93.5 565,736 93.5 5,657,360 18.3
Operating income Yen 33,415 6.5% Yen 39,073 6.5% $ 390,730 16.9
OTHER
Net sales Yen 269,043 100.0% Yen 317,598 100.0% $ 3,175,980 18.0
Operating expenses 251,486 93.5 291,141 91.7 2,911,410 15.8
Operating income Yen 17,557 6.5% Yen 26,457 8.3% $ 264,570 50.7
CORPORATE AND ELIMINATION
Net sales Yen (663,142) Yen (673,714) $(6,737,140)
Operating expenses (655,124) (679,398) (6,793,980)
Operating income (loss) Yen (8,018) Yen 5,684 $ 56,840
CONSOLIDATED
Net sales Yen 2,068,925 100.0% Yen 2,219,989 100.0% $22,199,890 7.3
Operating expenses 1,894,545 91.6 2,038,483 91.8 20,384,830 7.6
Operating income Yen 174,380 8.4% Yen 181,506 8.2% $ 1,815,060 4.1
Notes:
/(1)/ During fiscal year 2007, a subsidiary of the Company sold its content
distribution business. As a result of such sale, the operating
results of such business were reclassified as a discontinued
operation. Accordingly, sales derived from such business were
excluded from the above segment data for all periods in accordance
with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."
/(2)/ The above consolidated financial data set forth under the heading
"Thousands of U.S. Dollars 2008," which have been translated from
Japanese Yen to U.S. Dollar for the year ended March 31, 2008, are
included solely for the convenience of readers outside of Japan and
have been calculated using the exchange rate of Yen 100 to US$1, the
approximate rate of exchange prevailing at the Federal Reserve Board
on March 31, 2008.
/(3)/ The above consolidated financial data, which set forth net sales,
operating expenses and operating income (loss) for each geographic
segment by geographic origin, include both transactions with external
customers as well as intersegment transactions.
Japan
Sales in Japan for fiscal year 2008 increased by 0.9% (or Yen 13.5 billion)
to Yen 1,535.5 billion from Yen 1,521.9 billion for fiscal year 2007. Ricoh
recorded an increase in sales of color PPCs/MFPs, color and monochrome laser
printers and GELJET printers in Japan. This increase reflects the results of
Ricoh's strategic sales promotion activities and marketing strategy in the
Imaging and Solutions segment that capitalized on the shift in customer demand
from stand-alone monochrome products to color high-speed products that function
in the network environment. Sales of solutions products such as support
services, document management applications and other software increased in Japan
as well. The increase in sales of solutions products was attributable to Ricoh's
successful promotion of solutions associated with software and information
technology support services that optimized customers' total printing costs. In
addition, increased sales of thermal media also contributed to the overall
increase in sales in Japan.
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Operating expenses in Japan for fiscal year 2008 increased by 1.1% (or Yen
15.9 billion) to Yen 1,427.5 billion from Yen 1,411.6 billion for fiscal year
2007. The increase in operating expenses was due primarily to the increase in
sales as well as the increase in R&D expenses.
As a result, operating income for fiscal year 2008 decreased by 2.2% (or
Yen 2.3 billion) to Yen 107.9 billion from Yen 110.3 billion for fiscal year
2007.
The Americas
Net sales in the Americas for fiscal year 2008 increased by 1.5% (or Yen
6.5 billion) to Yen 435.7 billion from Yen 429.2 billion for fiscal year 2007.
Despite sluggish economic conditions in the Americas due to the slowdown in
growth in the United States, Ricoh recorded increased sales of value-added color
PPCs/MFPs in the Americas for fiscal year 2008. The increase in sales of such
PPCs/MFPs reflects Ricoh's introduction of new models that responded to the
diverse range of customer needs for color, networking and high-speed products in
this geographic segment. Furthermore, sales of production printing products from
the newly consolidated subsidiary InfoPrint Solutions Company and its
subsidiaries contributed favorably to the overall sales in the Americas.
Operating expenses in this geographic segment for fiscal year 2008
increased by 6.2% (or Yen 25.2 billion) to Yen 433.4 billion from Yen 408.1
billion for fiscal year 2007. Despite the increase in sales of value-added color
PPCs/MFPs, operating expenses increased at a higher percentage of increase than
the increase in net sales as the increasingly competitive business environment
in the Americas required Ricoh to increase its strategic sales promotions and
incur greater marketing related expenses.
As a result, operating income for fiscal year 2008 decreased by 88.8% (or
Yen 18.7 billion) to Yen 2.3 billion from Yen 21.1 billion for fiscal year 2007.
Europe
Sales in Europe for fiscal year 2008 increased by 18.2% (or Yen 93.0
billion) to Yen 604.8 billion from Yen 511.7 billion for fiscal year 2007, due
primarily to an increase in sales of value-added color PPCs/MFPs reflecting
Ricoh's continuing efforts to replace monochrome products at customer sites with
color products, and color laser printers and GELJET printers reflecting Ricoh's
sales promotional efforts to improve TCO.
Operating expenses in this geographic segment for fiscal year 2008
increased by 18.3% (or Yen 87.3 billion) to Yen 565.7 billion from Yen 478.3
billion for fiscal year 2007 due primarily to the increase in sales in this
geographic segment.
As a result, operating income for fiscal year 2008 increased by 16.9% (or Yen
5.6 billion) to Yen 39.0 billion from Yen 33.4 billion for fiscal year 2007 due
primarily to increased sales of value-added products such as color PPCs/MFPs,
color and monochrome laser printers and GELJET printers.
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Other
Net sales in the Other geographic segment, including China, South East Asia
and Oceania, increased for fiscal year 2008 by 18.0% (or Yen 48.5 billion) to
Yen 317.5 billion from Yen 269.0 billion for fiscal year 2007. This increase was
due primarily to the increase in sales of color PPCs/MFPs, color laser printers
and GELJET printers. Sales of these products increased in this geographic
segment as customer demand shifted from monochrome products toward color
products. In addition, products manufactured in this geographic segment were
exported to other geographic segments, reflecting increased demand of Ricoh's
office solution products worldwide, which in turn contributed to the increase in
sales in this geographic segment.
Operating expenses in this geographic segment for fiscal year 2008
increased by 15.8% (or Yen 39.6 billion) to Yen 291.1 billion from Yen 251.4
billion for fiscal year 2007 due primarily to the increase in net sales in this
geographic segment.
As a result, operating income for fiscal year 2008 increased by 50.7% (or Yen
8.9 billion) to Yen 26.4 billion from Yen 17.5 billion for fiscal year 2007 due
primarily to the increase in net sales in this geographic segment.
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B. Liquidity and Capital Resources
Cashflows
---------
The following table summarizes our cashflows for each of the three fiscal
years ended March 31, 2007, 2008 and 2009, as reported in our Consolidated
Statements of Cashflows in the accompanying Consolidated Financial Statements.
(Billions of Yen)
For the year ended March 31,
----------------------------
2007 2008 2009
------ ------ ------
Net cash provided by operating activities 167.2 194.3 87.4
Net cash used in investing activities (115.4) (198.3) (283.1)
Net cash provided by (used in) financing activities 9.2 (72.1) 295.9
Net increase in cash and cash equivalents from
discontinued operations 0.8 -- --
Increase (decrease) in cash and cash equivalents 68.6 (85.1) 87.8
Cash and cash equivalents at beginning of year 187.0 255.7 170.6
Cash and cash equivalents at end of year 255.7 170.6 258.4
Operating Cashflows
For fiscal year 2009, net cash provided by operating activities consisted
primarily of depreciation and amortization of Yen 101.8 billion, a decrease in
trade receivables of Yen 37.9 billion, loss on impairment of securities of Yen
26.8 billion and net income from continuing operations of Yen 6.5 billion, which
were partially offset by a decrease in trade payables of Yen 97.3 billion,
accrued income taxes and accrued expenses and other of Yen 14.0 billion,
deferred income taxes of Yen 5.1 billion and an increase in finance receivables
of Yen 3.0 billion. As compared to fiscal year 2008, net cash provided by
operating activities in fiscal year 2009 decreased mainly because net income
decreased by Yen 99.9 billion.
For fiscal year 2008, net cash provided by operating activities consisted
primarily of net income from continuing operations of Yen 106.4 billion,
depreciation and amortization of Yen 95.7 billion, an increase in accrued income
taxes and accrued expenses and other of Yen 5.2 billion and deferred income
taxes of Yen 4.9 billion, which were partially offset by an increase in finance
receivables of Yen 17.1 billion and an increase in trade receivables of Yen 16.5
billion. As compared to fiscal year 2007, net cash provided by operating
activities in fiscal year 2008 increased mainly because (1) depreciation and
amortization increased for fiscal year 2008 reflecting the financial effect of
new companies becoming subsidiaries of the Company in fiscal year 2008 (such as
InfoPrint Solutions Company) and (2) the depreciation of the U.S. Dollar in
relation to the Japanese Yen in fiscal year 2008 resulted in an increase in
Other, net.
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For fiscal year 2007, net cash provided by operating activities consisted
primarily of net income from continuing operations of Yen 106.2 billion,
depreciation and amortization of Yen 89.6 billion, and an increase in accrued
income taxes and accrued expenses and other of Yen 11.1 billion, which were
partially offset by an increase in finance receivables of Yen 28.0 billion and
an increase in trade receivables of Yen 15.9 billion. As compared to fiscal year
2006, net cash provided by operating activities in fiscal year 2007 decreased
mainly because the increase in net sales, especially in Japan, during the fourth
quarter as compared to such period during fiscal year 2006 resulted in an
increase in Ricoh's finance receivables and trade receivables for fiscal year
2007.
Investing Cashflows
For fiscal year 2009, net cash used in investing activities consisted
mainly of, Yen 157.4 billion for the acquisition of new subsidiaries, net of
cash acquired, Yen 96.9 billion of expenditures for property, plant and
equipment and Yen 27.1 billion of other, net. Net cash used in investing
activities increased in fiscal year 2009 mainly because Ricoh used cash in
connection with the establishment and commencement of IKON's operations.
For fiscal year 2008, net cash used in investing activities consisted
mainly of, Yen 97.9 billion in payments for purchases of available-for-sale
securities, Yen 96.7 billion for acquisitions of new subsidiaries, net of cash
acquired, Yen 85.2 billion of expenditures for property, plant and equipment and
Yen 19.3 billion of other, net. Ricoh realized Yen 100.0 billion from the sale
of available-for-sale securities that were held by the Company and certain
subsidiaries. Net cash used in investing activities increased in fiscal year
2008 mainly because Ricoh used cash in connection with the establishment and
commencement of operations of InfoPrint Solutions Company.
For fiscal year 2007, net cash used in investing activities consisted mainly of,
Yen 97.1 billion in payments for purchases of available-for-sale securities,
Yen 85.7 billion of expenditures for property, plant and equipment, Yen 23.2
billion for acquisitions of new subsidiaries, net of cash acquired, and Yen 17.9
billion of other, net. Ricoh realized Yen 96.0 billion from the sale of
available-for-sale securities that were held by the Company and certain
subsidiaries and Yen 12.0 billion from sales of discontinued operations. As
compared to fiscal year 2006, net cash used in investing activities decreased in
fiscal year 2007 mainly because Ricoh did not incur the capital expenditures
that incurred in fiscal year 2006.
Financing Cashflows
For fiscal year 2009, net cash provided by financing activities consisted
primarily of Yen 237.1 billion of proceeds from long-term indebtedness, Yen
110.2 billion of net increase in short-term borrowings and Yen 85.0 billion of
proceeds from the issuance of long-term debt securities. Ricoh repaid Yen 59.5
billion of long-term indebtedness, Yen 50.5 billion of long-term debt securities
and Yen 25.3 billion of dividends. As compared to fiscal year 2008, net cash
provided from financing activities increased in fiscal year 2009 as Ricoh
increased its short-term borrowings and received proceeds from the issuance of
long-term debt.
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For fiscal year 2008, net cash used in financing activities consisted
primarily of Yen 75.7 billion to repay long-term indebtedness and Yen 22.6
billion to pay dividends, which were partially offset by Yen 67.1 billion of
proceeds received from long-term indebtedness. As compared to fiscal year 2007,
net cash used in financing activities increased in fiscal year 2008 as Ricoh
reduced its interest-bearing indebtedness provided by external parties by Yen
32.3 billion and acquired Yen 15.7 billion of treasury stock.
For fiscal year 2007, net cash provided by financing activities consisted
primarily of Yen 65.2 billion of proceeds from the issuance of long-term debt
securities, of which Yen 55.2 billion of consisted of cash proceeds from the
issuance of Euro Yen zero coupon convertible bonds due 2011, and Yen 60.1
billion of proceeds from long-term indebtedness. Ricoh repaid Yen 55.0 billion
of long-term debt securities, Yen 49.1 billion of long-term indebtedness and
paid Yen 18.2 billion of dividends. As compared to fiscal year 2006, net cash
from financing activities increased in fiscal year 2007 as Ricoh received
proceeds from the issuance of Yen 55.2 billion aggregate principal amount of the
Euro Yen zero coupon convertible bonds and reduced the amount of its outstanding
long-term indebtedness.
Cash and Asset-Liability Management
Ricoh has in recent years tried to achieve greater efficiencies in the
utilization of cash balances held by its subsidiaries pursuant to its policy of
ensuring adequate financing and liquidity for its operations and growth, and
maintaining the strength of its balance sheet. One of the methods that Ricoh has
implemented to achieve greater efficiency is building up its cash management
system in Japan, the United States and Europe. This cash management system
functions as an arrangement whereby Ricoh's funds are pooled together and cash
resources are lent and borrowed from one group company to another company, with
finance companies located in Japan, the United States and the Netherlands
coordinating this arrangement. This pooling-of-funds arrangement has reduced the
occurrence of excess accumulation of cash in one group company while another
group company engages in unnecessary borrowing from third party institutions to
meet its cash requirements. As such, the pooling-of-funds arrangement has
reduced interest expense and related costs paid to third parties in connection
with borrowings to finance operations.
Ricoh also enters into various derivative financial instrument contracts in
the normal course of its business and in connection with the management of its
assets and liabilities. In order to hedge against the potentially adverse
impacts of foreign currency fluctuations on its assets and liabilities
denominated in foreign currencies, Ricoh enters into foreign exchange contracts
and foreign currency options. Another form of derivative financial contracts
that Ricoh enters into is interest rate swap agreements to hedge against the
potentially adverse impacts of fair value or cashflow fluctuations on its
outstanding debt interests. Ricoh uses derivative instruments to reduce its risk
and to protect the market value of its assets and liabilities in conformity with
Ricoh's policy. Ricoh does not use derivative financial instruments for trading
or speculative purposes, nor is it a party to leveraged derivatives. Detailed
discussion of these derivative contracts is provided in Item 11. Quantitative
and Qualitative Disclosures About Market Risk.
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Ricoh also engages in securitization activities through its domestic
leasing affiliate, Ricoh Leasing Co., Ltd. For a discussion of such activities,
see Item 5.E. Off-Balance Sheet Arrangements.
Sources of Funding
Ricoh's principal sources of funding are a combination of cash and
cash equivalents on hand, various lines of credit and the issuance of commercial
paper, medium-term notes and long-term debt securities. In assessing its
liquidity and capital resources needs, Ricoh places importance on the net income
figure in the income statement, balances of cash and cash equivalents in the
balance sheet and operating cashflows in the cashflow statements.
As of March 31, 2009, lines of credit and Ricoh's available short-term
and medium-term borrowing facilities were as follows:
(Billions of Yen)
Average
Interest Rate (%) Amount Available
----------------- ----------------
Bank loans 1.0 227.3
Commercial paper 0.5 158.4
Medium-term notes -- 98.2
--------------------------------------------------------
Total -- 483.9
--------------------------------------------------------
As of March 31, 2009, Ricoh had Yen 258.4 billion in cash and cash
equivalents and Yen 664.3 billion in aggregate borrowing facilities. Of the Yen
664.3 billion in aggregate borrowing facilities, Yen 483.9 billion was available
to be borrowed by Ricoh as of March 31, 2009. Ricoh Leasing Co., Ltd. has a Yen
27.0 billion committed credit line with several banks having credit ratings
satisfactory to Ricoh. This Yen 27.0 billion committed credit line amount is
included in the Yen 664.3 billion figure for aggregate borrowing facilities.
Almost all such borrowings from financial institutions and outstanding
securities are unsecured. Ricoh believes that its working capital used to repay
indebtedness and execute new transactions is sufficient, due to its diverse
funding sources and the inflow of cash generated from its operating activities.
Even if Ricoh is unable to access these markets on acceptable terms, Ricoh has
access to other sources of liquidity, including bank borrowings, cash flows from
operations and sales of assets. In addition, its subsidiaries may be restricted
from paying dividends for various reasons, such as capital adequacy
requirements. However, Ricoh does not expect such restrictions to have a
significant impact on its ability to meet its cash obligations.
The Company, Ricoh Leasing Co., Ltd. and certain overseas subsidiaries
raise capital by issuing commercial paper, medium-term notes and long-term debt
securities. Ricoh Leasing Co., Ltd. and certain overseas subsidiaries of the
Company issue commercial paper to meet their short-term funding requirements.
Utilization of such capacity depends on Ricoh's financing needs, investor demand
and market conditions, as
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well as the ratings outlook for Ricoh's securities, as discussed below. Interest
rates for commercial paper issued by the Company and its subsidiaries ranged
from 0.43% to 1.15% and interest rates for long-term debt securities ranged from
1.10% to 7.30% during fiscal year 2009. For fiscal year 2009, the Company and
its subsidiaries did not have any medium-term notes outstanding.
The Company obtains ratings from the following major rating agencies:
Standard & Poor's Rating Services, a division of McGraw-Hill Companies, Inc.
("S&P"), Moody's Investors Services ("Moody's"), and another local rating agency
in Japan. As of March 31, 2009, S&P assigned long-term and short-term credit
ratings for the Company of A+ and A-1, respectively, and Moody's assigned a
long-term credit rating for the Company of A1.
As is customary in Japan, substantially all of the bank loans are
subject to general agreements with each lending bank which provide, among other
things, that the bank may request additional security for loans if there is
reasonable and probable cause for the necessity of such additional security and
the bank may treat any security furnished, as well as any cash deposited in such
bank, as security for all present and future indebtedness. The Company has never
been requested to furnish such additional security. In some cases, the Company's
long-term debt securities contain customary covenants, including a "limitation
on liens" covenant. The Company was in compliance with the covenants in its bank
agreements and securities as of March 31, 2009. The Company is not subject to
any covenants limiting its ability to incur additional indebtedness. For
additional detail regarding these securities, see Note 11 to the Consolidated
Financial Statements.
Cash Requirements and Commitments
Ricoh believes that its cash and cash equivalents and funds expected
to be generated from its operations are sufficient to meet its cash requirements
at least through fiscal year 2010. Even if there were a decrease in cashflows
from operations as a result of fluctuations in customer demands from one year to
another due to unexpected changes in global economic conditions, Ricoh believes
that current funds on hand along with funds available under existing borrowing
facilities would be sufficient to finance its anticipated operations. In
addition, Ricoh believes that it is able to secure adequate resources to fund
ongoing operating requirements and investments related to the expansion of
existing businesses and the development of new projects through its access to
the financial and capital markets. Interest rates may fluctuate as it may be
affected by the financial market turbulence resulting in part from the global
economic recession. However, Ricoh believes that the effect of such fluctuations
will not significantly affect Ricoh's liquidity, mainly due to the fact that
Ricoh has sufficient amounts of cash and cash equivalents on hand, a continuous
cashflow generated from its operating activities and a group-wide cash
management system.
Ricoh expects that its capital expenditures for fiscal year 2010 will
amount to approximately Yen 95.0 billion, principally for investments in
manufacturing facilities of digital and networking equipment with new engines,
toners, semiconductor and thermal
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media. More specifically, Ricoh plans to complete the construction of a
manufacturing plant in Thailand, which is expected to commence its operations
during fiscal year 2010 and manufacture MFPs and laser printers. Ricoh
anticipates that this plant in Thailand will strengthen its manufacturing
network in Asia. In addition, one of Ricoh's subsidiaries, Tohoku Ricoh Co.,
Ltd., is expected to establish a manufacturing plant in Japan during fiscal year
2010 for PxP toners, which are toners that are capable of producing higher
quality images. In addition, Ricoh is obligated to repay long-term indebtedness
in the aggregate principal amount of Yen 85.5 billion during fiscal year 2010,
and in the aggregate principal amount of Yen 301.7 billion during fiscal years
2011 through 2013.
The Company and certain of its subsidiaries have various employee
pension plans covering all of their employees. As described in Note 11 to the
Consolidated Financial Statements, the unfunded portion of these employee
pension plans amounted to Yen 153.2 billion, as of March 31, 2009. The unfunded
amount was recorded as an asset of Yen 10.1 billion and a liability of Yen 163.4
billion on the consolidated balance sheet of Ricoh as of March 31, 2009. The
amounts contributed to pension plans for fiscal years 2007, 2008 and 2009 were
Yen 14.7 billion, Yen 14.5 billion and Yen 14.7 billion, respectively.
Ricoh believes that its cashflow from operating and investing
activities together with existing lines of credit and borrowing facilities
provide sufficient means to satisfy its liquidity needs and future obligations
as described above.
C. Research and Development, Patents and Licenses
Research and Development
------------------------
Since its formation, Ricoh's basic management philosophy has been to
contribute to society by developing and providing innovative and useful products
with an emphasis on the relationship between people and information. Based on
this management philosophy, Ricoh undertakes a variety of R&D activities to
develop new technologies, products and systems to facilitate better
communication. The Research and Development Group and the Corporate Technology
Development Group (collectively, the "R&D Groups") function as the headquarters
of Ricoh's R&D activities, which are conducted at its R&D bases throughout Japan
and certain satellite R&D bases overseas. Ricoh conducts a wide range of R&D
activities, from seeds research (i.e., early stage research) to research in
elemental technologies, product applications and manufacturing technologies,
including environmental technologies.
In Japan, we conduct basic and advanced research in connection with
optical technologies, new materials, devices, information electronics,
environmental technologies and software technologies as well as elemental
development for new products. In addition, Ricoh has established satellite R&D
bases in the United States and China. All aspects of Ricoh's research efforts
are focused on developing products and services that are suitable for the new
work environment in the Web2.0 era (known as the second generation of web
development and web design). Ricoh also engages in R&D activities to protect the
environment in every stage of each of its products' life cycle to
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realize Ricoh's three core values of "harmonizing with the environment (i.e.,
reducing and minimizing environmental impact)," "simplifying your life and work
(i.e., enhancing user friendliness and striving towards simplification)," and
"supporting knowledge management (i.e., offering solutions to process
information)." For fiscal years 2007, 2008 and 2009, Ricoh's consolidated R&D
expenditures totaled Yen 114.9 billion, Yen 126.0 billion and Yen 124.4 billion,
respectively.
Out of total consolidated R&D expenditures of Yen 124.4 billion for
fiscal year 2009, Yen 98.6 billion were for R&D activities related to the
Imaging and Solutions segment . Ricoh conducted development activities in the
Imaging and Solutions segment for (1) optical design for copiers, printers and
product printing products, (2) imaging data processing technology, (3)
electrophotographic supply technology, (4) elemental technology for the
next-generation of image producing engines, (5) cutting edge software technology
and (6) applications for the advancement of system solutions.
Out of total consolidated R&D expenditures of Yen 124.4 billion for
fiscal year 2009, Yen 10.7 billion were for R&D activities related to the
Industrial Products segment. In the Industrial Products segment, Ricoh's R&D
activities continued to include (1) designing ASICs and ASSPs for imaging, audio
and communication use, (2) developing methods to utilize electronic design
automation, (3) developing optical element technologies and new recording
methods and (4) R&D for supply parts such as thermal media.
More specifically, in the electronic devices business, Ricoh continued
to develop devices that are compatible with next-generation interfaces that have
improved data transmission rates and reduced pin numbers. In addition, Ricoh
continued to develop voltage regulator ICs that contribute to lower-power
consumption current, improved operational stability and further miniaturization
of various information equipment.
Out of total consolidated R&D expenditures of Yen 124.4 billion for
fiscal year 2009, Yen 1.9 billion were for R&D activities related to the Other
segment. In this segment, Ricoh continued to develop its image capturing device
technology for digital cameras and its related applications technology.
In addition, Ricoh continues to engage in the development of its
fundamental research fields, which focus on R&D activities that can be applied
to various products and that are difficult to categorize into a specific
operating segment. Out of total consolidated R&D expenditures of Yen 124.4
billion for fiscal year 2009, Yen 13.0 billion were for R&D activities relating
to fundamental research fields. Such R&D activities include R&D in
nanotechnology, micro-machining, general technologies in measuring, analysis and
simulation, new materials and devices, next-generation recording technologies,
production techniques, system software modules, photonics technology for high
speed and high quality image processing, the next-generation of office systems
and office solutions, and environmental technologies.
For a summary of Ricoh's R&D expenditures for fiscal years 2007, 2008
and 2009, see Note 19 to the Consolidated Financial Statements.
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Patents and Licenses
--------------------
Ricoh owns approximately 31,200 patents as of March 31, 2009, on a
worldwide basis, and has a large number of licenses under various agreements
with Japanese and foreign companies. Although patents and licenses are important
to Ricoh, it does not believe that the expiration of any single patent or group
of related patents or of any license agreements will materially affect its
business.
The following table lists some of the important patent and licensing
agreements which the Company is currently a party to:
Counterparty Country Summary of the Contract Contract Term
------------------------------- ------- ------------------------------------------- ------------------------------------------
International USA Comprehensive cross license patent March 28, 2007 to expiration date of the
Business Machines agreement relating to the information patent subject to the agreement
Corporation processing technology area (reciprocal
agreement)
ADOBE Systems Incorporated USA Patent licensing agreements relating to January 1, 1999 to December 31, 2009
development on printer software and sales
(the counterparty as the licensee)
Lemelson Medical, USA Patent licensing agreement relating to March 31, 1993 to expiration date of the
Education & Research Foundation computer image analysis and other products patent subject to the agreement
Limited Partnership (the counterparty as the licensee)
Canon Inc. Japan Patent licensing agreement relating to October 1, 1998 to expiration date of the
office equipment (reciprocal agreement) patent subject to the agreement
Brother Industries, Ltd. Japan Patent licensing agreement relating to October 1, 2004 to September 30, 2009
digital photography (the Company as the
licensor)
Kyocera Mita Corporation Japan Patent licensing agreement relating to January 1, 2007 to December 31, 2011
method of controlling multi function
peripheral (the Company as the licensor)
Hitachi, Ltd. Japan Patent licensing agreement relating to January 1, 2007 to December 31, 2013
optical record and playback equipment, and
multi function peripheral (reciprocal
agreement)
D. Trend Information
See "OVERVIEW" above and "Cautionary Statement with Respect to
Forward-Looking Statements" elsewhere in this Annual Report.
E. Off-Balance Sheet Arrangements
As disclosed in Note 5 to the Consolidated Financial Statements,
Ricoh, through its domestic leasing affiliate, has certain procedures in place
to sell some of its lease receivables through securitization programs; however,
no lease receivables have been securitized during the last three fiscal years.
Securitization involves the creation of
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special purpose entities ("SPEs") for purposes of holding pooled assets. The
SPEs are designed to place the pooled assets beyond the reach of Ricoh and its
creditors in the event of bankruptcy and when structured in this manner (and
subject to certain other conditions), the pooled assets are removed from Ricoh's
consolidated balance sheets. The SPEs are also designed so that investors have
no recourse to Ricoh in the event of any failure of payment on the pooled
assets. Therefore, when securitizing assets in this manner, Ricoh does not have
any exposed assets or contingent liabilities other than those recognized as
subordinated residual interests on Ricoh's consolidated balance sheets. As of
March 31, 2009, Ricoh had one SPE, which held assets that Ricoh sold in a
securitization totaling Yen 25.4 billion.
Ricoh does not dispose of troubled leases, loans or other problem
assets by means of nonconsolidated SPEs. None of our officers, directors or
employees holds any equity interests in the SPE noted above or receives any
direct or indirect compensation from the SPE. The SPE does not own shares or
equity interests in Ricoh or any of Ricoh's affiliates, and there are no
agreements in place to do so.
In addition to the above, Ricoh acts as a guarantor for some of its
employees' housing loans. As of March 31, 2009, the total amount of such
guarantees was Yen 59 million.
F. Tabular Disclosure of Contractual Obligations
The following table sets forth Ricoh's contractual obligations as of
March 31, 2009.
Millions of Yen
Payments due by period
-------------------------------------------------------------------
Less than 1 More than 5
CONTRACTUAL OBLIGATIONS Total year 1-3 years 3-5 years years
---------------------------------------------------------------------------------------------------------------------------------
Long-term Debt Obligations Yen 593,014 Yen 84,651 Yen 244,280 Yen 214,872 Yen 49,211
Interest Expense Associated with Long-term Debt Obligations 30,054 8,839 10,803 9,077 1,335
Capital (Finance) Lease Obligations 1,758 854 518 365 21
Operating Lease Obligations 99,443 24,208 37,904 23,932 13,399
Purchase Obligations 36,485 36,485 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
TOTAL Yen 760,754 Yen 155,037 Yen 293,505 Yen 248,246 Yen 63,966
---------------------------------------------------------------------------------------------------------------------------------
Ricoh expects to contribute Yen 15.7 billion to its pension plan
during fiscal year 2010 and is currently unable to predict funding requirements
for periods beyond fiscal year 2010 due to uncertainties related to changes in
actuarial assumptions, return on plan assets, and changes to plan membership.
Ricoh had operating lease commitments with rental payments totaling
Yen 54.3 billion for fiscal year 2009.
G. Safe Harbor
See "Cautionary Statement With Respect to Forward-Looking Statements."
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Item 6. Directors, Senior Management and Employees
------------------------------------------
A. Directors and Senior Management
Directors and Corporate Auditors of the Company as of June 25, 2009
were as follows:
Name Current Position
(Date of Birth) (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Masamitsu Sakurai Chairman of the Board and Apr. 1966 Joined the Company
(January 8, 1942) Representative Director May 1984 President of Ricoh UK Products Ltd.
Apr. 1990 General Manager of Purchasing Division
June 1992 Director
Apr. 1993 President of Ricoh Europe B.V.
June 1994 Managing Director
Apr. 1996 President and Representative Director
June 2005 Representative Director (Current)
June 2005 President
June 2005 Chairman of the Board (Current)
Apr. 2007 Chairman (Current)
Principal business activities and other principal directorships performed outside of Ricoh:
Chairman of Japan Association of Corporate Executives
Director of Tokio Marine Holdings, Inc.
Director of COCA-COLA WEST COMPANY, LIMITED
Director of Saga Television Station Co., Ltd.
Director of Omron Corporation.
Shiro Kondo Representative Director Apr. 1973 Joined the Company
(October 7, 1949) July 1999 Deputy General Manager of Imaging System Business Group
June 2000 Senior Vice President
Oct. 2000 General Manager of Imaging System Business Group
June 2002 Executive Vice President
June 2003 Managing Director
Oct. 2004 In charge of Imaging Engine Solution Development
Oct. 2004 General Manager of MFP Business Group
June 2005 Director
June 2005 Corporate Executive Vice President
Apr. 2007 Representative Director (Current)
Apr. 2007 President (Current)
Apr. 2007 CEO (Chief Executive Officer) (Current)
Principal business activities and other principal directorships performed outside of Ricoh:
Representative of Asahi Insurance Company
Koichi Endo Director Apr. 1966 Joined the Company
(February 16, 1944) Apr. 1987 President of Ricoh Electronics, Inc.
Oct. 1990 General Manager of Components Division
June 1992 Director
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Name Current Position
(Date of Birth) (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
June 1997 Managing Director
Apr. 1998 General Manager of Production Business Group
June 2000 Executive Managing Director
June 2000 Executive Vice President
Apr. 2004 General Manager of Fact Base Management Innovation
Office
June 2005 Director (Current)
June 2005 Corporate Executive Vice President
Apr. 2008 Deputy President (Current)
Apr. 2008 In charge of Business Process Innovation(Current)
Principal business activities and other principal directorships performed outside of Ricoh:
Director of San-Ai Plant Construction Co., Ltd.
Katsumi Yoshida Director Apr. 1967 Joined the Company
(August 20, 1944) Feb. 1996 Chairman of Ricoh Electronics, Inc.
Apr. 2000 President of Ricoh Corporation
Apr. 2001 Executive Vice President
June 2002 Managing Director
Oct. 2003 General Manager of International Marketing Group
Oct. 2003 Chairman of Ricoh China Co., Ltd.
June 2004 Executive Managing Director
June 2005 Director (Current)
June 2005 Corporate Executive Vice President
Jan. 2008 Chairman and CEO (Chief Executive Officer) of Ricoh
Americas Corporation
Apr. 2008 Deputy President (Current)
Apr. 2009 In charge of Business Process Innovation(Current)
Masayuki Matsumoto Director Apr. 1970 Joined the Company
(December 10, 1944) July 1993 Manager of Tokyo Branch of Imaging Equipment Marketing
Division of Marketing Group
June 1994 Director
Oct. 1998 Managing Director
Oct. 1998 General Manager of Marketing Group
June 2000 Executive Vice President
June 2002 Executive Managing Director
Apr. 2005 General Manager of Corporate Social Responsibility
Division
June 2005 Director (Current)
June 2005 Corporate Executive Vice President (Current)
CMO (Chief Marketing Officer) (Japan)
June 2005 (Current)
Apr. 2007 In charge of Corporate Social Responsibility (Current)
Takashi Nakamura Director Apr. 1972 Joined the Company
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Name Current Position
(Date of Birth) (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
(September 2, 1946) Apr. 1990 President of Ricoh UK Products Ltd.
Jan. 1995 President of Ricoh Europe B.V.
May 1998 Deputy General Manager of Corporate Planning Division
June 1998 Director
June 2000 Senior Vice President
June 2002 President of Ricoh Elemex Corporation
June 2004 Managing Director
June 2005 Director (Current)
Jan. 2006 Corporate Executive Vice President (Current)
Jan. 2006 CHO (Chief Human Resource Officer) (Current)
Apr. 2008 General Manager of Personnel Division (Current)
Principal business activities and other principal directorships performed outside of Ricoh:
Corporate Auditor of TOYO KANETSU K.K.
Kazunori Azuma Director Apr. 1971 Joined the Company
(February 11, 1949) Oct. 1994 President of Hokkaido Ricoh Co., Ltd.
June. 2000 Senior Vice President
Oct. 2000 President of Ricoh Technosystems Co., Ltd.
June 2003 Managing Director
June 2003 Executive Vice President
Oct. 2003 Chairman of Ricoh Technosystems Co., Ltd.
Nov. 2003 General Manager of Marketing Group (Current)
June 2005 Director (Current)
June 2005 Corporate Executive Vice President
(Current)
Apr. 2009 General Manager of Global Marketing Taskforce
June 2009 General Manager of Global Marketing Group (Current)
Zenji Miura Director Apr. 1976 Joined the Company
(January 5, 1950) Jan. 1993 President of Ricoh France S.A.
Apr. 1998 Deputy General Manager of Finance and Accounting
Division
Oct. 2000 Senior Vice President
Oct. 2000 General Manager of Finance and Accounting Division
June 2003 Executive Vice President
June 2004 Managing Director
June 2005 Director (Current)
June 2005 Corporate Executive Vice President (Current)
June 2005 CFO (Chief Financial Officer) (Current)
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Name Current Position
(Date of Birth) (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Apr. 2006 CIO (Chief Information Officer) (Current)
General Manager of Corporate Planning Division
Feb. 2008 In charge of Internal Management and Control Division
(Current)
July. 2008 General Manager of Finance and Accounting Division
Apr. 2009 CSO (Chief Strategy Officer) (Current)
General Manager of CRGP Office (Current)
Deputy General Manager of Global Marketing Taskforce
June 2009 General Manager of Global Marketing Support Division
(Current)
General Manager of Trade Affairs & Export/Import
Administration Division (Current)
Principal business activities and other principal directorships performed outside of Ricoh:
Corporate Auditor of COCA-COLA WEST COMPANY, LIMITED
Kiyoshi Sakai Director Apr. 1970 Joined the Company
(December 25, 1945) Jan. 1996 General Manager of Corporate Planning Division
June 1996 Director
Apr. 1999 General Manager of Research and Development Group
June 2000 Senior Vice President
June 2002 Managing Director
June 2002 Executive Vice President
Aug. 2002 General Manager of Corporate Technology Planning
Division
June 2005 Corporate Senior Vice President
Apr. 2006 In charge of Corporate Environment (Current)
June 2006 Director (Current)
June 2006 Corporate Executive Vice President (Current)
June 2006 Chief Technology Officer (Current)
Apr. 2008 President of Ricoh Innovation, Inc. (Current)
Apr. 2008 In charge of Legal Affairs and Intellectual Property
(Current)
Takaaki Wakasugi Director June 1985 Professor, Faculty of Economics, the University of
(March 11, 1943) Tokyo
Sep. 1990 Co-director of Mitsui Life Financial Research Center,
University of Michigan Ross School of Business
(Current)
Apr. 2003 Director and General Manager of Japan Corporate
Governance Research Institute, Inc. (Current)
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Name Current Position
(Date of Birth) (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Apr. 2004 Professor, Faculty of Business Administration, Tokyo
Keizai University (Current)
June 2004 Professor Emeritus, the University of Tokyo
June 2005 Director (Current)
Takuya Goto Director Apr. 1964 Joined Kao Soap Company (renamed Kao Corporation
(August 19, 1940) in 1985)
May 1990 General Manager of Chemical Business Division of Kao
Corporation
June 1990 Director of Kao Corporation
July 1991 Managing Director of Kao Corporation
June 1996 Executive Managing Director of Kao Corporation
June 1997 President of Kao Corporation
June 2002 Representative Director and President of Kao
Corporation
June 2004 Chairman of Kao Corporation
June 2006 Director (Current)
Sep. 2007 Chairman of Japan Marketing Association (Current)
June 2008 Adviser of Kao Corporation (Current)
Principal business activities and other principal directorships performed outside of Ricoh:
Chairman of Japan Marketing Association
Yuji Inoue Corporate Auditor Apr. 1971 Joined the Company
(April 4, 1948) Jan. 1997 Deputy General Manager of Finance and Accounting
Division
Apr. 1998 General Manager of Finance and Accounting Division
Oct. 1998 General Manager of Business Department of Ricoh Leasing
Co., Ltd
June 1999 Managing Director of Ricoh Leasing Co., Ltd
Apr. 2000 President of Ricoh Leasing Co., Ltd.
June 2000 Senior Vice President
June 2004 Managing Director
June 2005 Corporate Senior Vice President
President and Chief Executive Officer of
Ricoh Leasing Co., Ltd
June 2009 Corporate Auditor (Current)
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Name Current Position
(Date of Birth) (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Shigekazu Iijima Corporate Auditor Apr. 1972 Joined the Company
(July 7, 1948) Oct. 1990 General Manager of Accounting Department of Finance and
Accounting Division
Apr. 1993 General Manager of Administration Department of
Electronic Device Division
June 1996 Leader of Management Planning Group of Corporate
Planning Division
June 1999 Director of Ricoh Elemex Corporation
Apr. 2004 General Manager of Business Planning Department of
International Business Group
July 2005 General Manager of Business Strategy & Planning Center
of International Business Group
June 2006 Corporate Auditor (Current)
Kenji Matsuishi Corporate Auditor Apr. 1965 Graduated from the National Legal Training and Research
(July 24, 1937) Institute
Apr. 1965 Legal registration as a Japanese attorney
Apr. 1965 Joined Takano & Higuchi Legal Services
Feb. 1972 General Manager of Matsuishi Legal Services (Current)
June 1994 Corporate Auditor (Current)
Takao Yuhara Corporate Auditor Apr. 1969 Joined Nippon Chemical Industrial Co., Ltd.
(June 7, 1946) May. 1971 Joined Sony Corporation
Mar. 1988 Vice President of Sony International (Singapore) Ltd.
Apr. 1996 Vice President of Display Company of Sony Corporation
June 2002 Corporate Vice President and General Manager of
Corporate Planning Division of Sony Corporation
June 2003 Corporate Vice President and Group CFO (Chief Financial
Officer) of Sony Corporation
June 2004 In charge of Corporate Executive Finance and IR of Sony
Corporation
Dec. 2007 Managing Executive Officer and Senior General Manager,
Group Business Management Division of ZENSHO CO., LTD.
Apr. 2008 Officer in charge of Group Finance of ZENSHO CO., LTD.
June 2008 Managing Executive Director of ZENSHO CO., LTD.
(Current)
June 2008 Corporate Auditor (Current)
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Name Current Position
(Date of Birth) (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Nov. 2008 Senior General Manager, Group Business Management
Division,
Group Finance and Accounting Division of ZENSHO CO.,
LTD. (Current)
Kiyohisa Horie Substitute Corporate Auditor Apr. 1970 Joined Horie Morita Audit Office (now: Meiji Audit
(March 7, 1948) Corporation)
Joined Showa Accounting Office
Aug. 1980 Registered as Certified Public Accountant
Mar. 1988 Registered as Tax Accountant
Apr. 1988 Senior Partner of Meiji Audit Corporation (Current)
May. 1988 Representative Director of Showa Accounting Office
(Current)
May. 1988 Managing Partner of Meiji Audit Corporation (Current)
May. 1998 Vice-Chairman & Managing Partner of Meiji Audit
Corporation (Current)
Directors and Corporate Auditors are elected at a general meeting of
shareholders for two and four years terms, respectively, and may serve any
number of consecutive terms. The Board of Directors appoints from among its
members a Chairman and one or more Representative Directors in accordance with
the Corporation Law of Japan.
The Company maintains an executive officer system and under such
system there are 44 such officers each with one of the following roles:
. Executive officers: Oversee operations under the authority
granted from the president and report to the president.
. Group executive officers: Assist the president with the
management of Ricoh group.
Executive Officers of the Company as of June 25, 2009 were as follows:
Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Masamitsu Sakurai Chairman and See above for his business experience and other information.
(January 8, 1942) Chairman of the Board
Shiro Kondo President and See above for his business experience and other information.
(October 7, 1949) Chief Executive Officer
Koichi Endo Deputy President See above for his business experience and other information.
(February 16, 1944) Business Process Innovation
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Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Katsumi Yoshida Deputy President See above for his business experience and other information.
(August 20, 1944) Business Process Innovation
Masayuki Matsumoto Corporate Executive Vice See above for his business experience and other information
(December 10, 1944) President
(Chief Marketing Officer for
Japan)
(Corporate Social
Responsibility)
Takashi Nakamura Corporate Executive Vice See above for his business experience and other information.
(September 2, 1946) President
(Chief Human Resource Officer)
General Manager of Personnel
Division
Kazunori Azuma Corporate Executive Vice See above for his business experience and other information.
(February 11, 1949) President
(General Manager of Global
Marketing Taskforce
Zenji Miura Corporate Executive Vice See above for his business experience and other information.
(January 5, 1950) President
(Chief Financial Officer)
(Chief Information Officer)
(Chief Strategy Officer)
(Internal Management and
Control Division)
(General Manager of CRGP Office)
(General Manager of Global
Marketing Support Division)
(General Manager of Trade
Affairs & Export/Import
Administration Division)
Kiyoshi Sakai Corporate Executive Vice See above for his business experience and other information.
(December 25, 1945) President
(Chief Technology Officer)
(Corporate Environment)
President of Ricoh Innovation,
Inc.
(Legal & Intellectual Property)
Terumoto Nonaka Corporate Senior Vice President Jan. 1988 Joined the Company
(October 28, 1947) (General Manager of Research Jan. 1990 Deputy General Manager of Electronic Devices Division
and Development Group)
June 2000 Senior Vice President
Oct. 2000 President of Electronic Devices Company
June 2002 Executive Vice President
June 2005 Corporate Senior Vice President (Current)
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Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
July 2006 Chairman of Ricoh Electronics Devices Shanghai Co.,
Ltd. (Current)
Apr. 2009 General Manager of Research and Development Group
(Current)
Kenji Hatanaka Corporate Senior Vice President Apr. 1969 Joined the Company
(July 1, 1946) (General Manager of Marketing June 2000 Senior Vice President
Group June 2003 General Manager of Tokyo Branch of Marketing Group
June 2003 General Manager of Kanto Branch of Marketing Group
June 2004 Executive Vice President
Jan. 2005 President of Ricoh Sales Co., Ltd.
June 2005 Corporate Senior Vice President (Current)
June 2009 General Manager of Marketing Group (Current)
Hiroshi Kobayashi Corporate Senior Vice President Apr. 1974 Joined the Company
(July 2, 1948) (General Manager of Corporate Apr. 2002 General Manager of Corporate Planning Division
Technology Development Group) June 2002 Senior Vice President
(Chairman of Ricoh Software Apr. 2003 General Manager of Corporate Communication Center
Research Center (Beijing), June 2004 Executive Vice President
Co., Ltd.) Oct. 2004 General Manager of LP Business Group
June 2005 Corporate Senior Vice President (Current)
Apr. 2007 General Manager of Printer Business Group
Apr. 2008 General Manager of Office Business Planning Center
Apr. 2009 General Manager of Corporate Technology Development
Group (Current)
Chairman of Ricoh Software Research Center (Beijing),
Co., Ltd (Current)
Yoshimasa Matsuura Corporate Senior Vice President Apr. 1971 Joined the Company
(June 23, 1947) (General Manager of MFP May 1999 General Manager of Supply Chain Management Planning
Business Group) Division
Apr. 2004 General Manager of Imaging System Business Strategy
Center
June 2004 Senior Vice President
Oct. 2004 General Manager of Office Business Planning Center
June 2005 Deputy General Manager of MFP Business Group
June 2005 General Manager of Business Strategy Center of MFP
Business Group
June 2005 Corporate Vice President
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Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Oct. 2006 General Manager of Products Management & Planning
Center of MFP Business Group
Apr. 2007 Corporate Senior Vice President (Current)
Apr. 2007 General Manager of MFP Business Group (Current)
Apr. 2008 General Manager of Controller Development Division
Norio Tanaka Corporate Senior Vice President Feb. 1978 Joined the Company
(March 22, 1948) (General Manager of Office Apr. 2004 Deputy General Manager of Imaging System Business
Business Planning Center) Strategy Center
Apr. 2004 General Manager of Imaging Products Business Center of
International Business Center
June 2004 Senior Vice President
June 2004 Deputy General Manager of International Business Group
Oct. 2004 Deputy General Manager of MFP Business Group
Oct. 2004 General Manager of Products Management & Planning
Center of MFP Business Group
Oct. 2004 General Manager of Marketing Center of MFP Business
Group
June 2005 Corporate Vice President
Apr. 2007 Corporate Senior Vice President (Current)
Apr. 2007 General Manager of Production Printing Business Group
Apr. 2007 General Manager of Marketing Center of Production
Printing Business Group
Apr. 2007 General Manager of Products Strategy Center of
Production Printing Business Group
Apr. 2009 General Manager of Office Business Planning Center
(Current)
Hiroshi Adachi Corporate Senior Vice President Apr. 1968 Joined the Company
(January 8, 1946) (President of Thermal Media Oct. 2000 President of Thermal Media Company (Current)
Company)
(Chairman of Ricoh Thermal Nov.2001 Chairman of Ricoh Thermal Media (Beijing) Co., Ltd.
Media (Beijing) Co., Ltd. (Current)
(Chairman of Ricoh Thermal June 2002 Senior Vice President
Media (Wuxi) Co., Ltd.)
(Chairman of Ricoh June 2004 Chairman of Ricoh International (Shanghai) Co., Ltd.
International (Shanghai) (Current)
Co., Ltd.)
June 2005 Corporate Vice President
Dec. 2005 Chairman of Ricoh Thermal Media (Wuxi) Co., Ltd.
(Current)
Apr. 2008 Corporate Senior Vice President (Current)
Kenichi Kanemaru Corporate Senior Vice President Apr. 1973 Joined the Company
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Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
(November 19, 1952) (General Manager of Production Apr. 1998 General Manager of Production Strategic Center
Business Group)
(General Manager of Procurement June 1999 President of Ricoh UK Products Ltd.
Control Center of June 2004 Senior Vice President
Production Business Group) June 2005 Deputy General Manager of Imaging System Production
(General Manager of Office Business Group
Machine Division of Production
Business Group)
June 2005 General Manager of Procurement Control Center of
Production Business Group (Current)
June 2005 Corporate Vice President
Apr. 2006 General Manager of Imaging System Production Business
Group
Apr. 2008 Corporate Senior Vice President (Current)
Apr. 2008 General Manager of Production Business Group (Current)
Apr. 2008 General Manager of Office Machine Division of
Production Business Group (Current)
Hisashi Takata Corporate Senior Vice President Apr. 1974 Joined the Company
(May 20, 1951) (Deputy General Manager of Apr. 1999 General Manager of Business Strategy Division of
Global Marketing Group) International Marketing Group
(General Manager of GM Strategy Oct. 2004 Deputy General Manager of GJ (GEL JET) Business
Center of Global Marketing Division
Group) Oct. 2004 General Manager of Marketing Center of GJ (GEL JET)
(Chairman of Ricoh China Business Division
Co., Ltd.)
June 2005 Corporate Vice President
Oct. 2005 General Manager of GJ Marketing Division of Marketing
Group
Apr. 2007 Deputy General Manager of Printing Business Division
Apr. 2008 General Manager of Printer Business Group
Jan. 2009 General Manager of Printer Sales Promotion Center of
Printer Business Group
Apr. 2009 Corporate Senior Vice President (Current)
June 2009 Deputy General Manager of Global Marketing Group
(Current)
General Manager of GM Strategy Center of Global
Marketing Group (Current)
Chairman of Ricoh China Co., Ltd. (Current)
Kiyoto Nagasawa Corporate Vice President Apr. 1973 Joined the Company
(August 16, 1948) (President of Electronic Apr. 2001 General Manager of C&F Business Division 2
Devices Company
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Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
(Chairman of Ricoh Electronics June 2002 Senior Vice President
Devices Shanghai Co., Ltd.)
June 2005 General Manager of Quality of Management Division
June 2005 Corporate Vice President (Current)
Apr. 2009 President of Electronic Devices Company (Current)
Chairman of Ricoh Electronics Devices Shanghai Co.,
Ltd. (Current)
Yutaka Ebi Corporate Vice President Apr. 1972 Joined the Company
(October 20, 1949) (General Manager of Legal & Apr. 2001 General Manager of Imaging Technology Division
Intellectual Property Division) June 2002 Senior Vice President
Oct. 2004 General Manager of Legal & Intellectual Property
Division (Current)
June 2005 Corporate Vice President (Current)
Norihisa Goto Corporate Vice President Apr. 1972 Joined the Company
(March 8, 1949) (General Manager of Production Oct. 1997 President of Ricoh Deutschland GmbH
Printing Business Group) Mar. 2001 Chairman of Lanier Worldwide, Inc.
Jan. 2003 President of Lanier Worldwide, Inc.
June 2003 Senior Vice President
June 2005 Corporate Vice President (Current)
June 2006 Vice Chairman of Ricoh Corporation (now Ricoh Americas
Corporation)
June 2006 CEO of Ricoh U.S. - Ricoh Corporation (now Ricoh
U.S. - Ricoh Americas Corporation)
Oct. 2008 Deputy General Manager of Production Printing Business
Group
Apr. 2009 General Manager of Production Printing Business Group
(Current)
Mitsuhiko Ikuno Corporate Vice President May 1975 Joined the Company
(March 26, 1953) General Manager of Information June 2000 President of Ricoh Asia Industry Ltd.
Technology and Solution June 2004 President of Shanghai Ricoh Facsimile Co., Ltd.
Division June 2004 Senior Vice President
June 2005 Corporate Vice President (Current)
Oct. 2006 President of Shanghai Ricoh Digital Equipment Co., Ltd.
Apr. 2008 General Manager of Information Technology and Solution
Division (Current)
Kenichi Matsubayashi Corporate Vice President Apr. 1971 Joined the Company
(June 5, 1948) (General Manager of RS Products Apr. 1995 Manager of RS Business Planning Department
Division of Production Business
Group) Oct. 2003 General Manager of RS Products Division of Production
Business Group (Current)
June 2005 Corporate Vice President (Current)
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Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Soichi Nagamatsu Corporate Vice President July 2004 Joined the Company
(March 25, 1951) (General Manager of Corporate July 2004 Vice General Manager of Research and Development Group
Planning Division)
Apr. 2006 Corporate Vice President (Current)
Apr. 2006 General Manager of Research and Development Group
Apr. 2006 General Manager of Corporate Technology Planning
Division
Apr. 2007 General Manager of Office System Development Center of
Research and Development Group
Apr. 2008 General Manager of Corporate Technology Development
Group
Apr. 2008 General Manager of Office Solution Technology
Development Center of Corporate Technology Development
Group
Apr. 2008 General Manager of Advanced Technology R&D Center of
Research and Development Group
Apr. 2008 Chairman of Ricoh Software Research Center (Beijing)
Co., Ltd.
Apr. 2009 General Manager of Corporate Planning Division
(Current)
Kazuhiro Yuasa Corporate Vice President Apr. 1977 Joined the Company
(September 1, 1952) (President of Personal Multi Apr. 2001 Deputy General Manager of ICD Division of Personal
Media Company) Multi Media Company
Oct. 2002 Deputy General Manager of ICS Division of Personal
Multi Media Company
Nov. 2002 General Manager of ICS Division of Personal Multi
Media Company
Apr. 2006 Associate Director
Apr. 2006 President of Personal Multi Media Company (Current)
Apr. 2008 Corporate Vice President (Current)
Yohzoh Matsuura Corporate Vice President Apr. 1980 Joined the Company
(April 15, 1956) (General Manager of Imaging Oct. 2004 General Manager of Imaging Engine Development Division
Engine Development Division) (Current)
Apr. 2006 Associate Director
Apr. 2007 Deputy General Manager of MFP Business Group
Corporate Vice President (Current)
Apr. 2008 General Manager of Fundamental & Control Technology
Center of
Apr. 2008 Imaging Engine Development Division
Group Executive Officers of the Company as of June 25, 2009 were as follows:
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Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Kazuo Togashi Corporate Senior Vice Apr. 1972 Joined the Company
(November 28, 1949) President (Chairman and CEO Apr. 1998 President of Ricoh Europe B.V.
(Chief Executive Officer) of June 2000 Senior Vice President
Ricoh Americas Corporation) Apr. 2002 Chairman of said company
(General Manager of Americas Apr. 2002 Chairman of NRG Group PLC
Marketing Group) June 2002 Executive Vice President
June 2003 Managing Director
June 2005 Corporate Senior Vice President (Current)
Apr. 2006 General Manager of International Business Group
Apr. 2006 General Manager of Regional Business Support Center of
International Business Group
Apr. 2006 General Manager of Trade Affairs & Export/Import
Administration Center of International Business Group
Chairman of Ricoh China Co., Ltd.
Jan. 2008 General Manager of Business Strategy & Planning Center
Apr. 2009 of International Business Group
Deputy General Manager of Global Marketing Taskforce
June 2009 Chairman and CEO (Chief Executive Officer) of Ricoh
Americas Corporation (Current)
General Manager of Americas Marketing Group (Current)
Shiro Sasaki Corporate Senior Vice President Apr. 1972 Joined the Company
(December 23, 1949) (Chairman of Ricoh Apr. 2000 President of Gestetner Holdings PLC
Europe, PLC.) Apr. 2002 President of NRG Group PLC
(Chairman of Ricoh Europe June 2004 Senior Vice President
(Netherlands) B.V.) June 2005 Corporate Vice President
(General Manager of Europe Apr. 2006 Corporate Senior Vice President (Current)
Marketing Group)
Apr. 2006 Chairman of Ricoh Europe B.V.
Apr. 2006 Chairman of NRG Group PLC
Apr. 2007 Chairman of Ricoh Europe PLC (Current)
Apr. 2007 President of Ricoh Europe (Netherlands) B.V. (Current)
June 2009 General Manager of Europe Marketing Group (Current)
Sadahiro Arikawa Corporate Senior Vice President Apr. 1971 Joined the Company
(March 31, 1949) (President of Ricoh Leasing Apr. 2001 General Manager of Fukuoka Branch of Marketing Group
Co., Ltd.) Dec. 2001 President of Ricoh Kyusyu Co., Ltd.
Apr. 2004 General Manager of Major Accounts Marketing Division
June 2004 Senior Vice President
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Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
June 2005 Corporate Vice President
Apr. 2009 Associate Director
Apr. 2009 Corporate Senior Vice President of Ricoh Leasing
Co., Ltd.
June 2009 President of Ricoh Leasing Co., Ltd. (Current)
June 2009 Corporate Senior Vice President (Current)
Hiroshi Tsuruga Corporate Vice President Apr. 1971 Joined the Company
(November 18, 1948) (President of Tohoku Ricoh Apr. 1999 General Manager of Information Technology and Solution
Co., Ltd.) Division
June 2002 Senior Vice President
June 2005 Deputy President of Tohoku Ricoh Co., Ltd.
June 2005 Corporate Vice President (Current)
Apr. 2006 President of Tohoku Ricoh Co., Ltd. (Current)
Kohji Sawa Corporate Vice President Apr. 1971 Joined the Company
(June 5, 1948) (President of Ricoh Elemex Apr. 1998 General Manager of Imaging System Component Production
Corporation) Division
Apr. 2000 General Manager of Procurement Control Center
July 2001 General Manager of Optical Component Development Center
June 2002 Senior Vice President
June 2005 Corporate Vice President (Current)
General Manager of Information Technology and Solution
Division
Apr. 2008 Corporate Senior Vice President of Ricoh Elemex
Corporation
June 2008 President of Ricoh Elemex Corporation (Current)
Yoshihiro Niimura Corporate Vice President Apr. 1975 Joined the Company
(May 22, 1951) (President of Ricoh China June 2004 President of Ricoh China Co., Ltd. (Current)
Co., Ltd.)
(Chairman and President of June 2004 Chairman and President of Ricoh Electronic Technology
Ricoh Electronic Technology (China) Co., Ltd. (Current)
(China) Co., Ltd.) June 2004 Senior Vice President
(General Manager of China June 2005 Corporate Vice President (Current)
Marketing Group) June 2009 General Manager of China Marketing Group (Current)
Michel De Bosschere Corporate Vice President June 1993 Managing Director of Nashua/tec Benelux
(June 16, 1948) (Chairman of Ricoh Jan. 2000 President of NRG Benelux B.V.
Belgium N.V.) June 2004 Senior Vice President
(President of Ricoh France June 2005 Corporate Vice President (Current)
S.A.S.)
-87-
Current Position
Name (Function/Business area) Date Business Experience
-------------------- ------------------------------- ---------------- -------------------------------------------------------
Aug. 2007 President of Ricoh Nederland B.V.
Nov. 2007 Chairman of NRG Benelux B.V.
Chairman of Ricoh Nederland B.V.
Nov. 2007 Chairman of Ricoh Belgium N.V. (Current)
Chairman of NRG Belgium S.A.
Mar. 2009 President of Ricoh France S.A.S. (Current)
Daisuke Segawa Corporate Vice President Mar. 1980 Joined the Company
(July 21, 1954) (President and CEO (Chief Dec. 1998 General Manager of Treasury Department
Executive Officer) of InfoPrint Oct. 2004 General Manager of Corporate Planning Division
Solutions Company, LLC) June 2005 Corporate Vice President
Apr. 2006 General Manager of Finance and Accounting Division
(Current)
July 2008 Senior Vice President of InfoPrint Solutions Company,
LLC
Apr. 2009 Associate Director
May 2009 President and CEO (Chief Executive Officer) of
InfoPrint Solutions Company, LLC (Current)
June 2009 Corporate Vice President (Current)
Nobuaki Majima Corporate Vice President Apr. 1981 Joined the Company
(May 24, 1952) (President of Ricoh Asia Mar. 2001 President of Ricoh Deutschland GmbH
Pacific, Pte. Ltd.)
(General Manager of Asia Apr. 2006 President of Ricoh Asia Pacific, Pte. Ltd. (Current)
Pacific Marketing Group) Apr. 2008 Associate Director
Apr. 2009 Corporate Vice President (Current)
June 2009 General Manager of Asia Pacific Marketing Group
(Current)
There are no family relationships between any Director, Corporate
Auditor or Executive Officer and any other Director, Corporate Auditor or
Executive Officer of the Company. There are no arrangements or understandings
with major shareholders, customers, suppliers or others pursuant to which any
person named above was selected as a Director, Corporate Auditor, Executive
Officer, or a Group Executive Officer.
B. Compensation
The aggregate remuneration, including bonuses but excluding retirement
allowances, paid by the Company for fiscal year 2009 to all Directors, Corporate
Auditors, Executive Officers and Group Executive Officers of the Company who
served during fiscal year 2009 was Yen 1,072 million.
Bonuses to be received by the director are determined by a resolution
of an ordinary general meeting of shareholders of the Company. Bonuses so paid
are not
-88-
deductible by the Company for tax purposes and, for financial reporting
purposes, are reported under selling, general and administrative expenses
as a charge against income and are based on the Company's financial
performance for the fiscal year. During fiscal year 2010, the Company will
pay bonuses in the total amount of Yen 84 million to Directors as a group
in their capacity as such (excluding bonuses for their services as
employees) in respect of fiscal year 2010, as approved by the Company's
shareholders at the Ordinary General Meeting of Shareholders held on June
25, 2009.
In accordance with customary Japanese business practice, when a
Director or Corporate Auditor retires, a proposal to pay a lump-sum retirement
allowance is submitted to the shareholders for their approval. After
shareholders' approval is obtained, the amount of the retirement allowance for a
Director or Corporate Auditor is fixed by the Board of Directors or Board of
Corporate Auditors and generally reflects his remuneration and position at the
time of retirement, the length of his service as a Director or Corporate Auditor
and his contribution to the Company's performance. At the Ordinary General
Meeting of Shareholders held on June 27, 2007, the shareholders approved the
abolishment of this retirement allowance system. Accordingly, the Company will
pay incumbent Directors and Corporate Auditors their final retirement allowances
corresponding to their tenure through June 27, 2007 in accordance with standards
prescribed by the Company. The amount of such final retirement allowance through
June 27, 2007 is Yen 498 million, for which the Company has established a
reserve as of March 31, 2009.
The Company abolished the retirement system as described above, in its
place the Company introduced stock price-linked remuneration for its Directors
by enhancing of the bonuses for directors with the Company's financial
performance. Under this new system, the Company will pay a specified amount of
remuneration to Directors each month, which amount will be contributed to the
stock purchasing system to purchase the Company's stock. Each Director will be
required to hold the Company's stock purchased under this system for the tenure
of their office. One of the objectives of this system is to align the interests
of the Directors with the interests of the shareholders on a long-term basis,
which Ricoh believes will also strengthen the incentives to enhance shareholder
value.
C. Board Practices
Under the Corporation Law of Japan, all Directors and Corporate
Auditors shall be elected at the General Meeting of Shareholders. In general,
under the Articles of Incorporation of the Company, the terms of office of
Directors shall expire at the conclusion of the Ordinary General Meeting of
Shareholders held with respect to the last fiscal year ending within two years
after their election, and the terms of office of Corporate Auditors shall expire
at the conclusion of the Ordinary General Meeting of Shareholders held with
respect to the last fiscal year ending within four years after their election.
However, both the Directors and Corporate Auditors may serve any number of
consecutive terms.
-89-
From among the Directors, the Board of Directors shall elect one or
more Representative Directors. Each of the Representative Directors has the
statutory authority to represent the Company in the conduct of its affairs.
The Corporate Auditors of the Company are not required to be and are
not certified public accountants. However, at least half of the Corporate
Auditors must be a person who has not been a Director, executive officer,
manager, or employee of the Company or any of its subsidiaries prior to his or
her election as a Corporate Auditor. The Corporate Auditors may not at the same
time be Directors, executive officers, managers, or employees of the Company or
any of its subsidiaries. Each Corporate Auditor has the statutory duty to
examine the financial statements and business reports to be submitted by the
Board of Directors at the General Meeting of Shareholders and also to supervise
the administration by the Directors of the Company's affairs. Corporate Auditors
are entitled and obligated to participate in meetings of the Board of Directors
but are not entitled to vote. Under the Corporation Law, the Board of Corporate
Auditors has a statutory duty to prepare and submit its audit report to the
Board of Directors each year. A Corporate Auditor may note his or her opinion in
the audit report if it is different from the opinion of the Board of Corporate
Auditors that is expressed in the audit report. The Board of Corporate Auditors
is empowered to establish audit principles, the method of examination by the
Corporate Auditors of the Company's affairs and financial position, and other
matters concerning the performance of the Corporate Auditors' duties. The
Company does not have an audit committee.
There are no Director's service contracts with Ricoh providing for
benefits upon termination of service. For additional information regarding
director compensation, see Item 6.B.
D. Employees
The table below provides information about employees.
As of March 31,
-------------------------
2007 2008 2009
------ ------ -------
Categorized by Operating Segment
Imaging and Solutions 73,845 75,254 100,302
Industrial Products 3,340 3,421 3,150
Other 3,645 3,751 3,911
Headquarters 1,109 1,030 1,114
Total 81,939 83,456 108,477
Categorized by Geographic Location
Domestic 40,342 40,385 40,865
Overseas 41,597 43,071 67,612
Total 81,939 83,456 108,477
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Ricoh believes it is one of the few companies with a base in Japan
with a large labor force which is not unionized. There has been no significant
labor dispute in fiscal year 2009 and Ricoh knows of no efforts to organize a
union. Ricoh generally believes its employee relations to be good.
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E. Share Ownership
The following table lists the number of Common Stock owned by each
Director, Corporate Auditor and Executive Officer of the Company as of June 25,
2009. None of the Company's Directors, Corporate Auditors or Executive Officers
is a beneficial owner of more than 1% of the Company's Common Stock.
Collectively, the Directors, Corporate Auditors and Executive Officers
beneficially own approximately 0.03% of the total Company Common Stock issued.
Name Position Number of Shares
-------------------- ------------------------------------------------- ----------------
Masamitsu Sakurai Chairman of the Board and Representative Director 20,000
Shiro Kondo Representative Director 12,000
Koichi Endo Director 20,747
Katsumi Yoshida Director 9,100
Masayuki Matsumoto Director 9,000
Takashi Nakamura Director 17,693
Kazunori Azuma Director 11,000
Zenji Miura Director 10,000
Kiyoshi Sakai Director 6,000
Takaaki Wakasugi Director 5,000
Shigekazu Iijima Corporate Auditor 5,000
Yuji Inoue Corporate Auditor 10,000
Terumoto Nonaka Corporate Senior Vice President 8,050
Kenji Hatanaka Corporate Senior Vice President 3,000
Hiroshi Kobayashi Corporate Senior Vice President 5,000
Yoshimasa Matsuura Corporate Senior Vice President 5,000
Norio Tanaka Corporate Senior Vice President 3,000
Hiroshi Adachi Corporate Senior Vice President 9,000
Kenichi Kanemaru Corporate Senior Vice President 5,000
Hisashi Takata Corporate Vice President 1,000
Kiyoto Nagasawa Corporate Vice President 5,000
Yutaka Ebi Corporate Vice President 2,000
Kenichi Matsubayashi Corporate Vice President 4,000
Soichi Nagamatsu Corporate Vice President 3,000
Kazuo Togashi Corporate Senior Vice President 7,000
Shiroh Sasaki Corporate Vice President 4,000
Sadahiro Arikawa Corporate Vice President 4,000
Hiroshi Tsuruga Corporate Vice President 4,000
Kohji Sawa Corporate Vice President 5,000
Yoshihiro Niimura Corporate Vice President 1,000
Nobuaki Majima Corporate Vice President 4,000
-------
Total 217,590
=======
All shares of Common Stock of the Company carry the same voting
rights.
No options to purchase securities from the Company or any of its
subsidiaries were outstanding on June 25, 2009.
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Item 7. Major Shareholders and Related Party Transactions
-------------------------------------------------
A. Major Shareholders
Major shareholders that are beneficial owners of 5% or more of the
Common Stock as of March 31, 2009 are as follows:
Number of Percentage of
Shares Owned Outstanding
Title of Class Name (in thousands) Shares Owned
-------------- ------------------------------------ -------------- -------------
Common Stock Japan Trustee Services Bank, Ltd. 102,365 14.10%
Common Stock The Master Trust Bank of Japan, Ltd. 70,093 9.65
The Master Trust Bank of Japan, Ltd. is a joint venture managed by
Mitsubishi UFJ Trust and Banking Corporation, Nippon Life Insurance Company,
Meiji Yasuda Life Insurance Company and the Norinchukin Trust and Banking Co.,
Ltd.
Japan Trustee Services Bank, Ltd. is a joint venture managed by Resona
Bank, Ltd., the Sumitomo Trust and Banking Co., Ltd. and Chuo Mitsui Trust
Holdings, Inc.
As far as is known to the Company, there has not been any significant
change in the percentage ownership held by any major shareholders during fiscal
year 2009. The major shareholders do not have different voting rights.
American Depositary Receipts ("ADRs") evidencing American Depositary
Shares are issued by The Bank of New York. The normal trading unit is 5 American
Depositary Shares. As of March 31, 2009, 1,008,926 American Depositary Shares
were held of record by one institutional registered holder in the United States
of America.
As far as is known to the Company as of this date, it is not directly
or indirectly owned or controlled by any other corporation or by the Japanese or
any foreign government. As far as is known to the Company as of this date, there
is no arrangement, the operation of which may at a subsequent date result in a
change in control of the Company.
B. Related Party Transactions
Ricoh sells or purchases products, materials, supplies and services to
or from affiliated companies on normal commercial terms and conditions. See Note
7 to the Consolidated Financial Statements.
No Directors, Corporate Auditors or Executive Officers were indebted
to the Company or its subsidiaries at any time during the latest three fiscal
years. Neither the Company nor its subsidiaries expect to make any loans to
Directors, Corporate Auditors or Executive Officers in the future.
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C. Interest of Experts and Counsel
Not applicable.
Item 8. Financial Information
---------------------
A. Consolidated Statements and Other Information
See Item 18. Financial Statements and pages F-1 through F-52.
Legal or arbitration proceedings
--------------------------------
There are no material pending legal or arbitration proceedings to
which Ricoh is a party.
Dividend Policy
---------------
Ricoh endeavors to provide stable dividends to its shareholders by
boosting profitability. At the same time, Ricoh undertakes to increase retained
earnings to reinforce its corporate structure and to cultivate new businesses.
Ricoh uses such retained earnings to strengthen its core businesses and invest
in new fields with medium- and long-term perspectives. See Item 10 "Dividends"
for important information on the Company's dividend payment procedure and
restrictions.
B. Significant Changes
No significant changes have occurred since the date of the
Consolidated Financial Statements included in this report.
Item 9. The Offer and Listing
---------------------
A. Offer and Listing Details
The primary market for the Company's Common Stock is the Tokyo Stock
Exchange (the "TSE") in the form of original Common Stock.
The Company's Common Stock has been listed on the TSE since 1949, and
in Japan it is also listed on the Osaka Stock Exchange, the Nagoya Stock
Exchange, the Fukuoka Stock Exchange and the Sapporo Stock Exchange. In
addition, the Company's Common Stock is listed outside of Japan on the following
stock exchange: Euronext Paris.
In the United States, the Company's American Depositary Shares are
traded on the Over-the-Counter Market in the form of ADRs and are issued and
exchanged by The Bank of New York, as depositary. The following table sets forth
for the periods indicated the reported high and low sales prices of the
Company's Common Stock on the TSE and the reported high and low sales prices per
share of the Company's ADSs on the Over-the-Counter Market.
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Over-the-Counter Market Price Per
Tokyo Stock Exchange Price American Depositary Share
Per Share of Common Stock (5 shares of Common Stock)
(Japanese Yen) (U.S. Dollars)
-------------------------- ---------------------------------
High Low High Low
----- ----- ------ ------
Annual highs and lows
---------------------
Fiscal Year 2005 2,345 1,782 107.50 84.80
Fiscal Year 2006 2,360 1,646 110.00 73.00
Fiscal Year 2007 2,775 1,991 116.50 88.00
Fiscal Year 2008 2,950 1,395 121.25 69.55
Fiscal Year 2009 1,986 770 93.50 41.50
Quarterly highs and lows
------------------------
Fiscal Year 2008
1st quarter 2,950 2,550 121.25 106.00
2nd quarter 2,915 2,185 119.50 95.25
3rd quarter 2,545 1,905 109.50 87.00
4th quarter 1,977 1,395 95.00 69.55
Fiscal Year 2009
1st quarter 1,986 1,558 93.50 78.10
2nd quarter 1,983 1,441 92.20 65.00
3rd quarter 1,534 770 70.50 41.50
4th quarter 1,359 931 71.43 48.00
Monthly highs and lows
----------------------
December 2008 1,142 911 63.00 48.50
January 2009 1,359 1,027 71.43 57.00
February 2009 1,204 1,029 64.85 54.75
March 2009 1,272 931 63.25 48.00
April 2009 1,359 1,171 68.49 59.74
May 2009 1,361 1,194 69.71 61.55
Notes: (1) Price per share of Common Stock is as reported by the TSE.
(2) Price per ADSs is based upon one ADS representing 5 shares of Common
Stock as reported by the Over-the-Counter Market Bulletin Board(R).
B. Plan of Distribution
Not applicable.
C. Markets
See Item 9.A. for a list of the stock exchanges on which the
securities are listed.
-95-
See Item 10.B. for certain information relating to the Common Stock of
the Company.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. Additional Information
----------------------
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
ORGANIZATION
Ricoh Company, Ltd. was incorporated in Japan under the Commercial
Code of Japan and is deemed to remain to exist under the Corporation Law
(Kaisha-ho; Law No. 86 of 2005) which took effect as of May 1, 2006. It is
registered in the Commercial Register (shogyo tokibo) maintained by the Tokyo
Legal Affairs Bureau of the Ministry of Justice.
OBJECTIVES AND PURPOSES
Article 3 of the Articles of Incorporation of the Company provides
that its purpose is to engage in the following business activities:
1. Manufacture, sale and installation work and electrical
communication work of optical, office, audio, electric and
measuring equipment, other general machinery and equipment and
accessories and supplies therefor.
2. Manufacture and sale of photographic sensitive materials and
duplicating papers.
3. Manufacture and sale of various raw materials for photographic
sensitive materials, and various chemical materials for chemical
industries.
4. Manufacture, processing and sale of papers, pulps, textiles,
general merchandise and by-products thereof.
5. Investment in, or sale of the products of, other companies.
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6. Import and Export of the goods described in any of the foregoing
items and other goods of every kind and description. ]
7. Brokerage business for casualty insurance and insurance brokerage
under the Automobile Liability Security Law of Japan.
8. Direct marketing through the Internet, facsimile, telephone, etc.
9. Any and all business incidental or relating to any of the
foregoing items.
DIRECTORS
Under the Corporation Law, the Board of Directors has executive powers
and duties to manage the affairs of the Company and each Representative
Director, who is elected from among the Directors by the Board of Directors, has
the statutory authority to represent the Company in all respects. Under the
Corporation Law, the Directors must refrain from engaging in any business
competing with the Company unless approved by the Board of Directors and any
Director who has a material interest in the subject matter of a resolution to be
taken by the Board of Directors cannot vote in such resolution. The total amount
of remuneration to Directors and to Corporate Auditors is subject to approval at
the General Meeting of Shareholders. Within such authorized amounts the Board of
Directors and the Board of Corporate Auditors respectively determine the
compensation to each Director and Corporate Auditor.
Except as stated below, neither the Corporation Law nor the Company's
Articles of Incorporation make a special provision as to the Director's or
Corporate Auditor's power to vote in connection with their compensation,
borrowing powers exercisable by a Representative Director (or a Director who is
given power by a Representative Director to exercise such powers), their
retirement age or requirement to hold any shares of capital stock of the
Company. The Corporation Law specifically requires the resolution of the Board
of Directors for a corporation to acquire or dispose of material assets; to
borrow substantial amounts of money; to employ or discharge from employment
important employees, such as managers (shihainin); to establish, change or
abolish a material corporate organization such as a branch office; to decide
certain important matters related to the offering as to subscription of bonds;
to establish a system necessary to ensure appropriateness of business operations
of a joint stock corporation (kabushiki kaisha), including compliance with the
laws and regulations and the Articles of Incorporation by the Directors in
performing their duties. The Regulations of the Board of Directors of the
Company require a resolution of the Board of Directors for the Company's
borrowing or lending of a significant amount of money or giving of a guarantee
in a large amount.
Set forth below is certain information relating to the Common Stock of
the Company, including brief summaries of certain provisions of the Company's
Articles of Incorporation and Share Handling Regulations, as currently in
effect, and of the Corporation Law of Japan relating to a joint stock company
(kabushiki kaisha) and certain related legislation.
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GENERAL
The presently authorized capital stock of the Company is 1,500,000,000
shares. Under the Corporation Law, shares of the Company (which chose under
Article 7 of its Articles of Incorporation to issue share certificates) are
transferable by delivery of share certificates, but in order to assert
shareholders' rights against the Company, the transferee must generally have his
name registered in the Company's register of shareholders. Shareholders are
required to file their names, addresses and seals with The Chuo Mitsui Trust &
Banking Co., Ltd., the custodian of the shareholders' register (kabu-nushi meibo
kanrinin), transfer agent for the Company's Common Stock, and shareholders not
resident in Japan are required to file a mailing address in Japan or appoint a
resident proxy in Japan. These requirements do not apply to the holders of ADRs.
The central clearing system of share certificates under the Law
Concerning Central Clearing of Share Certificates and Other Securities of Japan
applies to the shares of Common Stock of the Company. Pursuant to this system a
holder of shares of Common Stock is able to choose, at his discretion, to
participate in this system and all certificates of shares of Common Stock
elected to be put into this system are deposited with the central clearing
system and all such shares are registered in the name of the clearing house in
the Company's register of shareholders. Each participating shareholder is in
turn registered in the register of beneficial shareholders and treated the same
way as shareholders registered in the Company's register of shareholders.
DIVIDENDS
The Articles of Incorporation of the Company provide that the accounts
shall be closed on March 31 of each year and that dividends, if any, shall be
paid to the shareholders of record as of the end of such fiscal period. After
the close of the fiscal period, the Board of Directors prepares, among other
things, accounting documents (financial statements) and the attachments thereto
for dividends and other purposes; these documents are to be submitted to the
Corporate Auditors of the Company and to the Accounting Auditors and then
submitted for approval by an annual Ordinary General Meeting of Shareholders,
which is normally held in June of each year and the distribution of surplus
(joyo-kin) is to be decided upon by shareholders at such Meeting. In addition to
provisions for dividends, if any, and for the reserve, bonuses to Directors and
Corporate Auditors will also be decided upon at this Meeting. In addition to a
distribution of annual dividends, the Board of Directors of the Company may by
its resolution declare an interim dividend pursuant to Article 454, paragraph 5
of the Corporation Law to shareholders who are registered in the Company's
register of shareholders at the end of each September 30, subject to the
limitations described below.
The Corporation Law provides that the Company may not make any
distribution of surplus by way of dividends in cash unless it has set aside in
its reserve an amount equal to at least one-tenth of any amount paid out as an
appropriation of retained earnings (including any payment by way of annual
dividend and bonuses to Directors and Corporate Auditors) or equal to one-tenth
of any interim dividend. The Corporation Law permits the Company to distribute
surplus by way of dividends. First, surplus is
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calculated by adding (i), (ii), (iii) and (iv) described below and subtracting
(v), (vi) and (vii) described below from such aggregate of (i) through (iv): (i)
amount determined by subtracting the aggregate of (c), (d) and (e) described
below from the aggregate of (a) and (b) described below as of the final date of
the last fiscal year; (a) amount of assets, (b) the aggregate amount of the book
value of the treasury stock, (c) amount of liabilities, (d) the aggregate amount
of the stated capital and the reserve and (e) the aggregate of each amount
entered under respective accounting titles (kanjo kamoku) set forth under the
relevant Ordinance of the Ministry of Justice, (ii) amount determined by
subtracting the book value of the treasury stock from the consideration for the
treasury stock disposed of, if any, after the final date of the last fiscal
year, (iii) amount of reduction of the stated capital, if any, after the final
date of the last fiscal year, (iv) amount of reduction of the reserve, if any,
after the final date of the last fiscal year, (v) book value of the treasury
stock, if any, cancelled after the final date of the last fiscal year, (vi)
amount determined by adding (a) through (c) described below in the event that
surplus is distributed after the final date of the last fiscal year: (a) the
aggregate of the book value of assets for distribution set forth under Article
454, paragraph 1, item 1 of the Corporation Law (regarding distribution of
surplus), (b) the aggregate of each sum of the money given to the shareholders
who exercised the right to monetary distribution set forth under Article 454,
paragraph 4, item 1 of the Corporation Law (regarding distribution in kind) and
(c) the aggregate of each sum of the money given to each shareholder holding
shares of which number is less than a certain number to be set forth by the
Company pursuant to Article 454, paragraph 4, item 2 of the Corporation Law
(regarding distribution in kind), (vii) the aggregate of each amount entered
under respective accounting titles set forth under the relevant Ordinance of the
Ministry of Justice. Second, the distributable amount is calculated by
subtracting the aggregate of (iii), (iv), (v) and (vi) described below from the
aggregate of (i) and (ii) described below: (i) surplus; (ii) the aggregate of
the following items (a) and (b) in the event that extraordinary accounting
documents are approved by the shareholders' meeting or by the Board of
Directors, as the case may be; (a) the aggregate of each amount entered as
profit under respective accounting titles set forth under the relevant Ordinance
of the Ministry of Justice during a period of time in question, (b)
consideration for the treasury stock disposed of, if any, during such period;
(iii) the book value of the treasury stock; (iv) the consideration for treasury
stock disposed of, if any, after the final date of the last fiscal year; (v) the
aggregate of each amount entered as loss under respective accounting titles set
forth under the relevant Ordinance of the Ministry of Justice during the same
period as stated in (ii) above; and (vi) the aggregate of each amount entered
under the respective accounting titles set forth under the relevant Ordinance of
Ministry of Justice. The Company may distribute such distributable amount to
shareholders.
The Corporation Law does not provide for stock dividends but provides
for "free share allotment" under Article 185. The Board of Directors may by
resolution issue and allot new shares to the shareholders on a prorated basis
without receiving any consideration/contribution as issue price. In addition,
under the Corporation Law, the Board of Directors may by resolution issue
additional shares by way of a stock split, while the General Meeting of
Shareholders by resolution transfers any amount which is distributable as
dividends to stated capital, and thus the same effect as a stock dividend can be
achieved.
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In Japan, the "ex-dividend" date and the record date for dividends
precede the date of determination of the amount of the dividend to be paid.
In accordance with the Company's Articles of Incorporation, once a
right to any dividends is accrued and has become due and payable, such right to
dividends will lapse after three years from the due date.
TRANSFER OF RESERVE TO STATED CAPITAL AND STOCK SPLITS
When the Company issues new shares of Common Stock, the entire amount
of the issue price of such new shares is required to be accounted for as stated
capital, although the Company may account for an amount not exceeding one-half
of such issue price as capital surplus. The General Meeting of Shareholders may
by resolution transfer the whole or any part of reserve to stated capital. On
the other hand, the Board of Directors may by resolution issue to shareholders
additional shares of Common Stock without receiving any
consideration/contribution as issue price by way of free allotment of shares or
stock split without referring to the whole or any part of the amount of reserve
so transferred to stated capital.
GENERAL MEETING OF SHAREHOLDERS
The Ordinary General Meeting of Shareholders to settle accounts of the
Company for each fiscal period is normally held in June each year in Ota-ku,
Tokyo, Japan. In addition, the Company may hold an extraordinary General Meeting
of Shareholders whenever necessary by giving at least two weeks' advance notice
to shareholders.
Notice of a Shareholders' Meeting setting forth the place, time and
purpose thereof, must be mailed to each shareholder having voting rights (or, in
the case of a non-resident shareholder, to his resident proxy or mailing address
in Japan) at least two weeks prior to the date set for the meeting. Such notice
may also be furnished to shareholders by electronic means with such
shareholders' consent.
Any shareholders' holding at least 300 voting shares or 1% of the
total number of outstanding voting shares for six months or more may propose a
matter to be considered at a General Meeting of Shareholders by submitting a
written request to Directors at least eight weeks prior to the date set for such
Meeting. Such request may be submitted by electronic means with the Company's
consent.
VOTING RIGHTS
A shareholder is entitled to one vote per share subject to the
limitations on voting rights set forth in the following paragraph below and in
the sections entitled "Unit share system" through "Voting rights of a holder of
shares representing less than one unit" below. Except as otherwise provided by
law or by the Company's Articles of Incorporation, a resolution can be adopted
at a General Meeting of Shareholders by a majority of the shares having voting
rights represented at the meeting. Special resolutions provided for in paragraph
2, Article 309 of the Corporation Law shall be adopted by the vote of the
shareholders not less than two-thirds (2/3) of those present at a
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meeting whereby one-third (1/3) of voting rights of all of the shareholders
shall constitute a quorum. The Corporation Law and the Company's Articles of
Incorporation provide, however, that the quorum for the election of Directors
and Corporate Auditors shall not be less than one-third of the total number of
outstanding shares having voting rights. The Company's shareholders are not
entitled to cumulative voting in the election of Directors. A corporate
shareholder, more than one-quarter of whose outstanding voting shares are
directly or indirectly owned by the Company, may not exercise its voting rights
in respect of the shares of the Company. The Company has no voting rights with
respect to its own Common Stock. Shareholders may exercise their voting rights
through proxies provided that the proxies are also shareholders holding voting
rights. The Company's shareholders also may cast their votes in writing.
The Corporation Law provides that in order to amend the Articles of
Incorporation and in certain other instances, including an increase in the total
number of shares authorized to be issued, a reduction of the stated capital, the
removal of a Director or Corporate Auditor, dissolution, merger (with an
exception of a merger with a company of very small business) or consolidation of
a corporation, the transfer of the whole or an important part of the business,
the taking over of the whole of the business of any other corporation (with an
exception of a merger with a company of very small business), any offering of
new shares at a "specially favorable" price (or any offering of convertible
bonds or debentures with "specially favorable" conversion conditions or of bonds
or debentures with warrants or rights to subscribe for new shares with
"specially favorable" conditions) to persons other than shareholders, the quorum
shall be one-third of the total number of shares having voting rights
outstanding and the approval of the holders of at least two-thirds of the shares
having voting rights represented at the Meeting is required (the "special
shareholders resolution").
SUBSCRIPTION RIGHTS (KABUSHIKI WARIATEWO UKERU KENRI)
Holders of the Company's Common Stock have no preemptive rights under
its Articles of Incorporation. Authorized but unissued shares may be issued at
such times and upon such terms as the Board of Directors determines, subject to
the limitations as to the offering of new shares at a "specially favorable"
price mentioned above. The Board of Directors may, however, determine that
shareholders shall be given subscription rights regarding a particular issue of
new shares, in which case such rights must be given on uniform terms to all
shareholders and a notice must be given to shareholders not less than two weeks
prior to the date when such rights are to be vested to shareholders. The
Corporation Law provides that if a shareholder to whom such rights are given
does not apply for subscription by a certain date of subscription, such
shareholder will lose such rights.
Rights to subscribe for new shares may be made generally transferable
by the Board of Directors. In such case, such transferable right is called "call
option of new shares (shinkabu yoyakuken). Whether the Company will make
subscription rights generally transferable in future rights offerings will
depend upon the circumstances at the time of such offerings. If subscription
rights are not made generally transferable, transfers by a non-resident of Japan
or a corporation organized under the laws of a
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foreign country or whose principal office is located in a foreign country will
be enforceable against the Company and third parties only if the Company's
consent to each such transfer is obtained. When such consent is necessary in the
future for the transfer of subscription rights, the Company intends to consent,
on request, to all such transfers by such a non-resident or foreign corporation.
DILUTION
In the future it is possible that market conditions and other factors
might make a rights offering to shareholders substantially below the market
price of shares of Common Stock desirable. If the number of shares offered in a
rights offering is substantial in relation to the number of shares outstanding
and the market price exceeds the subscription price at the time of the offering,
a shareholder who does not exercise and is unable otherwise to realize the full
value of his subscription rights would suffer economic dilution of his equity
interest in the Company.
LIQUIDATION RIGHTS
In the event of a liquidation of the Company, the assets remaining
after payment of all debts and liquidation expenses and taxes will be
distributed among the shareholders in proportion to the respective numbers of
shares held.
LIABILITY TO FURTHER CALLS OR ASSESSMENTS
All the Company's presently outstanding shares of Common Stock
including shares represented by the American Depository Shares are fully paid
and non-assessable.
CUSTODIAN OF THE SHAREHOLDERS' REGISTER
The Chuo Mitsui Trust and Banking Co., Ltd. is the custodian of the
shareholders' register of the Company's Common Stock; as such custodian, it
keeps the Company's register of shareholders and register of the lost share
certificates in its office at 33-1, Shiba 3-chome, Minato-ku, Tokyo, Japan, and
makes transfer of record ownership upon presentation of the certificates
representing the transferred shares.
RECORD DATE
March 31 is the record date for the Company's year-end dividends. The
shareholders who are registered as the holders of 1,000 shares or more in the
Company's register of shareholders at the end of each March 31 are also entitled
to exercise shareholders' rights at the Ordinary General Meeting of Shareholders
with respect to the fiscal period ending on such March 31. September 30 is the
record date for interim dividends. In addition, the Company may set a record
date for determining the shareholders entitled to other rights and for other
purposes by giving at least two weeks' public notice.
The price of the shares generally goes ex-dividend or ex-rights on
Japanese stock exchanges on the third business day prior to a record date (or if
the record date is not a
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business day, the fourth business day prior thereto), for the purpose of
dividends or rights offerings.
PURCHASE BY THE COMPANY OF ITS COMMON STOCK
The Company may purchase its own shares only in case of the events
falling under Article 155 of the Corporation Law. As a matter of manner of such
purchase, the Company may purchase of its own shares (i) through the Tokyo Stock
Exchange or other stock exchange on which the shares are listed or by way of
tender offer, if authorized by a resolution of the Board of Directors, (ii) from
a specific party, if authorized by a special resolution of an Ordinary General
Meeting of Shareholders, or (iii) from the Company's own subsidiary, if
authorized by a resolution of the Board of Directors.
When a repurchase is made by the Company from a specified party
pursuant to an authorization by a special resolution of an Ordinary General
Meeting of Shareholders as noted above, shareholders may make a demand to a
Representative Director, five days or more prior to the relevant Shareholders'
Meeting, that the Company also repurchase the shares held by that shareholder.
Purchase of shares falling under Article 461, paragraph 1 of the Corporation Law
must satisfy, among others, the requirement that the total amount of the
repurchase price (of book value) may not exceed the distributable amount as
described in "Dividends" above. The Company may hold its own shares as treasury
stock so purchased without restriction as to a period of time to hold. However,
the Company is not entitled to any voting rights or right to dividends as to
such treasury stock. The Company may cancel its treasury stock that it holds by
a resolution of the Board of Directors. The Company may otherwise dispose of its
treasury stock by a resolution of the Board of Directors.
"UNIT" SHARE SYSTEM (TANGENKABU SEIDO)
Pursuant to the Corporation Law the Company has adopted 1,000 shares
as one unit of shares.
TRANSFERABILITY OF SHARES REPRESENTING LESS THAN ONE UNIT
As adopted in the Company's Articles of Incorporation, the Company
will not issue certificates for shares representing less than one unit. Since
the transfer of shares normally requires delivery of the certificates therefor,
fractions of a unit for which no share certificates are issued are not
transferable. Shares representing less than one unit for which share
certificates have been issued continue to be transferable.
RIGHT OF A HOLDER OF SHARES REPRESENTING LESS THAN ONE UNIT TO REQUIRE THE
COMPANY TO PURCHASE SUCH SHARES
A holder of shares representing less than one unit may at any time
require the Company to purchase such shares at their last reported sale price on
the Tokyo Stock Exchange on the day when such request is made less applicable
brokerage commission. The usual securities transfer tax is applicable to such
transactions.
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RIGHT OF THE HOLDER OF SHARES TO DEMAND THE PURCHASE OF SHARES REPRESENTING LESS
THAN ONE UNIT
As adopted in the Company's Articles of Incorporation and set forth in
the Share Handling Regulations, a holder of shares of less-than-one-unit may
request the Company to sell additional shares so that their less-than-one-unit
can share constitute one unit of shares.
OTHER RIGHTS OF A HOLDER OF SHARES REPRESENTING LESS THAN ONE UNIT
A holder of shares representing less than one unit has certain rights
in respect of such shares, including the following: (i) the right to receive
dividends (including interim dividends), (ii) the right to receive shares and/or
cash by way of a stock split or upon consolidation or subdivision of shares or
upon a capital decrease or merger of the Company, (iii) the right to be allotted
subscription rights with respect to new shares, convertible bonds and bonds with
warrants to subscribe for shares when such rights are granted to shareholders
and (iv) the right to participate in the distribution of surplus assets in the
event of the liquidation of the Company. Other rights, including voting rights,
cannot be exercised with respect to shares representing less than one unit.
VOTING RIGHTS OF A HOLDER OF SHARES REPRESENTING LESS THAN ONE UNIT
A holder of shares representing less than one unit cannot exercise any
voting rights with respect to such shares. A holder of shares representing one
or more whole units will have one vote for each such unit, except as stated in
"Voting rights" above.
C. Material Contracts
All contracts entered into by Ricoh or any member of the Ricoh group
during the two years preceding this report were entered into in the ordinary
course of business.
D. Exchange Controls
The Foreign Exchange and Foreign Trade Law of Japan, as amended, and
the cabinet orders and ministerial ordinances thereunder (the "Exchange Law")
govern certain matters relating to the issuance of equity-related securities by
the Company and the acquisition and holding of shares of Common Stock or ADSs
representing such shares by "exchange non-residents" and by "foreign investors"
as hereinafter defined. The Exchange Law currently in effect does not affect the
right of an exchange non-resident to purchase or sell an ADS outside of Japan.
"Exchange non-residents" are defined under the Exchange Law as
individuals who are not resident in Japan and corporations whose principal
offices are located outside of Japan. Generally branches and other offices of
Japanese corporations located outside of Japan are regarded as exchange
non-residents, but branches and other offices located within Japan of
non-resident corporations are regarded as residents of Japan. "Foreign
investors" are defined to be (i) individuals not resident in Japan, (ii)
corporations which are organized under the laws of foreign countries or whose
principal offices are located
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outside of Japan, and (iii) corporations of which (a) 50% or more of the shares
are held by (i) and/or (ii) above, (b) a majority of officers consists of
non-resident individuals or (c) a majority of the officers having the power of
representation consists of non-resident individuals.
Dividends and Proceeds of Sales
Under the Exchange Law, dividends paid on, and the proceeds of sales
in Japan of, shares of Common Stock held by exchange non-residents in general
may be converted into any foreign currency and repatriated abroad. The
acquisition of shares of Common Stock by exchange non-resident shareholders by
way of stock splits is not subject to any requirements under the Exchange Law.
Acquisition of Shares
Under the Exchange Law, acquisition of shares of a Japanese company
listed on any Japanese stock exchange or traded on the over-the-counter market
in Japan ("listed shares") by an exchange non-resident from a resident of Japan
is generally not subject to a prior filing requirement. In case a foreign
investor acquires listed shares (whether from a resident of Japan or an exchange
non-resident, from another foreign investor or from or through a designated
securities company) and as a result of such acquisition the number of shares
held directly or indirectly by such foreign investor would become 10% or more of
the total outstanding shares of the company, the foreign investor is required to
make a subsequent report on such acquisition to the Minister of Finance and
other Ministers having jurisdiction over the business of the subject company
(the "Competent Ministers"). In certain exceptional cases, a prior filing is
required and the Competent Ministers may recommend the modification or
abandonment of the proposed acquisition and, if the foreign investor does not
accept the recommendation, order its modification or prohibition. The deposit of
shares of Common Stock by an exchange non-resident of Japan, the issuance of
ADRs in exchange therefor and the withdrawal of the underlying shares of Common
Stock by an exchange non-resident upon surrender of ADRs are not subject to any
requirements under the Exchange Law, except where as a result of such deposit or
withdrawal the aggregate number of shares of Common Stock held by the Depositary
(or its nominee) or the holder surrendering ADRs, as the case may be, would be
10% or more of the total outstanding shares of Common Stock, in which event a
subsequent reporting may be required as described above.
E. Taxation
JAPANESE TAXATION
Generally, a non-resident of Japan or a non-Japanese corporation is
subject to Japanese withholding tax on dividends paid by a Japanese corporation.
Generally, stock splits are not subject to Japanese income tax. According to the
Income Tax Law of Japan, the rate of Japanese national withholding tax
applicable to dividends paid on listed shares issued by the Company to
non-residents of Japan or non-Japanese corporations is (i) 7% for the period
from January 1, 2004 to March 31, 2008, and (ii) 15% thereafter, except for
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dividends paid to any individual shareholder who holds 5% or more of the
outstanding total of the shares issued by the Company, for which the applicable
rate is 20%. Under the new income tax convention between the U.S. and Japan (the
"Convention") ratified in March 2004, the maximum rate of Japanese withholding
tax that may be imposed on dividends paid to a U.S. resident or corporation not
having a "permanent establishment" (as defined therein) in Japan is generally
10%. This 10% withholding tax rate is applicable to dividends declared on or
after July 1, 2004. The 15% withholding tax rate under the old income tax
convention is still applicable to dividends declared before July 1, 2004. If the
tax rate under the domestic tax law is lower than that under the Convention, the
domestic tax rate is still applicable.
Gains derived by a non-resident of Japan or a non-Japanese corporation
from the sale of Common Stock or ADRs outside of Japan, or from the sale of
Common Stock within Japan by a non-resident of Japan or by a non-Japanese
corporation not having a permanent establishment in Japan, are in general not
subject to Japanese income or corporation tax. Japanese inheritance or gift tax
at progressive rates may be payable by an individual who has acquired Common
Stock or ADRs as a legatee, heir or donee.
For purposes of the Convention and the U.S. Internal Revenue Code of
1986, as amended (the "Code"), U.S. holders of ADRs will be treated as the
owners of the Common Stock underlying the American Depositary Shares evidenced
by the ADRs.
U.S. TAXATION
This summary describes the material U.S. federal income tax
consequences for a U.S. holder (as defined below) of owning and disposing of
shares of Common Stock or American Depositary Shares evidenced by the ADRs. This
summary applies to you only if you hold shares of Common Stock or American
Depositary Shares as capital assets for U.S. federal income tax purposes. This
summary does not apply to you if you are a member of a class of holders subject
to special rules, such as:
. a dealer in securities or currencies;
. a trader in securities that elects to use a mark-to-market method of
accounting for securities holdings;
. a bank;
. a life insurance company;
. a tax-exempt organization;
. a person that holds shares of Common Stock or American Depositary
Shares that are a hedge or that are hedged against interest rate or
currency risks;
. a person that is subject to the alternative minimum tax;
. a person that holds shares of Common Stock or American Depositary
Shares as part of a straddle or conversion transaction for tax
purposes;
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. a person whose functional currency for U.S. federal income tax
purposes is not the U.S. Dollar; or
. a person that actually or constructively owns or is deemed to own 10%
or more of any class of our stock.
This summary is based on laws, treaties, and regulatory
interpretations in effect on the date hereof, all of which are subject to
change, possibly on a retroactive basis. Moreover, this summary assumes that the
Company will not be treated as a passive foreign investment company (a "PFIC")
for U.S. federal income tax purposes. See the summary below under the heading
"PFIC Rules."
Please consult your own tax advisers concerning the U.S. federal,
state, local, and other tax consequences of purchasing, owning, and disposing of
shares of Common Stock or American Depositary Shares in your particular
circumstances.
For purposes of this summary, you are a "U.S. holder" if you are a
beneficial owner of a share of Common Stock or an American Depositary Share that
is for U.S. federal income tax purposes: (i) a citizen or a resident of the
United States, (ii) a corporation or a partnership (including an entity treated
as a corporation or a partnership for U.S. federal income tax purposes) created
or organized in or under the laws of the United States, any state thereof or the
District of Columbia (unless, in the case of a partnership, Treasury regulations
are adopted that provide otherwise), (iii) an estate whose income is subject to
U.S. federal income tax regardless of its source, or (iv) a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. Certain trusts not
described in clause (iv) above in existence on August 20, 1996 that elect to be
treated as a United States person will also be a U.S. holder for purposes of
this discussion.
In general, if you hold ADRs evidencing American Depositary Shares,
you will be treated as the owner of the shares of Common Stock represented by
those American Depositary Shares for U.S. federal income tax purposes, and no
gain or loss will be recognized if you exchange an American Depositary Share for
the shares of Common Stock represented by that American Depositary Share.
Dividends
The gross amount of cash dividends paid out of the Company's current
or accumulated earnings and profits, as determined for U.S. federal income tax
purposes, that a U.S. holder receives (prior to deduction of Japanese taxes)
generally will be subject to U.S. federal income taxation as foreign source
ordinary dividend income. However, in certain circumstances, all or a portion of
the cash dividends paid by the Company may be treated as U.S. source dividend
income. You should consult your tax advisers regarding the U.S. federal income
tax consequences of all or a portion of the cash dividends paid by the Company
being treated as U.S. source dividend income.
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Dividends paid in Japanese Yen will be included in your income in a
U.S. Dollar amount calculated by reference to the exchange rate in effect on the
date of your (or, in the case of American Depositary Shares, the depositary's)
receipt of the dividend, regardless of whether the payment is in fact converted
into U.S. Dollars. If such a dividend is converted into U.S. Dollars on the date
of receipt, you generally should not be required to recognize a foreign currency
gain or loss in respect of the dividend income. You should consult your own tax
adviser regarding the treatment of any foreign currency gain or loss realized
with respect to any Japanese Yen received by you (or, in the case of American
Depositary Shares, the depositary) that are converted into U.S. Dollars on a
date subsequent to receipt. Dividends paid by the Company generally will not be
eligible for the dividends-received deduction allowed to corporations that are
U.S. holders.
Notwithstanding the foregoing, pursuant to recently enacted
legislation, certain dividends received by individual U.S. holders that
constitute "qualified dividend income" will be subject to a reduced maximum
marginal U.S. federal income tax rate. Qualified dividend income generally
includes, among other dividends, dividends received during the taxable year from
"qualified foreign corporations." In general, the term "qualified foreign
corporation" includes a foreign corporation that is eligible for the benefits of
a comprehensive income tax treaty with the United States which the U.S. Treasury
Department determines to be satisfactory, and which includes an exchange of
information program. In addition, a foreign corporation is treated as a
qualified foreign corporation with respect to any dividend paid by the
corporation with respect to stock of the corporation that is readily tradable on
an established securities market in the United States. Notwithstanding this
previous rule, dividends received from a foreign corporation that was a foreign
investment company (as defined in section 1246(b) of the Code), a passive
foreign investment company (as defined in section 1297 of the Code), or a
foreign personal holding company (as defined in section 552 of the Code) in
either the taxable year of the corporation in which the dividend was paid or the
preceding taxable year will not constitute qualified dividend income. In
addition, the term qualified dividend income will not include, among other
dividends, any (i) dividends on any share of stock which is held by a taxpayer
for 60 days or less during the 121-day period beginning on the date which is 60
days before the date on which such share becomes ex-dividend with respect to
such dividends (as measured under section 246(c) of the Code) or (ii) dividends
to the extent that the taxpayer is under an obligation (whether pursuant to a
short sale or otherwise) to make related payments with respects to positions in
substantially similar or related property. Moreover, special rules apply in
determining a taxpayer's foreign tax credit limitation under section 904 of the
Code in the case of qualified dividend income. Individual U.S. holders should
consult their own tax advisors to determine whether or not amounts received as
dividends from the Company will constitute qualified dividend income subject to
a reduced maximum marginal U.S. federal income tax rate and, in such case, the
effect, if any, on the individual U.S. holder's foreign tax credit.
In addition to the foregoing, you should consult your own tax advisers
to determine whether any rules limit your ability to make effective use of
foreign tax credits, including the possible adverse impact of failing to take
advantage of benefits under the income tax treaty between the United States and
Japan. If no such rules apply, you
-108-
generally may claim a credit against your U.S. federal income tax liability for
Japanese taxes withheld from dividends on shares of Common Stock or American
Depositary Shares, so long as you have owned the shares of Common Stock or
American Depositary Shares (and not entered into specified kinds of hedging
transactions) for at least a 16-day period that includes the ex-dividend date.
Instead of claiming a credit, you may, at your election, deduct such Japanese
taxes in computing your taxable income, subject to generally applicable
limitations under U.S. federal income tax law. The calculation of foreign tax
credits and, in the case of a U.S. holder that elects to deduct foreign taxes,
the availability of deductions involve the application of complex rules that
depend, in part, on a U.S. holder's particular circumstances. You should consult
your own tax advisers regarding the creditability or deductibility of such
taxes.
Sales and Other Dispositions
A U.S. holder will recognize a gain or loss on the sale or other
disposition of shares of Common Stock or American Depositary Shares evidenced by
ADRs in an amount equal to the difference between the U.S. Holder's adjusted tax
basis in such shares of Common Stock or American Depositary Shares (in U.S.
Dollars) and the amount realized on the disposition (in U.S. Dollars, generally
determined at the spot rate on the date of disposition if the amount realized is
denominated in a foreign currency). For U.S. federal income tax purposes, a gain
or loss realized by a U.S. holder on a sale or other disposition of shares of
Common Stock or American Depositary Shares will be a capital gain or loss, and
will be a long-term capital gain or loss if the shares of Common Stock or
American Depositary Shares were held for more than one year. Such gain or loss
generally will be treated as U.S. source gain or loss for U.S. foreign tax
credit purposes. Your ability to offset capital losses against ordinary income
is limited. Long-term capital gain recognized by an individual U.S. holder
generally is subject to taxation at a reduced maximum marginal U.S. federal
income tax rate.
PFIC Rules
The Company believes that it will not be treated as a PFIC for U.S.
federal income tax purposes. However, that is a factual determination made
annually and therefore may be subject to change. If the Company was treated as a
PFIC, a U.S. holder of shares of Common Stock or American Depositary Shares
evidenced by ADRs would be subject to certain adverse U.S. federal income tax
consequences.
U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING RULES
Payments in respect of the shares of Common Stock or American
Depositary Shares that are made within the United States or through certain
U.S.-related financial intermediaries are subject to information reporting and
may be subject to backup withholding unless the holder (i) is a corporation or
other exempt recipient or (ii) provides a taxpayer identification number and
certifies that no loss of exemption from backup withholding has occurred (and
certain other conditions are met).
-109-
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
The Company is subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended. In accordance with these
requirements, the Company files reports and other information with the U.S.
Securities and Exchange Commission (the "SEC"). These materials, including this
annual report and exhibits thereto, may be inspected and copied at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of
the materials may be obtained from the SEC's Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549 at prescribed rates. The public may obtain
information on the operation of the Public Reference Room by calling the SEC in
the United States at 1-800-SEC-0330. The documents filed via the Electronic Data
Gathering, Analysis, and Retrieval system are also available for inspection on
the SEC's website (http://www.sec.gov).
I. Subsidiary Information
Not Applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Ricoh is exposed to market risks primarily from changes in foreign
currency exchange rates and interest rates, which affect outstanding debt and
certain assets and liabilities denominated in foreign currencies. To a lesser
extent, Ricoh is also exposed to equity price risk. In order to manage these
risks that arise in the normal course of business, Ricoh enters into various
hedging transactions pursuant to its policies and procedures covering such areas
as counterparty exposure and hedging practices. Ricoh does not hold or issue
derivative financial instruments for trading purposes or to generate income.
Ricoh regularly assesses these market risks based on the policies and
procedures established to protect against adverse effects of these risks and
other potential exposures, primarily by reference to the market value of the
financial instruments. As a result of the latest assessment, Ricoh does not
anticipate any material losses in these areas for the fiscal year 2009, and
there are no material quantitative changes in market risk exposure at March 31,
2009 when compared to March 31, 2008. In the normal course of business, Ricoh
also faces risks that are either non-financial or nonquantifiable. Such risks
principally include credit risk and legal risk, and are not represented in the
following tables.
-110-
FOREIGN CURRENCY RISK
In the ordinary course of business, Ricoh uses foreign exchange
forward contracts to manage the effects of foreign currency exchange risk on
monetary assets and liabilities denominated in foreign currencies. The contracts
with respect to the operating activities generally have maturities of less than
six months, while the contracts with respect to the financing activities have
the same maturities as the underlying assets and liabilities.
The table below provides information about Ricoh's material derivative
financial instruments that are sensitive to foreign currency exchange rates. The
table below relating to foreign exchange forward contracts presents the notional
amounts, weighted average exchange rates and estimated fair value. These
notional amounts generally are used to calculate the contractual payments to be
exchanged under the contracts.
Foreign Exchange Forward Contracts
Year Ended March 31,
----------------------------------------------------------------------------
2008 2009
------------------------------------ -------------------------------------
Estimated Estimated
Contract fair Contract fair
Average amounts value Average amounts value
contractual (Millions (Million contractual (Millions (Million
rates of Yen) of Yen) rates of Yen) of Yen)
--------------------------------------------------------------------------------------
US$/Yen 109.74 Yen (295) Yen (135) 92.25 Yen 15,959 Yen (1,023)
EUR/Yen 163.20 (3,418) (120) 127.25 17,576 (347)
US$/EUR 0.67 1,581 (93) -- -- --
INTEREST RATE RISK
In the ordinary course of business, Ricoh enters into interest rate
swap agreements to reduce interest rate risk and to modify the interest rate
characteristics of its outstanding debt. These agreements primarily involve the
exchange of fixed and floating rate interest payments over the life of the
agreement without the exchange of the underlying principal amounts.
The table below provides information about Ricoh's major derivative
and other financial instruments that are sensitive to changes in interest rates,
including interest rate swaps and debt obligations. For debt obligations, the
table presents principal cash flows by expected maturity date, related weighted
average interest rates and estimated fair value. For interest rate swaps, the
table presents notional amounts by expected maturity date, weighted average
interest rates. Notional amounts are generally used to calculate the contractual
payments to be exchanged under the contract.
-111-
LONG-TERM INDEBTEDNESS Year ended March 31, 2008
--------------------------------------------------------------------------------------------------------------------------------
Millions of Yen
-----------------------------------------------------------------------------------------------
(Excluding Capital Expected maturity date
Lease Obligations and ----------------------------------------------------------------------------------
SFAS No. 133 fair Average Fair
value adjustment) pay rate Total 2009 2010 2011 2012 2013 Thereafter Value
--------------------------------------------------------------------------------------------------------------------------------
Bonds 1.43% Yen 54,999 Yen 25,000 Yen 20,000 Yen 9,999 Yen -- Yen -- Yen -- Yen 54,577
Convertible Bonds -- 55,202 -- -- -- 55,202 -- -- 51,865
Loans 1.66 196,818 57,377 56,690 57,072 24,643 1,033 3 196,438
--------------------------------------------------------------------------------------------------------------------------------
TOTAL Yen 307,019 Yen 82,377 Yen 76,690 Yen 67,071 Yen 79,845 Yen 1,033 Yen 3 Yen 302,880
--------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INDEBTEDNESS Year ended March 31, 2009
-----------------------------------------------------------------------------------------------------------------------------------
Millions of Yen
--------------------------------------------------------------------------------------------------
(Excluding Capital Expected maturity date
Lease Obligations -------------------------------------------------------------------------------------
and SFAS No. 133 fair Average Fair
value adjustment) pay rate Total 2010 2011 2012 2013 2014 Thereafter Value
-----------------------------------------------------------------------------------------------------------------------------------
Bonds 2.71% Yen 149,206 Yen 20,000 Yen 9,999 Yen 20,000 Yen -- Yen 50,000 Yen 49,207 Yen 146,211
Convertible Bonds -- 55,147 -- -- 55,147 -- -- -- 52,747
Loans 1.42 388,661 64,652 88,442 70,691 56,700 108,172 4 385,427
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL Yen 593,014 Yen 84,652 Yen 98,441 Yen 145,838 Yen 56,700 Yen 158,172 Yen 49,211 Yen 584,385
-----------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAPS Year ended March 31, 2008
-------------------------------------------------------------------------------------------------------------------------------
Millions of Yen
----------------------------------------------------------------------------------
Expected maturity date
Notional Average Average ----------------------------------------------------------------------
amounts receive pay Fair
(Millions) Type of swap rate rate Total 2009 2010 2011 2012 2013 Thereafter Value
-------------------------------------------------------------------------------------------------------------------------------
Yen 130,000 Receive floating
/Pay fixed 1.04% 0.96% Yen 130,000 Yen 45,000 Yen 15,000 Yen 54,000 Yen 16,000 Yen -- Yen -- Yen (368)
Receive fixed
18,000 /Pay floating 2.04 1.08 18,000 -- 10,000 8,000 -- -- -- 392
Receive floating
US$ 190 /Pay fixed 3.00% 4.64% Yen 19,036 Yen -- Yen 19,036 Yen -- Yen -- Yen -- Yen -- Yen (380)
Receive fixed
4 /Pay fixed 6.00 5.92 366 366 -- -- -- -- -- (238)
INTEREST RATE SWAPS Year ended March 31, 2009
-----------------------------------------------------------------------------------------------------------------------------------
Millions of Yen
--------------------------------------------------------------------------------------
Expected maturity date
Notional Average Average --------------------------------------------------------------------------
amounts receive pay Fair
(Millions) Type of swap rate rate Total 2010 2011 2012 2013 2014 Thereafter Value
-----------------------------------------------------------------------------------------------------------------------------------
Yen 267,800 Receive floating
/Pay fixed 1.13% 1.23% Yen 267,800 Yen 15,000 Yen 54,000 Yen 52,300 Yen 25,000 Yen 58,000 Yen 63,500 Yen (798)
Receive fixed
18,000 /Pay floating 2.04 1.09 18,000 10,000 8,000 -- -- -- -- 213
Receive floating
US$ -- /Pay fixed --% --% Yen -- Yen -- Yen -- Yen -- Yen -- Yen -- Yen -- Yen --
Receive fixed
1 /Pay fixed 6.00 6.00 98 98 -- -- -- -- -- (39)
-112-
CREDIT RISK
Ricoh is also exposed to credit-related losses in the event of
nonperformance by counterparties to the financial instrument; however, credit
risk arising from the nonperformance of counterparties to meet the terms of
financial instrument contracts is generally limited to the amounts by which the
counterparties' obligations exceed the obligations of Ricoh. It is Ricoh's
policy to only enter into financial instrument contracts with a diversified
group of financial institutions having credit ratings satisfactory to Ricoh to
minimize the concentration of credit risk. Therefore, Ricoh does not expect to
incur material credit losses on its financial instruments.
DEBT/EQUITY PRICE RISK
Ricoh has a relatively small portion of marketable securities which
are subject to equity price risk arising from changes in their market prices.
Marketable securities consist of a diversified pool of Japanese equity
securities. Ricoh's overall investment policy is to invest in highly-liquid, low
risk investments.
The table below provides information about contractual maturities for
available-for-sale securities and the fair values for market risk sensitive.
(Millions of Yen)
Year ended March 31,
----------------------------------------------
2008 2009
---------------------- ----------------------
Cost Fair Value Cost Fair Value
----------------------------------------------
Debt Securities
Due within one year Yen -- Yen -- Yen -- Yen --
Due after one year through five years 6,000 5,246 1,279 1,279
Equity Securities 62,208 64,716 43,002 45,062
Other 0 0 -- --
----------------------------------------------------------------------------------------
TOTAL Yen 68,208 Yen 69,962 Yen 44,281 Yen 46,341
----------------------------------------------------------------------------------------
Item 12. Description of Securities Other Than Equity Securities
------------------------------------------------------
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
-----------------------------------------------
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of
-------------------------------------------------------------------
Proceeds
--------
None.
-113-
Item 15. Controls and Procedures
-----------------------
Disclosure Controls and Procedures
Ricoh's disclosure controls and procedures are designed with the
objective of ensuring that information required to be disclosed by Ricoh in the
reports it files or submits under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported, within the time
periods specified in the SEC's rules and forms, and is accumulated and
communicated to Ricoh's management, including its Chief Executive Officer
("CEO") and the Chief Financial Officer ("CFO"), as appropriate, to allow timely
decisions regarding required disclosure. Under the supervision and with the
participation of its management, including the CEO and CFO, Ricoh evaluated its
disclosure controls and procedures. Based on this evaluation, the CEO and the
CFO concluded that Ricoh's disclosure controls and procedures were effective as
of March 31, 2009 at a reasonable assurance level, provided that it be
understood that any system of control is based in part upon certain assumptions
designed to obtain reasonable (but not absolute) assurance as to its
effectiveness, and there can be no assurance that Ricoh's system of control will
succeed in achieving its stated objectives.
Management's Report on Internal Control Over Financial Reporting
Ricoh's management is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined in Rule 13a-15(f)
and Rule 15d-15(f) of the Securities Exchange Act of 1934, as amended. Ricoh's
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that (1) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the
assets of Ricoh; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
Ricoh are being made only in accordance with authorizations of management and
directors of Ricoh; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of Ricoh's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. In addition, projections of
any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with internal control policies or procedures may
deteriorate.
Ricoh's management excluded from its assessment of the effectiveness
of Ricoh's internal control over financial reporting as of March 31, 2009 an
assessment of internal control over financial reporting of IKON Office
Solutions, Inc. (a company that Ricoh acquired on October 31, 2008). IKON Office
Solutions, Inc. had total assets of Yen
-114-
319,651 million and total sales of Yen 141,941 million that were reflected in
the consolidated financial statements of the Company as of and for the year
ended March 31, 2009.
Ricoh's management assessed the effectiveness of Ricoh's internal
control over financial reporting as of March 31, 2009. In making this
assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control -
Integrated Framework. Management's assessment included evaluating the design of
Ricoh's internal control over financial reporting and testing of the operational
effectiveness of Ricoh's internal control over financial reporting.
Based on such assessment, management concluded that, as of March 31,
2009, Ricoh's internal control over financial reporting was effective based on
the criteria set forth by COSO.
Ricoh's independent registered accounting firm, KPMG AZSA & Co., has
issued an audit report on the effectiveness of Ricoh's internal control over
financial reporting as of March 31, 2009, such report is included in the
Consolidated Financial Statements attached hereto.
Changes in Internal Control Over Financial Reporting
There has been no change in Ricoh's internal control over financial
reporting that occurred during the period covered by this Form 20-F that has
materially affected, or is reasonably likely to materially affect, its internal
control over financial reporting.
Item 16. [RESERVED]
Item 16A. Audit Committee Financial Expert
--------------------------------
The Board of Directors of the Company has determined that it does not
have an "audit committee financial expert" as defined in Item 16A. of Form 20-F
serving on the Board of Corporate Auditors.
The Company is considering the issues related to and the ramifications
of such a designation. In Japan, there are limited numbers of qualified persons
who meet all of the criteria established by the SEC for financial experts to be
designated by issuers. Accordingly, it is taking some time for the Company to
identify such a qualified person. Although the Board of Directors is satisfied
that that members of the Board of Corporate Auditors possess the appropriate
skills and experience, as a group, to carry out their duties as members of the
Board of Corporate Auditors, the Company will continue to strive to identify
potential candidates that might qualify for this position. The Board of
-115-
Corporate Auditors will keep under active review the financial expert matter
during fiscal year 2009 as part of their overall risk management and compliance
program.
Item 16B. Code of Ethics
--------------
Ricoh has adopted a code of ethics that applies to its employees,
including the President, Chief Executive Officer, Chief Operating Officer, and
the senior management of accounting and finance. Such code of ethics of Ricoh is
provided hereto as Exhibit 11.
Item 16C. Principal Accountant Fees and Services
--------------------------------------
The aggregate fees for professional services and other services
rendered by KPMG AZSA & Co. and the various member firms of KPMG International
to Ricoh for the years ended March 31, 2008 and 2009, were:
(Millions of Yen)
Year ended March 31,
--------------------
2008 2009
----- -----
Audit Fees 1,629 1,901
Audit-related Fees 15 164
Tax Fees 185 935
All Other Fees 4 8
------------------------------------
TOTAL 1,833 3,008
------------------------------------
Audit Fees consist of fees for the annual audit of Ricoh's
consolidated financial statements, and audit services that are normally provided
by our independent accountants.
Audit-related Fees consist of fees for assurance and related services
that are reasonably related to due diligence related to mergers and acquisitions
and consultation concerning financial accounting and reporting standards.
Tax Fees consist of fees for tax compliance, tax advice and tax
consulting associated with international transfer prices.
All Other Fees consist of fees for all other services not included in
any of the categories noted above.
-116-
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
In accordance with Japanese law, the Company's independent accountants
(Kaikei Kansanin) ("Accounting Auditors") are appointed by the shareholders at
the Ordinary General Meeting of Shareholders with the consent of the Company's
Board of Corporate Auditors. In addition, the Board of Corporate Auditors may,
by its resolution, request the Company's Board of Directors to submit a proposal
as to the appointment of Accounting Auditors at the Ordinary General Meeting of
Shareholders. Subsequent to the appointment of the Accounting Auditors, the
Board of Corporate Auditors is responsible, among other matters, for the
oversight of the Accounting Auditors, subject to the requirements of Japanese
law. No proposal was submitted to discharge KPMG AZSA & Co. as the Company's
Accounting Auditors at the most recent Ordinary General Meeting of Shareholders
held on June 25, 2009.
The Board of Corporate Auditors has adopted policies and procedures to
pre-approve all audit and permissible non-audit services provided by the
Accounting Auditor ("Pre-approval Policies"). Under the Pre-approval Policies,
proposed services either (i) may be pre-approved by the Board of Corporate
Auditors without specific consideration on a case-by-case basis if such services
do not exceed pre-approved fee levels ("general pre-approval"), or (ii) require
the specific pre-approval of the Board of Corporate Auditors ("specific
pre-approval"). The Board of Corporate Auditors may delegate its specific
pre-approval authority to one or more of its independent members who shall be
designated by the Board of Corporate Auditors. Under the Pre-approval Policies,
the Accounting Auditors are not allowed to perform any non-audit services which
may impair the auditors independence under the rules of the SEC. The appendices
to the Pre-approval Policies set out the audit, audit-related, tax and other
services, including those described above, that have received the general
pre-approval of the Board of Corporate Auditors.
The term of any general pre-approval is twelve months from the date of
pre-approval, unless the Board of Corporate Auditors specifically provides for a
different period and sets forth such different period in the relevant appendix
to the Pre-approval Policies. The Board of Corporate Auditors will annually
review the Pre-approval Policies and revise the list of services that it has
provided general pre-approval. Requests or applications to provide services that
require specific pre-approval by the Board of Corporate Auditors will be
submitted to the Board of Corporate Auditors by the Chief Officer of a company
or division to which services are provided, accompanied by a draft engagement
letter from the Accounting Auditor.
During fiscal year 2009, none of the services provided to the Company
by KPMG AZSA & Co. were approved by the Board of Corporate Auditors pursuant to
the de minimis exception to the pre-approval requirement provided by paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
Item 16D. Exemptions from the Listing Standards for Audit Committees
----------------------------------------------------------
Not applicable.
-117-
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
----------------------------------------------------------------------
Not applicable.
Item 16F. Change in Registrant's Certifying Accountant
--------------------------------------------
Not applicable.
Item 16G. Corporate Governance
--------------------
Not applicable.
PART III
Item 17. Financial Statements
--------------------
Not applicable.
Item 18. Financial Statements
--------------------
See Consolidated Financial Statements and Schedule attached hereto.
Item 19. Exhibits
--------
Documents filed as exhibits to this annual report:
1.1 Articles of Incorporation, as amended (English translation)
1.2 Share Handling Regulations, as amended (English translation)
1.3 Regulations of the Board of Directors, as amended (English
translation)
1.4 Regulation of the Board of Corporate Auditors, as amended
(English translation)
8.1 List of Significant Subsidiaries (See "Organizational structure"
in Item 4.C. of this Form 20-F)
11 Code of Ethics (English translation)
12.1 Certification Pursuant to Rule 13a-14(a)/15d-14(a)
12.2 Certification Pursuant to Rule 13a-14(a)/15d-14(a)
13.(a)(1) Certification Pursuant to Section 1350 of Chapter 63 of Title 18
of the United States Code
13.(a)(2) Certification Pursuant to Section 1350 of Chapter 63 of Title 18
of the United States Code
-118-
SIGNATURES
----------
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.
RICOH COMPANY, LTD.
By: /s/ ZENJI MIURA
---------------------------------------
Zenji Miura
Director, Corporate Executive
Vice President and
Chief Financial Officer
Date: June 26, 2009
RICOH COMPANY, LTD.
Consolidated Financial Statements and Schedule
For the years ended March 31, 2007, 2008 and 2009
With Reports of Independent Registered Public Accounting Firm Thereon
Ricoh Company, Ltd. and Consolidated Subsidiaries
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
------------
Reports of Independent Registered Public Accounting Firm ................ F-2 to F-3
Consolidated Balance Sheets as of
March 31, 2008 and 2009 .............................................. F-4 to F-5
Consolidated Statements of Income
for the years ended March 31, 2007, 2008 and 2009 .................... F-6
Consolidated Statements of Shareholders' Investments
for the years ended March 31, 2007, 2008 and 2009 .................... F-7 to F-8
Consolidated Statements of Cash Flows
for the years ended March 31, 2007, 2008 and 2009 .................... F-9
Notes to Consolidated Financial Statements .............................. F-10 to F-58
Schedule:
II. Valuation and Qualifying Accounts and Reserves ................... F-59
All schedules not listed have been omitted because they are not applicable, or
the required information has been otherwise supplied in the consolidated
financial statements or the notes thereto.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Ricoh Company, Ltd.:
We have audited the accompanying consolidated balance sheets of Ricoh Company,
Ltd. (a Japanese corporation) and subsidiaries as of March 31, 2009 and 2008,
and the related consolidated statements of income, shareholders' investment,
and cash flows for each of the years in the three-year period ended March 31,
2009. In connection with our audits of the consolidated financial statements,
we also have audited the related financial statement schedule. We also have
audited Ricoh Company, Ltd.'s internal control over financial reporting as of
March 31, 2009, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Ricoh Company, Ltd.'s management is responsible for these
consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule and an opinion on the Company's internal control over financial
reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. Our audits of the consolidated financial statements included
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. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
F-2
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ricoh Company, Ltd.
and subsidiaries as of March 31, 2009 and 2008, and the results of its
operations and its cash flows for each of the years in the three-year period
ended March 31, 2009, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information set forth
therein. Also in our opinion, Ricoh Company, Ltd. maintained, in all material
respects, effective internal control over financial reporting as of March 31,
2009, based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Ricoh Company, Ltd. acquired IKON Office Solutions, Inc. during the year ended
March 31, 2009, and management excluded from its assessment of the
effectiveness of Ricoh Company, Ltd.'s internal control over financial
reporting as of March 31, 2009, IKON Office Solutions, Inc.'s internal control
over financial reporting associated with total assets of Yen 319,651 million
and total revenues of Yen 141,941 million included in the consolidated
financial statements of Ricoh Company, Ltd. and subsidiaries as of and for the
year ended March 31, 2009. Our audit of internal control over financial
reporting of Ricoh Company, Ltd. also excluded an evaluation of the internal
control over financial reporting of IKON Office Solutions, Inc.
The accompanying consolidated financial statements as of and for the year ended
March 31, 2009 have been translated into United States dollars solely for the
convenience of the reader. We have audited the translation and, in our opinion,
the consolidated financial statements, expressed in yen, have been translated
into dollars on the basis set forth in Note 2 to the consolidated financial
statements.
KPMG AZSA & Co.
Tokyo, Japan
June 26, 2009
F-3
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31, 2008 and 2009
Thousands of
Millions of Yen U.S. Dollars
----------------------------- ------------
ASSETS 2008 2009 2009
----------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents Yen 170,607 Yen 258,484 $ 2,610,949
Time deposits 1,531 2,043 20,636
Trade receivables:
Notes 57,068 45,781 462,434
Accounts 463,999 460,519 4,651,707
Less - Allowance for doubtful receivables (16,666) (21,533) (217,505)
Current maturities of long-term finance receivables, net 194,642 195,617 1,975,929
Inventories:
Finished goods 117,658 123,798 1,250,485
Work in process and raw materials 74,365 67,772 684,566
Deferred income taxes and other 60,936 79,385 801,869
----------------------------------------------------------------------------------------------------------
Total current assets 1,124,140 1,211,866 12,241,070
----------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land 46,681 45,693 461,545
Buildings 235,106 235,905 2,382,879
Machinery and equipment 587,956 613,879 6,200,798
Construction in progress 12,884 23,459 236,960
----------------------------------------------------------------------------------------------------------
Total 882,627 918,936 9,282,182
Less - accumulated depreciation (627,994) (649,600) (6,561,616)
----------------------------------------------------------------------------------------------------------
Net property, plant and equipment 254,633 269,336 2,720,566
----------------------------------------------------------------------------------------------------------
Investments and other assets:
Long-term finance receivables, net 445,436 465,262 4,699,616
Investment securities 71,244 47,815 482,980
Investments in and advances to affiliates 1,977 1,248 12,606
Goodwill 112,538 250,330 2,528,586
Other intangible assets 114,402 165,126 1,667,939
Lease deposits and other 89,998 102,512 1,035,475
----------------------------------------------------------------------------------------------------------
Total investments and other assets 835,595 1,032,293 10,427,202
----------------------------------------------------------------------------------------------------------
Total Yen 2,214,368 Yen 2,513,495 $25,388,838
==========================================================================================================
F-4
Thousands of
Millions of Yen U.S. Dollars
----------------------------- ------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT 2008 2009 2009
----------------------------------------------------------------------------------------------------------
Current liabilities:
Short-term borrowings Yen 75,784 Yen 184,210 $ 1,860,707
Current maturities of long-term indebtedness 82,658 85,582 864,465
Trade payables:
Notes 18,942 12,914 130,444
Accounts 341,627 272,499 2,752,515
Accrued income taxes 28,909 10,317 104,212
Accrued expenses and other 165,836 207,969 2,100,697
----------------------------------------------------------------------------------------------------------
Total current liabilities 713,756 773,491 7,813,040
----------------------------------------------------------------------------------------------------------
Long-term liabilities:
Long-term indebtedness 225,930 509,403 5,145,485
Accrued pension and severance costs 99,830 156,625 1,582,071
Deferred income taxes and other 36,373 49,626 501,273
----------------------------------------------------------------------------------------------------------
Total long-term liabilities 362,133 715,654 7,228,829
----------------------------------------------------------------------------------------------------------
Minority interests 58,283 48,977 494,717
----------------------------------------------------------------------------------------------------------
Commitments and contingent liabilities (Note 17)
Shareholders' investment:
Common stock;
Authorized - 1,500,000,000 shares in 2008 and 2009
Issued and outstanding - 744,912,078 shares
and 720,951,250 shares in 2008 and 744,912,078
shares and 725,679,726 shares in 2009 135,364 135,364 1,367,313
Additional paid-in capital 186,448 186,083 1,879,626
Retained earnings 835,238 815,725 8,239,646
Accumulated other comprehensive loss (31,005) (125,121) (1,263,848)
Treasury stock at cost; 23,960,828 shares in 2008 and
19,232,352 shares in 2009 (45,849) (36,678) (370,485)
----------------------------------------------------------------------------------------------------------
Total shareholders' investment 1,080,196 975,373 9,852,252
----------------------------------------------------------------------------------------------------------
Total Yen 2,214,368 Yen 2,513,495 $25,388,838
==========================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-5
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended March 31, 2007, 2008 and 2009
Thousands of
Millions of Yen U.S. Dollars
--------------------------------------------- ------------
2007 2008 2009 2009
-------------------------------------------------------------------------------------------------------------------------
Net sales:
Products Yen 1,189,548 Yen 1,292,228 Yen 1,027,694 $10,380,747
Post sales and rentals 768,965 817,230 955,490 9,651,414
Other revenue 110,412 110,531 108,512 1,096,081
-------------------------------------------------------------------------------------------------------------------------
Total 2,068,925 2,219,989 2,091,696 21,128,242
-------------------------------------------------------------------------------------------------------------------------
Cost of sales:
Products 783,681 855,852 710,892 7,180,727
Post sales and rentals 335,444 346,945 440,510 4,449,596
Other revenue 87,394 89,465 85,908 867,758
-------------------------------------------------------------------------------------------------------------------------
Total 1,206,519 1,292,262 1,237,310 12,498,081
-------------------------------------------------------------------------------------------------------------------------
Gross profit 862,406 927,727 854,386 8,630,162
Selling, general and administrative expenses 688,026 746,221 779,850 7,877,273
-------------------------------------------------------------------------------------------------------------------------
Operating income 174,380 181,506 74,536 752,889
-------------------------------------------------------------------------------------------------------------------------
Other (income) expenses:
Interest and dividend income (5,501) (6,341) (5,227) (52,798)
Interest expense 7,350 4,835 5,863 59,222
Foreign currency exchange loss, net 1,199 10,901 15,575 157,323
Losses on impairment of securities 270 142 26,837 271,081
Other, net (3,457) (2,700) 549 5,546
-------------------------------------------------------------------------------------------------------------------------
Total (139) 6,837 43,597 440,374
-------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes,
minority interests and equity in earnings of affiliates 174,519 174,669 30,939 312,515
Provision for income taxes:
Current 66,523 58,426 27,321 275,970
Deferred (2,197) 4,970 (5,163) (52,152)
-------------------------------------------------------------------------------------------------------------------------
Total 64,326 63,396 22,158 223,818
-------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before minority
interests and equity in earnings of affiliates 110,193 111,273 8,781 88,697
Minority interests 5,508 6,057 2,322 23,454
Equity in earnings of affiliates 1,539 1,247 71 717
-------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 106,224 106,463 6,530 65,960
Income from discontinued operations, net of tax 5,500 -- -- --
-------------------------------------------------------------------------------------------------------------------------
Net income Yen 111,724 Yen 106,463 Yen 6,530 $ 65,960
=========================================================================================================================
Yen U.S. Dollars
--------------------------------------------- ------------
Per share of common stock: 2007 2008 2009 2009
-------------------------------------------------------------------------------------------------------------------------
Basic:
Income from continuing operations Yen 145.56 Yen 146.04 Yen 9.02 $ 0.09
Income from discontinued operations, net of tax 7.54 -- -- --
-------------------------------------------------------------------------------------------------------------------------
Net income 153.10 146.04 9.02 0.09
-------------------------------------------------------------------------------------------------------------------------
Diluted:
Income from continuing operations Yen 144.41 Yen 142.15 Yen 8.75 $ 0.09
Income from discontinued operations, net of tax 7.48 -- -- --
-------------------------------------------------------------------------------------------------------------------------
Net income 151.89 142.15 8.75 0.09
=========================================================================================================================
Cash dividends paid per share Yen 25.00 Yen 31.00 Yen 35.00 $ 0.35
=========================================================================================================================
Per American Depositary Share, each representing 5 shares of common stock:
Basic:
Income from continuing operations Yen 727.80 Yen 730.20 Yen 45.10 $ 0.46
Income from discontinued operations, net of tax 37.70 -- -- --
-------------------------------------------------------------------------------------------------------------------------
Net income 765.50 730.20 45.10 0.46
-------------------------------------------------------------------------------------------------------------------------
Diluted:
Income from continuing operations Yen 722.05 Yen 710.75 Yen 43.75 $ 0.44
Income from discontinued operations, net of tax 37.40 -- -- --
-------------------------------------------------------------------------------------------------------------------------
Net income 759.45 710.75 43.75 0.44
=========================================================================================================================
Cash dividends paid per share Yen 125.00 Yen 155.00 Yen 175.00 $ 1.77
=========================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Years Ended March 31, 2007, 2008 and 2009
Millions of Yen
------------------------------------------------------------------------------------
Accumulated
Additional other Total
Common paid-in Retained comprehensive Treasury shareholders'
stock capital earnings income (loss) stock investment
-------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2006 Yen 135,364 Yen 186,450 Yen 665,394 Yen 4,099 Yen (31,062) Yen 960,245
Cumulative effect of adjustment from
applying SAB 108, net of tax -- -- (6,464) -- -- (6,464)
-------------------------------------------------------------------------------------------------------------------------------
Balance at April 1, 2006, as adjusted 135,364 186,450 658,930 4,099 (31,062) 953,781
-------------------------------------------------------------------------------------------------------------------------------
Gain (loss) on disposal of treasury stock 4 4
Dividends declared and approved (18,256) (18,256)
Comprehensive income (loss)
Net income 111,724 111,724
Net unrealized holding gains (losses)
on available-for-sale securities 73 73
Minimum pension liability adjustments 970 970
Net unrealized gains (losses) on
derivative instruments (185) (185)
Cumulative translation adjustments 24,774 24,774
-------------
Total comprehensive income (loss) 137,356
Adjustment to initially apply SFAS 158 (2,733) (2,733)
Net changes in treasury stock 761 761
-------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2007 Yen 135,364 Yen 186,454 Yen 752,398 Yen 26,998 Yen (30,301) Yen 1,070,913
-------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of adjustment from
applying EITF 06-2, net of tax -- -- (995) -- -- (995)
-------------------------------------------------------------------------------------------------------------------------------
Balance at April 1, 2007, as adjusted 135,364 186,454 751,403 26,998 (30,301) 1,069,918
-------------------------------------------------------------------------------------------------------------------------------
Gain (loss) on disposal of treasury stock (6) (6)
Dividends declared and approved (22,628) (22,628)
Comprehensive income (loss)
Net income 106,463 106,463
Net unrealized holding gains (losses)
on available-for-sale securities (7,685) (7,685)
Pension liability adjustments (11,382) (11,382)
Net unrealized gains (losses) on
derivative instruments (380) (380)
Cumulative translation adjustments (38,556) (38,556)
-------------
Total comprehensive income (loss) 48,460
Net changes in treasury stock (15,548) (15,548)
-------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2008 Yen 135,364 Yen 186,448 Yen 835,238 Yen (31,005) Yen (45,849) Yen 1,080,196
-------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of adjustment from
applying measurement date provisions
of SFAS No.158, net of tax -- -- (643) (6) -- (649)
-------------------------------------------------------------------------------------------------------------------------------
Balance at April 1, 2008, as adjusted 135,364 186,448 834,595 (31,011) (45,849) 1,079,547
-------------------------------------------------------------------------------------------------------------------------------
Gain (loss) on disposal of treasury stock (365) (80) (445)
Dividends declared and approved (25,320) (25,320)
Comprehensive income (loss)
Net income 6,530 6,530
Net unrealized holding gains (losses)
on available-for-sale securities 532 532
Pension liability adjustments (33,507) (33,507)
Net unrealized gains (losses) on
derivative instruments 35 35
Cumulative translation adjustments (61,170) (61,170)
-------------
Total comprehensive income (loss) (87,580)
Net changes in treasury stock 9,171 9,171
-------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2009 Yen 135,364 Yen 186,083 Yen 815,725 Yen (125,121) Yen (36,678) Yen 975,373
===============================================================================================================================
F-7
Thousands of U.S. Dollars
-------------------------------------------------------------------------------
Accumulated
Additional other Total
Common paid-in Retained comprehensive Treasury shareholders'
stock capital earnings income (loss) stock investment
------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2008 $1,367,313 $1,883,313 $8,436,748 $ (313,182) $(463,121) $10,911,071
-----------------------------------------------------------------------------------------------------------------------------
Cumulative effect of adjustment from
applying measurement date provisions of
SFAS No.158, net of tax -- - (6,495) (61) - (6,556)
-----------------------------------------------------------------------------------------------------------------------------
Balance at April 1, 2008, as adjusted 1,367,313 1,883,313 8,430,253 (313,243) (463,121) 10,904,515
-----------------------------------------------------------------------------------------------------------------------------
Gain (loss) on disposal of treasury stock (3,687) (808) (4,495)
Dividends declared and approved (255,758) (255,758)
Comprehensive income (loss)
Net income 65,960 65,960
Net unrealized holding gains (losses)
on available-for-sale securities 5,374 5,374
Pension liability adjustments (338,455) (338,455)
Net unrealized gains (losses) on
derivative instruments 354 354
Cumulative translation adjustments (617,879) (617,879)
-----------
Total comprehensive income (loss) (884,646)
Net changes in treasury stock 92,636 92,636
-----------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2009 $1,367,313 $1,879,626 $8,239,646 $(1,263,848) $(370,485) $ 9,852,252
=============================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-8
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended March 31, 2007, 2008 and 2009
Thousands of
Millions of Yen U.S. Dollars
--------------------------------------- ------------
2007 2008 2009 2009
-----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income Yen 111,724 Yen 106,463 Yen 6,530 $ 65,960
Income from discontinued operations, net of tax (5,500) -- -- --
------------------------------------------------------
Income from continuing operations 106,224 106,463 6,530 65,960
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 89,632 95,788 101,817 1,028,455
Equity in earnings of affiliates, net of dividends received (711) (622) 117 1,182
Deferred income taxes (2,197) 4,970 (5,163) (52,152)
Losses on disposals and sales of property, plant and equipment 3,722 2,174 1,885 19,040
Losses on impairment of securities 270 142 26,837 271,081
Pension and severance costs, less payments (773) (320) 2,031 20,515
Changes in assets and liabilities, net of effects from
acquisition-
(Increase) decrease in trade receivables (15,919) (16,567) 37,913 382,960
(Increase) decrease in inventories (1,494) 129 2,836 28,646
Increase in finance receivables (28,047) (17,183) (3,050) (30,808)
(Decrease) increase in trade payables 2,199 (7,491) (97,372) (983,556)
(Decrease) increase in accrued income taxes and accrued
expenses and other 11,175 5,216 (14,094) (142,364)
Other, net 3,216 21,664 27,201 274,758
-----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 167,297 194,363 87,488 883,717
-----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment 463 1,194 454 4,586
Expenditures for property, plant and equipment (85,747) (85,205) (96,945) (979,242)
Payments for purchases of available-for-sale securities (97,158) (97,958) (1,781) (17,990)
Proceeds from sales of available-for-sale securities 96,087 100,025 243 2,455
(Increase) decrease in time deposits 64 (240) (615) (6,212)
Proceeds from sales of discontinued operations 12,000 -- -- --
Purchase of business, net of cash acquired (23,200) (96,796) (157,404) (1,589,939)
Other, net (17,941) (19,370) (27,124) (273,981)
-----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (115,432) (198,350) (283,172) (2,860,323)
-----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term indebtedness 60,157 67,166 237,116 2,395,111
Repayment of long-term indebtedness (49,115) (75,716) (59,500) (601,010)
(Decrease) increase in short-term borrowings, net 8,362 (14,598) 110,211 1,113,242
Proceeds from issuance of long-term debt securities 65,274 - 85,000 858,586
Repayment of long-term debt securities (55,000) (10,000) (50,539) (510,495)
Dividends paid (18,240) (22,628) (25,320) (255,758)
Payment for purchase of treasury stock (799) (15,770) (644) (6,505)
Other, net (1,357) (639) (410) (4,141)
-----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 9,282 (72,185) 295,914 2,989,030
-----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS OF DISCONTINUED OPERATIONS:
Net, operating cash flows 838 -- -- --
Net, investing cash flows (13) -- -- --
Net, financing cash flows -- -- -- --
Effect of exchange rate change on cash and cash equivalents
from discontinued operations -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents from
discontinued operations 825 -- -- --
-----------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS 6,710 (8,958) (12,353) (124,778)
-----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 68,682 (85,130) 87,877 887,646
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 187,055 255,737 170,607 1,723,303
-----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR Yen 255,737 Yen 170,607 Yen 258,484 $ 2,610,949
=============================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR-
Interest Yen 8,222 Yen 8,619 Yen 9,352 $ 94,465
Income taxes 66,603 76,220 56,764 573,374
=============================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-9
Ricoh Company, Ltd. and Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Ricoh Company, Ltd. (the "Company") was established in 1936 and is headquartered
in Tokyo, Japan. The Company and its consolidated subsidiaries ("Ricoh" as a
consolidated group) is a world-wide supplier of office automation equipment,
including copiers, facsimile machines, data processing systems, printers and
related supplies. Ricoh is also well known for its state-of-the-art electronic
devices, digital photographic equipment and other products.
Ricoh distributes its products primarily through domestic (Japanese) and foreign
sales subsidiaries. Overseas, Ricoh owns and distributes not only Ricoh brand
products but also other brands, such as Lanier, Savin and Infotec.
Ricoh manufactures its products primarily in 16 plants in Japan and 9 plants
overseas, which are located in the United States, United Kingdom, France and
China.
2. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The accompanying consolidated financial statements of Ricoh have been prepared
in conformity with U.S. generally accepted accounting principles. Significant
accounting and reporting policies are summarized below:
(A) BASIS OF PRESENTATION
The accompanying consolidated financial statements for each of the years in the
three year period ended March 31, 2009 are presented in Japanese yen, the
functional currency of the Company and its domestic subsidiaries. The
translation of Japanese yen amounts into U.S. Dollar equivalents as of and for
the year ended March 31, 2009 is included solely for the convenience of readers
outside Japan and has been made using the exchange rate of Yen 99 to US$1, the
approximate rate of exchange prevailing at the Federal Reserve Board on March
31, 2009.
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 U.S.
generally accepted accounting principles.
F-10
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. The accounts of variable interest
entities as defined by the FASB Interpretation ("FIN") No. 46 (revised December
2003), "Consolidated of Variable Interest Entities" are included in the
consolidated financial statements, if applicable. Investments in entities in
which Ricoh has the ability to exercise significant influence over the entities'
operating and financial policies, but not control (generally 20 to 50 %
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 March 31.
(C) REVENUE RECOGNITION
Ricoh generates revenue principally through the sale of equipment, supplies and
related services under separate contractual arrangements for each. 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.
Product sales are generally recognized at the time of delivery and installation
at the customer location. Equipment revenues are based on established prices by
product type and model and are net of discounts. A sales return is accepted only
when the equipment is defective and does not meet Ricoh's product performance
specifications. Other than installation, there are no customer acceptance
clauses in the sales contract.
Post sales and rentals result primarily from maintenance contracts that are
normally entered into at the time the equipment is sold. Standard service fee
prices are established depending on equipment classification and include a cost
value for the estimated services to be performed based on historical experience
plus a profit margin thereon. As a matter of policy, Ricoh does not discount
such prices. On a monthly basis, maintenance service revenues are earned and
recognized by Ricoh and billed to the customer in accordance with the contract
and include a fixed monthly fee plus a variable amount based on usage. The
length of the contract ranges up to five-years, however, most contracts are
cancelable at any time by the customer upon a short notice period. Leases not
qualifying as sales-type leases or direct financing leases are accounted for as
operating leases and related revenue is recognized over the lease term.
Ricoh also 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 Emerging Issues Task Force ("EITF") Issue No. 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.
Revenue from the sale of equipment under sales-type leases is recognized as
product sales at the inception of the lease. Other revenue consists primarily of
interest income on sales-type leases and direct-financing leases, which are
recognized as Other revenue over the life of each respective lease using the
interest method.
F-11
(D) 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
fiscal year-end, and income and expenses are translated at the average rates of
exchange prevailing during each fiscal year. 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 expenses in the period incurred.
(E) 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.
(F) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
As discussed further in Note 16, 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 Statement of Financial Accounting Standards ("SFAS") No.133,
as amended, Ricoh recognizes all derivative instruments as either assets or
liabilities in the consolidated balance sheets and measures those instruments at
fair value. When Ricoh enters into a derivative contract, it 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 sheets 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
marked-to-market with gains and losses recognized in current period earnings to
offset the respective losses and gains recognized on the change in fair value of
the hedged item. 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
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-12
(G) 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
for 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.
(H) SECURITIES
Ricoh applies 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 March 31, 2008 and 2009, Ricoh's
investments in debt and marketable equity securities are classified as trading
or available-for-sale securities. Trading securities are reported at fair value
with gains and losses recognized in current earnings. Available-for-sale
securities are reported at fair value with unrealized gains and losses, net of
related taxes, 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 Ricoh 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.
Investments in affiliated companies over which Ricoh has the ability to exercise
significant influence, but does not hold a controlling financial interest, are
accounted for by the equity method.
Non-marketable equity securities owned by Ricoh primarily relate to less than
20% owned companies and are stated at cost unless indication of impairment
exist, which require the investment to be written down to its estimated fair
value.
(I) INVENTORIES
Inventories are mainly stated at the lower of average cost or net realizable
values. Inventory costs include raw materials, labor and manufacturing
overheads.
F-13
(J) 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 33% 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.
Effective rates of depreciation for the years ended March 31, 2007, 2008 and
2009 are summarized below:
2007 2008 2009
----- ---- ----
Buildings 9.8% 10.1% 10.7%
Machinery and equipment 40.8 43.1 44.4
Effective rates of depreciation increased for the year ended March 31, 2009
mainly due to the commencement of the new manufacturing facilities of the
Company.
Certain leased buildings, machinery and equipment are accounted for as capital
leases in conformity with SFAS No.13, "Accounting for Leases." The aggregate
cost included in property, plant and equipment and related accumulated
depreciation as of March 31, 2008 and 2009 are as follows:
Thousands of
Millions of Yen U.S. Dollars
--------------------- ------------
2008 2009 2009
--------- --------- -------
Aggregate cost Yen 7,269 Yen 6,003 $60,636
Accumulated depreciation 6,072 5,161 52,131
The related future minimum lease payments and the present value of the net
minimum lease payments as of March 31, 2009 were Yen 1,815 million ($18,333
thousand) and Yen 1,758 million ($17,758 thousand), respectively.
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.
(K) CAPITALIZED SOFTWARE COSTS
In accordance with Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," Ricoh capitalizes
qualifying cost of computer software. Costs incurred during the application
development stage as well as upgrades and enhancements that results in
additional functionality are capitalized. The capitalized software is amortized
on a straight line basis generally from 3 years to 5 years.
F-14
(L) GOODWILL AND OTHER INTANGIBLE ASSETS
SFAS No.141, "Business Combinations" requires the use of the purchase method of
accounting for business combinations and refines the definition of intangible
assets acquired in a purchase business combination. SFAS No.142, "Goodwill and
Other Intangible Assets" eliminates the amortization of goodwill and instead
requires goodwill to be tested at least annually for impairment. SFAS 142 also
requires acquired intangible assets with a definite useful life to be amortized
over their respective estimated useful lives and reviewed for impairment when an
indication of impairment is identified in accordance with SFAS No.144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." Other
intangible assets with definite useful lives, consisting primarily of software,
patents, customer relationships and trademarks are amortized on a straight line
basis over 1 year to 20 years. Any acquired intangible assets determined to have
an indefinite useful life are not amortized, but instead are tested annually for
impairment based on its fair value until its life would be determined to no
longer be indefinite. In performing the test, Ricoh utilizes the two-step
approach prescribed under SFAS 142. The first step requires a comparison of the
carrying value of the reporting units to the fair value of these units. If the
carrying value of a reporting unit exceeds its fair value, Ricoh will perform
the second step of the goodwill impairment test to measure the amount of
impairment loss, if any.
Pursuant to the adoption of SFAS 142 on April 1, 2002, Ricoh selected an annual
goodwill impairment date of September 30. In the fourth quarter of fiscal year
2009, Ricoh changed its annual impairment measurement date to December 31. The
change was made to better align the impairment test date with Ricoh' acquisition
of IKON Office Solutions, Inc. on October 31, 2008, which had a significant
impact on Ricoh's financial statements. This change to the date of Ricoh's
annual goodwill impairment test constitutes a change in the method of applying
an accounting principle, as discussed in SFAS No.154, "Accounting Changes and
Error Corrections" (SFAS 154). Ricoh believes that this change in accounting
principle is preferable.
SFAS 154 requires reporting a change in accounting principle through
retrospective application of the new accounting principle to all periods, unless
it is impractical to do so. However, the change in the impairment measurement
date had no impact on Ricoh's prior period financial statements, as no goodwill
impairment changes had been recorded in any prior period financial statements
nor did the change in annual impairment test date cause any impairments.
Furthermore, there were no impairment charges that resulted from the December
31, 2008 impairment test, and no event indicating an impairment has occurred
subsequent to December 31, 2008.
Ricoh completed its annual impairment assessment of indefinite-lived intangible
assets for the years ended March 31, 2007, 2008 and 2009 and determined that no
impairment charge was necessary.
(M) PENSION AND RETIREMENT ALLOWANCES PLANS
The measurement of pension costs and liabilities is determined in accordance
with SFAS No.87, "Employers' Accounting for Pensions" as amended by SFAS No.158,
"Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans". Under SFAS 158 which was adopted effective March 31, 2007, Ricoh
recognizes the funded status (i.e., the difference between the fair value of
plan assets and the projected benefit obligations) of its pension fund plans as
of the end of fiscal year, with a corresponding adjustment to accumulated other
comprehensive income (loss), net of tax, and a charge to other comprehensive
income for periods subsequent to adoption. 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
F-15
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.
For periods prior to the year ended March 31, 2009, Ricoh used a December 31
measurement date for determining benefit obligations and fair value of plan
assets. Ricoh adopted the measurement date provisions of SFAS No. 158 as of
March 31, 2009.
(N) 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 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.
On April 1, 2007, Ricoh adopted FIN 48, "Accounting for Uncertainty in Income
Taxes - an Interpretation of FASB Statement No. 109", which requires a
more-likely-than-not threshold for financial statement recognition and
measurement of tax positions taken or expected to be taken in a tax return.
Ricoh recognizes interest and penalties related to unrecognized tax benefits in
provision for income taxes in the consolidated statements of income.
(O) RESEARCH AND DEVELOPMENT EXPENSES AND ADVERTISING COSTS
Research and development expenses and advertising costs are expensed as
incurred.
(P) 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.
(Q) 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 asset group may not be recoverable.
Recoverability of assets to be held and used is assessed by comparing the
carrying amount of an asset or asset group to the expected future undiscounted
net cash flows of the asset or asset group. If an asset or asset group 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 asset group 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.
(R) EARNINGS PER SHARE
Basic net income per share of common stock is calculated by dividing net income
by the weighted-average number of shares of common stock outstanding during the
period. The calculation of diluted net income per share of common stock 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.
F-16
(S) NON-CASH TRANSACTIONS
There were no significant non-cash transactions for the years ended March 31,
2007 or 2008.
The following non-cash transactions have been excluded from the consolidated
statements of cash flows:
Thousands of
Millions of Yen U.S. Dollars
----------------------------------
2007 2008 2009 2009
--------------------------------------------------------------------------------------------------
Debt assumed in connection with business acquisition -- -- 81,737 825,626
Issuance of treasury stock in exchange for subsidiary's stock -- -- 9,138 92,303
(T) USE OF ESTIMATES
Management of Ricoh 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 U.S. generally accepted accounting
principles. Actual results could differ from those estimates.
Ricoh has identified seven 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 of
securities, impairment of long-lived assets including goodwill, uncertain tax
positions, realizability of deferred tax assets, the valuation of assets and
liabilities in purchase business combinations and pension accounting.
(U) DISCONTINUED OPERATIONS
On May 31, 2006, the Company's subsidiary San-Ai Co., Ltd. sold its digital
content distribution business to Giga Networks Co., Ltd. (former Mobile Alliance
Co., Ltd.). Because Ricoh has no significant continuing involvement in the
operation sold, the operating result of the business units sold were
reclassified to a discontinued operation pursuant to the requirement of SFAS
144.
(V) ADOPTION OF SAB 108
The Securities and Exchange Commission of the U.S. issued Staff Accounting
Bulletin ("SAB") No.108, "Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements" in
September 2006. SAB 108 requires companies to quantify misstatements using both
the balance sheet approach and the income statement approach ("dual" method),
and to evaluate the importance of misstatements taking into account relevant
quantitative and qualitative factors. Historically, Ricoh used the income
statement ("rollover") approach to quantify misstatements. Upon adoption, Ricoh
recorded adjustment for the cumulative effect of misstatements that were
previously considered immaterial under the rollover method that were considered
material under the dual method. Ricoh adopted SAB 108 in the fourth quarter of
the fiscal year ended March 31, 2007.
F-17
The Company and some of its domestic consolidated subsidiaries previously set
the residual value of tangible fixed assets at 5% of acquisition cost in
principle using the standards provided in the Corporate Tax Law. However, based
on an evaluation of residual values realized from disposition of property, plant
and equipment, Ricoh concluded that the residual value of substantially all long
lived assets is negligible at the end of useful life. This misstatement had been
considered immaterial to Ricoh's historical consolidated financial statements
using the income statement approach prior to the adoption of SAB 108.
Accordingly, upon adoption of SAB 108, Ricoh recorded an increase in accumulated
depreciation of Yen 11,464 million and an increase in deferred tax assets
(included in "Lease deposits and other") of Yen 4,675 million as of April 1,
2006 with a net reduction of the beginning balance of retained earnings of Yen
6,464 million.
(W) RECENTLY ADOPTED NEW ACCOUNTING STANDARDS
In September 2006, the FASB issued SFAS No.157, "Fair Value Measurements," which
defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value measurements, where
fair value is the relevant measurement attribute. SFAS 157 does not require any
new fair value measurements. In February 2008, the FASB issued Staff Positions
("FSP") No. FAS 157-2, "Effective Date of FASB Statement No. 157," which delays
the effective date of SFAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually) and remove certain
leasing transactions from its scope. SFAS 157 is effective for fiscal years
beginning after November 15, 2007, and was adopted by Ricoh in fiscal year
beginning April 1, 2008. The adoption of SFAS 157 did not have a material effect
on Ricoh's consolidated financial position or results of operations.
In September 2006, the FASB issued SFAS 158. SFAS 158 requires companies to
recognize an asset or liability for the overfunded or underfunded status of
their benefit plans in their financial statements and to recognize changes in
that funded status in comprehensive income (loss) in the year in which the
changes occur. SFAS 158 also requires the measurement date for plan assets and
liabilities to coincide with the sponsor's year-end. The standard provides two
transition alternatives related to the change in measurement date provisions.
The recognition of an asset and liability related to the funded status provision
is effective for fiscal years ending after December 15, 2006. Ricoh adopted the
recognition and disclosure provisions and the measurement date provisions of
SFAS 158 as of March 31,2007 and 2009, respectively. The change in measurement
date provisions is effective for fiscal years ending after December 15, 2008.
The adoption of the measurement date provisions resulted in adjustments to
decrease retained earnings by Yen 643 million, and increase other comprehensive
loss by Yen 6 million as of April 1, 2008.
In March 2008, the FASB issued SFAS No.161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133".
SFAS 161 requires disclosures of how and why an entity uses derivative
instruments, how derivative instruments and related hedged items are accounted
for and how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. SFAS 161 is effective
for fiscal years and interim periods beginning after November 15, 2008, with
early adoption permitted. Ricoh adopted SFAS161 as of January 1, 2009.
(X) NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In December 2007, the FASB issued SFAS No.141 (revised 2007), "Business
Combinations " ("SFAS 141R"). SFAS 141R establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements to enable
F-18
the evaluation of the nature and financial effects of the business combination.
SFAS 141R is effective for fiscal years beginning on or after December 15, 2008
and is required to be adopted by Ricoh in the first quarter beginning April 1,
2009. Ricoh will apply prospectively to all business combinations subsequent to
the effective date.
In December 2007, the FASB issued SFAS No.160, "Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51." This Statement
requires that the noncontrolling interest in the equity of a subsidiary be
accounted for and reported as equity, provides revised guidance on the treatment
of net income and losses attributable to the noncontrolling interest and changes
in ownership interests in a subsidiary and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160
also requires additional disclosures that identify and distinguish between the
interests of the controlling and noncontrolling owners. Pursuant to the
transition provisions of SFAS 160, Ricoh will adopt SFAS 160 in fiscal year 2010
via retrospective application of the presentation and disclosure requirements.
Ricoh is currently evaluating the effect the adoption of SFAS 160 will have on
its consolidated results of operations and financial condition.
In May 2009, the FASB issued SFAS No.165, "Subsequent Events." SFAS 165 is
intended to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date -- that is, whether that date represents the date the financial statements
were issued or were available to be issued. SFAS 165 is effective for fiscal
years beginning after June 15, 2009, and for subsequent interim and annual
reporting periods. SFAS 165 will be adopted by Ricoh in the second quarter
beginning July 1, 2009.
In June 2009, the FASB issued SFAS No.166, "Accounting for Transfers of
Financial Assets-an amendment of FASB Statement No. 140." This statement
eliminates the concept of a qualifying special-purpose entity ("QSPE"),
establishes conditions for reporting a transfer of a portion of a financial
asset as a sale, clarifies the financial-asset derecognition criteria, revises
how interests retained by the transferor in a sale of financial assets initially
are measured, removes the guaranteed mortgage securitization recharacterization
provisions and requires additional disclosures. SFAS 166 is effective for fiscal
years beginning after November 15, 2009, and for subsequent interim and annual
reporting periods. SFAS 166 will be adopted by Ricoh in the first quarter
beginning April 1, 2010. Ricoh is currently evaluating the effect that the
adoption of SFAS 166 will have on its consolidated results of operations and
financial condition.
In June 2009, the FASB issued SFAS No.167, "Amendments to FASB Interpretation
No. 46(R). " This statement requires reporting entities to evaluate former QSPEs
for consolidation, changes the approach to determining a VIE' s primary
beneficiary from a mainly quantitative assessment to an exclusively qualitative
assessment designed to identify a controlling financial interest, and increases
the frequency of required reassessments to determine whether a company is the
primary beneficiary of a VIE. SFAS 167 is effective for fiscal years beginning
after November 15, 2009, and for subsequent interim and annual reporting
periods. Earlier application is prohibited. SFAS 167 will be adopted by Ricoh in
the first quarter beginning April 1, 2010. Ricoh is currently evaluating the
effect that the adoption of SFAS 167 will have on its consolidated results of
operations and financial condition.
In April 2008, the FASB finalized FSP 142-3, "Determination of the Useful Life
of Intangible Assets". The position amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under SFAS 142. The position applies to
intangible assets that are acquired individually or with a group of other assets
and both intangible assets acquired in business combinations and asset
acquisitions. FSP 142-3 is effective for fiscal years beginning after December
15, 2008, and interim periods within those fiscal years. FSP142-3 will be
adopted by Ricoh in the first quarter beginning April 1, 2009. Ricoh is
currently evaluating the effect that the adoption of FSP 142-3 will have on its
consolidated results of operations and financial condition.
F-19
In December 2008, the FASB issued FSP No. FAS 132(R)-1, "Employer's Disclosures
about Postretirement Benefit Plan Assets." FSP FAS 132(R)-1 requires additional
disclosures about assets held in an employer's defined benefit pension or other
postretirement plan. FSP FAS 132(R)-1 is effective for fiscal years ending after
December 15, 2009 and will be adopted by Ricoh in the first quarter beginning
April 1, 2010. Ricoh will present the required disclosures in the prescribed
format on a prospective basis upon adoption. The principal impact from FSP FAS
132(R)-1 will be to require Ricoh to expand disclosures regarding benefit plan
assets.
(Y) RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform with the current year's presentation.
3. ACQUISITION
In October 2008, Ricoh acquired IKON Office Solutions, Inc. ("IKON") through the
Company's wholly owned U.S. distribution subsidiary, Ricoh Americas Corporation
("RAC") for total cash consideration of Yen 170,310 million ($1,720,303
thousand), including transaction costs. This acquisition was financed with bank
loans. IKON supplies and services a wide range of office equipment, such as
MFPs, fax machines and printers, in the North America and the Western European
markets. With this acquisition, Ricoh aims to strengthen and broaden its
business opportunities and infrastructure in the North America and Europe by
capitalizing on IKON's broad sales and service network and gaining access to
IKON's customer relationships, which includes large private corporations as well
as government and public sector entities/organizations.
Ricoh applied the purchase method of accounting to account for the acquisition
and, accordingly, the purchase price has been allocated to the tangible and
intangible net assets of IKON based on the estimated fair value of such net
assets. The amount of consideration paid in excess of the estimated fair value
of the net identifiable assets acquired of Yen 143,278 million ($1,447,253
thousand) was recorded as goodwill that is not tax deductible. Ricoh reflected
certain preliminary estimates with respect to the value of the underlying net
assets of IKON in determining amounts of the goodwill. Therefore, the amount of
intangible assets and goodwill could possibly be adjusted upon the completion of
the purchase price allocation. Assets, liabilities and operations of IKON has
been included in the accompanying consolidated financial statements since the
acquisition date.
In connection with the acquisition of IKON, Ricoh recorded certain liabilities
in accordance with EITF 95-3 "Recognition of Liabilities in Connection with a
Purchase Business Combination." These liabilities included those for workforce
reductions and facilities consolidation, intended to align the company's
capacity and infrastructure, and promote synergies within the business to
provide more effective services to customers. The liabilities include mainly
accrual for severance of Yen 2,029 million ($20,495 thousand), and property exit
cost Yen 1,008 million ($10,182 thousand) associated with the acquisition of
IKON.
The following table reflects the October 31, 2008 condensed balance sheet of
IKON, as adjusted to give effect to the purchase method accounting adjustments:
Thousands of
Millions of Yen U.S. Dollars
-------------------------------------------------------------------------------
Receivables and other assets Yen 138,532 $ 1,399,313
Property and equipment 18,798 189,879
Identifiable intangible assets 55,566 561,273
Goodwill 143,278 1,447,253
Liabilities (185,864) (1,877,415)
-------------------------------------------------------------------------------
Total cash consideration Yen 170,310 $ 1,720,303
===============================================================================
F-20
Identifiable intangible assets of IKON included a trademark of Yen 1,968 million
($19,879 thousand) which was estimated to have remaining useful life of 3 years,
customer relationships of Yen 53,136 million ($536,727 thousand) which were
estimated to have remaining useful life of 10 years to 20 years, and other
intangible assets of Yen 462 million ($4,667 thousand). Goodwill arising from
the acquisition of IKON has been allocated to the Imaging & Solutions segment.
The primary items that generated the goodwill are the value of the synergies
between IKON and Ricoh and the acquired assembled workforce, neither of which
qualify as an (amortizable) intangible asset.
Supplemental unaudited pro forma information, as if the IKON acquisition were
consummated at the beginning of fiscal years 2008 and 2009, is as follows:
Millions of yen
---------------------
2008 2009
--------------------------------------------------------------------------------
Net sales 2,640,126 2,301,087
Net income 112,218 3,326
Yen
---------------------
2008 2009
--------------------------------------------------------------------------------
Earnings per share:
Basic 153.93 4.59
Diluted 149.84 4.44
The supplemental unaudited pro forma information is based on estimates and
assumptions, which Ricoh believes are reasonable; it is not necessarily
indicative of the consolidated financial position or results for future periods
or the results that actually would have been realized had IKON has been a
combined company as of the beginning of the periods presented. The unaudited pro
forma results for all periods presented include amortization charges for
acquired intangible assets, eliminations of intercompany transactions,
adjustments to interest expenses and related tax effects.
Furthermore, Ricoh acquired other immaterial entities during the year ended
March 31, 2009 for a consideration of Yen 4,777 million ($48,253 thousand), net
of cash acquired.
In June 2007, Ricoh and International Business Machines Corporation ("IBM")
completed formation of a joint venture company (now known as InfoPrint Solutions
Company, LLC) which was spun-out from IBM's Printing Systems Division to provide
output solutions for production printing area. InfoPrint Solutions Company, LLC
has benefited from access to IBM's powerful worldwide distribution and sales
network, as well as extensive printer development capabilities. The
consideration was paid in a form of cash for the initial 51% acquisition of
InfoPrint Solutions Company, LLC by Ricoh as well as a prepayment for the
remaining 49% to be acquired and certain royalties and services to be provided
by IBM to InfoPrint Solutions Company, LLC. Ricoh has progressively acquired the
remaining 49% over the next three years since the acquisition, approximately 4%
per each quarter, as InfoPrint Solutions Company, LLC becomes a wholly owned
subsidiary. Ricoh had an approximately 80% equity in InfoPrint Solutions
Company, LLC as of March 31, 2009. Ricoh applied the purchase method of
accounting to account for the acquisition.
Final consideration for this transaction will be determined at the end of the
three-year period based upon the participation in the profits and losses
recorded by the equity partners. Therefore, the amount of goodwill may be
adjusted at the determination of final consideration. Assets, liabilities and
operations of InfoPrint
F-21
Solutions Company, LLC have been included in the accompanying consolidated
financial statements since the acquisition date.
The following table reflects the condensed balance sheet of InfoPrint Solutions
Company, LLC, as adjusted to give effect to the purchase method accounting
adjustments:
Millions of Yen
Receivables and other assets Yen 18,121
Property and equipment 2,214
Identifiable intangible assets 38,091
Goodwill 50,301
Liabilities (15,772)
--------------------------------------------------------------------------------
Total cash consideration Yen 92,955
================================================================================
Identifiable intangible assets of InfoPrint Solutions Company, LLC primarily
included trademarks of Yen 16,852 million which were estimated to have remaining
useful lives of 5 years to 7 years, existing maintenance contracts of Yen 8,289
million which were estimated to have remaining useful life of 9 years,
outsourcing agreement of Yen 5,162 million which were estimated to have
remaining useful lives of 1 year to 6 years, and other intangible assets of Yen
7,788 million. Goodwill arising from the acquisition of InfoPrint Solutions
Company, LLC has been allocated to the Imaging & Solutions segment, and
deductible for tax purposes. .
Furthermore, Ricoh acquired other immaterial entities during the year ended
March 31, 2008 for a consideration of Yen 3,840 million, net of cash acquired.
In January 2007, Ricoh Europe B.V., a wholly-owned subsidiary of the Company,
acquired the European operations of Danka Business Systems PLC ("Danka's
European operations") for total cash consideration of Yen 27,132 million
including direct acquisition costs. Ricoh made the acquisition to strengthen its
sales and service network in major countries in Europe.
Ricoh applied the purchase method of accounting to account for the acquisition
and, accordingly, the purchase price has been allocated to the tangible and
intangible net assets of Danka's European operations based on the estimated fair
value of such net assets. A part of this acquisition cost was financed with Euro
Yen Zero Coupon Conversion Bonds issued in December 2006. The amount of
consideration paid in excess of the estimated fair value of the net assets
acquired of Yen 18,658 million was recorded as goodwill which is not tax
deductible. Assets, liabilities and operations of Danka's European operations
have been included in the accompanying consolidated financial statements since
the acquisition date.
Millions of Yen
Cash and cash equivalents Yen 3,839
Receivables and other assets 22,385
Property and equipment 1,434
Identifiable intangible assets 4,883
Goodwill 18,658
Liabilities (24,067)
--------------------------------------------------------------------------------
Total cash consideration Yen 27,132
================================================================================
Identifiable intangible assets of Danka's European operations primarily
comprised customer relationships of Yen 4,700 million, which were estimated to
have a remaining useful life of 10 years to 18 years. Goodwill arising from the
acquisition of Danka's European operations has been allocated to the Imaging &
Solutions segment.
F-22
4. DISCONTINUED OPERATIONS
Summarized selected financial information for the years ended March 31, 2007 for
the discontinued operations is as follows:
Millions of
Yen
-----------
2007
-------------------------------------------------------------
Net sales Yen 1,487
-------------------------------------------------------------
Income from discontinued operations before gain
on disposal of discontinued operations and
provision for income taxes 866
Gain on disposal of discontinued operations 8,830
Provision for income taxes 4,196
-------------------------------------------------------------
Income from discontinued operations, net of tax Yen 5,500
5. FINANCE RECEIVABLES
Finance receivables as of March 31, 2008 and 2009 are comprised primarily of
lease receivables and installment loans.
Ricoh's products are leased to domestic customers primarily through Ricoh
Leasing Company, Ltd., a majority-owned domestic subsidiary, and to overseas
customers primarily through certain overseas subsidiaries. These leases are
accounted for as sales-type leases in conformity with SFAS 13. Sales revenue
from sales-type leases is recognized at the inception of the leases.
Information pertaining to Ricoh's lease receivables as of March 31, 2008 and
2009 is as follows:
Thousands of
Millions of Yen U.S. Dollars
--------------------------- ------------
2008 2009 2009
-----------------------------------------------------------------------------------------------
Minimum lease payments receivable Yen 645,198 Yen 645,890 $ 6,524,141
Estimated non-guaranteed residual value 6,358 8,303 83,869
Unearned income (56,408) (43,701) (441,424)
Allowance for doubtful receivables (9,935) (10,394) (104,990)
-----------------------------------------------------------------------------------------------
Lease receivables, net 585,213 600,098 6,061,596
Less - Current portion of lease receivable, net (193,497) (194,348) (1,963,111)
-----------------------------------------------------------------------------------------------
Amounts due after one year, net Yen 391,716 Yen 405,750 $ 4,098,485
===============================================================================================
F-23
As of March 31, 2009, the minimum lease payments receivable due in each of the
next five years and thereafter are as follows:
Thousands of
Years ending March 31 Millions of Yen U.S. Dollars
------------------------------------------------------
2010 Yen 219,536 $2,217,535
2011 180,968 1,827,960
2012 130,530 1,318,485
2013 76,480 772,525
2014 30,017 303,202
2015 and thereafter 8,359 84,434
------------------------------------------------------
Total Yen 645,890 $6,524,141
======================================================
Ricoh Leasing Company, Ltd. has also extended certain other types of loans as
part of its business activity, which are primarily residential housing loans to
current or former employees and private individuals in Japan secured by the
underlying real estate properties. Loan terms range from 15 years to 30 years
with monthly repayments. The total balance of these loans, net of allowance for
doubtful receivables, as of March 31, 2008 and 2009 was Yen 54,863 million and
Yen 60,781 million ($613,949 thousand), respectively. The current portion of
loans receivable was Yen 1,145 million and Yen 1,269 million ($12,818 thousand),
respectively, as of March 31, 2008 and 2009, and was included in short-term
finance receivables, net in the accompanying consolidated balance sheets. Loan
activity for the years ended March 31, 2007, 2008 and 2009 is as follows:
Thousands of
Millions of Yen U.S. Dollars
------------------------------------ ------------
2007 2008 2009 2009
------------------------------------------------------------------------------------
Extension of new loans Yen 11,883 Yen 14,356 Yen 15,324 $154,788
Repayment of outstanding loans 11,621 12,319 9,670 97,677
Ricoh sold certain finance lease receivables in prior years through revolving
securitization transactions, which were structured as special purpose entities
("SPE"). The value assigned to undivided interests retained in these
transactions was based on the fair value of retained interests as of a transfer
of these receivables and was reflected in its consolidated balance sheets. Ricoh
expects certain unrecoverable amount for lease receivables and reflects such
unrecoverable amount in measuring fair value of retained interest. Ricoh's
retained interests are subordinate to the investors' interests. Their value is
subject to credit, prepayment and interest rate risk on the sold financial
assets. The investors and SPE that hold the lease receivables have limited
recourse to Ricoh's retained interest in such receivables for failure of debtors
to pay. Ricoh determines the fair value of the retained interests by discounting
the future cash flows. Those cash flows are estimated based on credit losses and
other information as available and are discounted at a rate which Ricoh believes
is commensurate with the risk free rate plus a risk premium. Servicing assets or
liabilities related to securitization transactions initiated were not recorded,
because the servicing fees adequately compensate Ricoh. The amount of lease
receivable transferred, net of retained interest, for the year ended March 31,
2007, 2008 and 2009 was Yen 19,381 million, Yen 13,937 million and Yen 9,143
million ($92,354 thousand), respectively.
Key economic assumptions used in measuring the fair value of retained interests
related to securitization transactions completed during the years ended March
31, 2008 and 2009 are as follows:
2008 2009
--------------------------------------------------
Expected credit losses 0.70% -0.95% 1.23% -1.26%
Discount rate 2.00% -3.00% 2.00% -3.00%
Annual prepayment rate 4.01% -5.37% 4.35% -8.76%
F-24
The impacts of 10% and 20% adverse changes to the key economic assumptions on
the fair value of retained interests as of March 31, 2009 are presented below.
Thousands of
Millions of Yen U.S. Dollars
--------------- ------------
2009 2009
-----------------------------------------------------------------------------------------
Carrying value of retained interests (included in lease
deposits and other in the consolidated balance sheet) Yen 4,293 $43,364
Expected credit losses:
+10% (55) (556)
+20% (111) (1,121)
Discount rate:
+10% (14) (141)
+20% (29) (293)
Annual prepayment rate:
+10% (209) (2,111)
+20% (419) (4,232)
The hypothetical scenario does not reflect expected market conditions and should
not be used as a prediction of future performance. As the figures indicate,
changes in fair value may not be linear. Also, in the above table, the effect of
a variation in a particular assumption on the fair value of the retained
interest is calculated without changing any other assumption; in reality,
changes in one factor may result in changes in another, which might magnify or
counteract the sensitivities.
The following table summarizes certain cash flows received from and paid to the
SPE for all securitization activity for the years ended March 31, 2007, 2008 and
2009:
Thousands of
Millions of Yen U.S. Dollars
---------------------------------- ------------
2007 2008 2009 2009
--------------------------------------------------------------------------------------------------------------
Servicing fees received Yen 21 Yen 20 Yen 13 $ 131
Repurchases of delinquent or ineligible assets 2,776 2,527 2,037 20,576
Repurchases of terminated securitization of assets -- -- 10,000 101,010
Payments by terminating revolving securitization of assets -- 2,779 3,608 36,444
The components of all receivables managed and securitized, amounts of
delinquencies and the components of net credit losses as of March 31, 2008 and
2009, and for the years then ended, are as follows:
Millions of Yen
-------------------------------------------------------------------------------------------
2008 2009
-------------------------------------------- --------------------------------------------
Principal Principal
amount of amount of
Total principal receivables Total principal receivables
amount of 4 months or Net credit amount of 4 months or Net credit
receivables more past due losses receivables more past due losses
-------------------------------------------------------------------------------------------------------------------------------
Principal amount outstanding Yen 635,095 Yen 1,977 Yen 3,383 Yen 635,965 Yen 2,710 Yen 4,048
Less - Receivables securitized (40,442) (25,473)
----------- -----------
Receivables held in portfolio Yen 594,653 Yen 610,492
F-25
Principal amount of
Total principal receivables
amount of 4 months or more Net credit
receivables past due losses
--------------------------------------------------------------------------------------
Principal amount outstanding $6,423,889 $27,374 $40,889
Less - Receivables securitized (257,303)
----------
Receivables held in portfolio $6,166,586
6. SECURITIES
Securities as of March 31, 2008 and 2009 consist of the following:
Thousands of
Millions of Yen U.S. Dollars
----------------------- ------------
2008 2009 2009
----------------------------------------------------------------------------
Current:
Trading securities Yen -- Yen 725 $ 7,323
Available-for-sale securities 0 -- --
Non-current:
Available-for-sale securities Yen 69,962 Yen 46,341 $468,091
Non-marketable equity securities 1,282 1,474 14,889
----------------------------------------------------------------------------
Yen 71,244 Yen 47,815 $482,980
============================================================================
All of available-for-sale securities as of March 31, 2009 are classified as
non-current securities.
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 March 31, 2008 and 2009 are as follows:
Millions of Yen
-----------------------------------------------------------------------------------------------
2008 2009
---------------------------------------------- -----------------------------------------------
Gross Gross Gross Gross
unrealized unrealized unrealized unrealized
holding holding Fair holding holding Fair
Cost gains losses value Cost gains losses value
-----------------------------------------------------------------------------------------------------------------------------
Current:
Other Yen 0 Yen -- Yen -- Yen 0 Yen -- Yen -- Yen -- Yen --
Non-current:
Equity securities Yen 62,208 Yen 6,231 Yen 3,723 Yen 64,716 Yen 43,002 Yen 2,650 Yen 590 Yen 45,062
Corporate debt securities 6,000 -- 754 5,246 1,279 0 -- 1,279
-----------------------------------------------------------------------------------------------------------------------------
Yen 68,208 Yen 6,231 Yen 4,477 Yen 69,962 Yen 44,281 Yen 2,650 Yen 590 Yen 46,341
=============================================================================================================================
Thousands of U.S. Dollars
------------------------------------------
2009
------------------------------------------
Gross Gross
unrealized unrealized
holding holding Fair
Cost gains losses value
------------------------------------------------------------------------
Current:
Other $ -- $ -- $ -- $ --
Non-current:
Equity securities $434,364 $26,768 $5,960 $455,172
Corporate debt securities 12,919 0 -- 12,919
------------------------------------------------------------------------
$447,283 $26,768 $5,960 $468,091
========================================================================
F-26
Gross unrealized holding losses and the fair value of available-for-sale
securities, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position at March 31, 2009
are as follows:
Millions of Yen
---------------------------------------------------------------------------------------------
Less than 12 months 12 months or longer Total
----------------------------- ----------------------------- -----------------------------
Gross unrealized Gross unrealized Gross unrealized
Fair value holding losses Fair value holding losses Fair value holding losses
----------------------------------------------------------------------------------------------------------------------
2009:
Noncurrent:
Available-for-sale:
Equity securities Yen 1,753 Yen 481 Yen 492 Yen 109 Yen 2,244 Yen 590
Thousands of U.S. Dollars
---------------------------------------------------------------------------------------------
Less than 12 months 12 months or longer Total
----------------------------- ----------------------------- -----------------------------
Gross unrealized Gross unrealized Gross unrealized
Fair value holding losses Fair value holding losses Fair value holding losses
----------------------------------------------------------------------------------------------------------------------
2009:
Noncurrent:
Available-for-sale:
Equity securities $17,707 $4,859 $4,970 $1,101 $22,667 $5,960
Ricoh judged the decline in fair value of investment securities at yearend to be
temporary, with considering such factors as financial and operating conditions
of issuer, the industry in which the issuer operates and other relevant factors.
The contractual maturities of debt securities classified as available-for-sale
as of March 31, 2009, regardless of their balance sheet classification, are as
follows:
Thousands of
Millions of Yen U.S. Dollars
---------------------- -------------------
Cost Fair value Cost Fair value
-------------------------------------------------------------------------------------
Due after one year through five years Yen 269 Yen 269 $ 2,717 $ 2,717
Over five years 1,010 1,010 10,202 10,202
-------------------------------------------------------------------------------------
Yen 1,279 Yen 1,279 $12,919 $12,919
=====================================================================================
Proceeds from the sales of available-for-sale securities were Yen 96,087
million, Yen 100,025 million and Yen 243 million ($2,455 thousand) for the years
ended March 31, 2007, 2008 and 2009, respectively.
There were no significant realized gains and losses from the sales of
available-for-sale securities for the years ended March 31, 2007, 2008 or 2009.
There were no significant realized gains and losses on valuation of
available-for-sale securities for the years ended March 31, 2007 and 2008. The
losses on impairment of available-for-sale securities for the years ended
March 31, 2009 were Yen 26,543 million ($268,111 thousand).
F-27
As for unrealized gains (losses) on securities in accumulated other
comprehensive income (loss) and related reclassification adjustments for (gains)
losses realized in net income for the years ended March 31, 2008 and 2009, refer
to note 14 other comprehensive income (loss).
7. INVESTMENTS IN AND ADVANCES TO AFFILIATES
The investments in and advances to affiliates primarily relate to 20% to 50%
owned companies. Ricoh's equity in the underlying net book values of the
companies is approximately equal to their individual carrying values of Yen
1,977 million and Yen 1,248 million ($12,606 thousand) at March 31, 2008 and
2009, respectively.
On July 1, 2006, Coca-Cola West Japan Co., Ltd. (former affiliate company) and
Kinki Coca-Cola Bottling Co., Ltd. (former unrelated company) established a
joint holding company Coca-Cola West Holdings Co., Ltd. by means of an exchange
of shares. As a result, proportion of ownership interest of Coca-Cola West
Holdings Co., Ltd. by Ricoh decreased under 20% and Ricoh no longer has
significant influence, and according to Accounting Principles Board ("APB")
Opinion No. 18, "The Equity Method of Accounting for Investments in Common
Stock," Ricoh excluded these companies from affiliate companies on October 1,
2006.
On November 30, 2007, Ricoh sold the part of shares of common stock of Sindoh
Co., Ltd. The gain on sale of the shares was not material. As a result,
proportion of ownership interest Sindoh Co., Ltd. by Ricoh decreased under 20%
and Ricoh no longer has significant influence, and according to Accounting
Principles Board ("APB") Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock," Ricoh excluded these companies from affiliate
companies on February 29, 2008.
Those securities are classified into available for sale security and accounted
in accordance with SFAS 115 and presented in Investment securities in the
balance sheet on March 31, 2008 and 2009.
Summarized financial information for all affiliates as of March 31, 2008 and
2009 and for the years ended March 31, 2007, 2008 and 2009 is as follows (some
operation data for entities reflect only the period the current affiliates and
former affiliates were affiliates of Ricoh and its subsidiaries' affiliates):
Thousands of
Millions of Yen U.S. Dollars
------------------- ------------
FINANCIAL POSITION 2008 2009 2009
------------------------------------------------------------------------------
Assets:
Current assets Yen 4,088 Yen 375 $3,788
Other assets 1,581 99 1,000
------------------------------------------------------------------------------
Yen 5,669 Yen 474 $4,788
==============================================================================
Liabilities and shareholders' investment:
Current liabilities Yen 3,489 Yen 273 $2,757
Other liabilities 581 6 61
Shareholders' investment 1,599 195 1,970
------------------------------------------------------------------------------
Yen 5,669 Yen 474 $4,788
==============================================================================
Thousands of
Millions of Yen U.S. Dollars
------------------------------------ ------------
OPERATIONS 2007 2008 2009 2009
------------------------------------------------------------------------
Sales Yen 193,753 Yen 68,662 Yen 4,617 $46,636
Costs and expenses 186,199 64,013 4,785 48,333
------------------------------------------------------------------------
Net income (loss) Yen 7,554 Yen 4,648 Yen (168) $(1,697)
========================================================================
F-28
The significant transactions of Ricoh with these affiliates for the years ended
March 31, 2007, 2008 and 2009, and the related account balances at March 31,
2008 and 2009 are summarized as follows:
Thousands of
Millions of Yen U.S. Dollars
----------------------------------- ------------
2007 2008 2009 2009
-----------------------------------------------------------------------
Transactions:
Sales Yen 16,158 Yen 20,184 Yen 6,677 $67,444
Purchases 28,993 21,274 1,773 17,909
Dividend income 828 625 188 1,899
Unrealized profits regarding the above transactions were eliminated in the
consolidated financial statements.
Thousands of
Millions of Yen U.S. Dollars
----------------------- ------------
2008 2009 2009
-----------------------------------------------------------
Account balances:
Receivables Yen 3,080 Yen 422 $4,263
Payables 1,930 32 323
As of March 31, 2009, consolidated retained earnings included undistributed
earnings of 20% to 50% owned companies accounted for by the equity method in the
amount of Yen 26,610 million ($268,788 thousand). This amount included
undistributed earnings of Yen 22,241 million ($224,657 thousand) million of
Coca-Cola West Holdings Co., Ltd. and of Yen 4,428 million ($44,727 thousand) of
Sindoh Co., Ltd. as of the date that Ricoh ceased applying the equity method.
F-29
8. GOODWILL AND OTHER INTANGIBLE ASSETS
The information for intangible assets subject to amortization and for intangible
assets not subject to amortization as of March 31, 2008 and 2009 is as follows:
Millions of Yen
------------------------------------------------------------------------------
2008 2009
------------------------------------------------------------------------------
Gross Net Gross Net
carrying Accumulated carrying carrying Accumulated carrying
amount amortization amount amount amortization amount
---------------------------------------------------------------------------------------------------------------
Other intangible assets
subject to amortization:
Software Yen 113,072 Yen (61,383) Yen 51,689 Yen 128,142 Yen (68,774) Yen 59,368
Trademarks and
customer relationships 56,201 (20,385) 35,816 110,867 (29,793) 81,074
Other 36,360 (10,750) 25,610 31,973 (8,501) 23,472
----------- ------------ ----------- ----------- ------------ -----------
Total 205,633 (92,518) 113,115 270,982 (107,068) 163,914
Other intangible assets not
subject to amortization 1,287 1,212
----------- -----------
Total other intangible assets Yen 114,402 Yen 165,126
Thousands of U.S. Dollars
------------------------------------
2009
------------------------------------
Gross Net
carrying Accumulated carrying
amount amortization amount
---------------------------------------------------------------------
Other intangible assets
subject to amortization:
Software $1,294,364 $ (694,687) $ 599,677
Trademarks and
customer relationships 1,119,869 (300,939) 818,929
Other 322,959 (85,869) 237,091
---------- ------------ ----------
Total 2,737,192 (1,081,495) 1,655,697
Other intangible assets not
subject to amortization 12,242
----------
Total other intangible assets $1,667,939
Gross carrying amount of trademarks and customer relationships increased during
the year ended March 31, 2009 mainly due to the acquisition of IKON Office
Solutions, Inc.
The aggregate amortization expense of other intangible assets subject to
amortization for the years ended March 31, 2007, 2008 and 2009 was Yen 17,200
million, Yen 23,026 million and Yen 26,931 million ($272,030 thousand),
respectively. The future amortization expense for each of the next five years
relating to existing intangible assets is estimated to be the following at March
31, 2009:
Thousands of
Years ending March 31 Millions of Yen U.S. Dollars
------------------------------------------------------
2010 Yen 27,391 $276,677
2011 25,120 253,737
2012 23,183 234,172
2013 18,236 184,202
2014 14,497 146,434
F-30
The changes in the carrying amounts of goodwill for the years ended March 31,
2008 and 2009, are as follows:
Millions of Yen Thousands of
------------------------- U.S. Dollars
2008 2009 2009
----------------------------------------------------------------------------
Balance at beginning of year Yen 72,048 Yen 112,538 $1,136,747
Goodwill acquired during the year 53,971 145,625 1,470,960
Foreign exchange impact (13,481) (7,833) (79,121)
----------------------------------------------------------------------------
Balance at end of year Yen 112,538 Yen 250,330 $2,528,586
============================================================================
As of March 31, 2009, all of the carrying value of goodwill was allocated to the
Imaging & Solutions segment.
9. INCOME TAXES
Income (loss) from continuing operations before income taxes, minority interests
and equity in earnings of affiliates and provision for income taxes for the
years ended March 31, 2007, 2008 and 2009 are as follows:
Thousands of
Millions of Yen U.S. Dollars
-------------------------------------- ------------
2007 2008 2009 2009
--------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes, minority interests
and equity in earnings of affiliates:
Domestic Yen 107,749 Yen 110,986 Yen 31,861 $321,828
Foreign 66,770 63,683 (922) (9,313)
--------------------------------------------------------------------------------------------------
Yen 174,519 Yen 174,669 Yen 30,939 $312,515
--------------------------------------------------------------------------------------------------
Provision for income taxes:
Current:
Domestic Yen 47,530 Yen 38,199 Yen 20,077 $202,798
Foreign 18,993 20,227 7,244 73,172
--------------------------------------------------------------------------------------------------
Yen 66,523 Yen 58,426 Yen 27,321 $275,970
--------------------------------------------------------------------------------------------------
Deferred:
Domestic Yen (741) Yen 6,694 Yen (4,473) $(45,182)
Foreign (1,456) (1,724) (690) (6,970)
--------------------------------------------------------------------------------------------------
Yen (2,197) Yen 4,970 Yen 5,163) $(52,152)
--------------------------------------------------------------------------------------------------
Consolidated provision for income taxes Yen 64,326 Yen 63,396 Yen 22,158 $223,818
--------------------------------------------------------------------------------------------------
F-31
Total income taxes are allocated as follows:
Thousands of
Millions of Yen U.S. Dollars
------------------------------------- ------------
2007 2008 2009 2009
--------------------------------------------------------------------------------------------------
Provision for income taxes relating to
continuing operations Yen 64,326 Yen 63,396 Yen 22,158 $ 223,818
Provision for income taxes relating to
discontinued operations 4,196 -- -- --
Shareholders' investment:
Foreign currency translation adjustments (50) 78 (19) (192)
Unrealized gains (losses) on securities 25 (4,879) 366 3,697
Unrealized gains (losses) on derivatives (128) (259) (4) (40)
Minimum pension liability adjustments 693 -- -- --
Adjustment to initially apply SFAS 158 1,066 -- -- --
Pension liability adjustments -- (10,014) (22,879) (231,101)
--------------------------------------------------------------------------------------------------
Yen 70,128 Yen 48,322 Yen (378) $ (3,818)
--------------------------------------------------------------------------------------------------
The Company and its domestic subsidiaries are subject to a National Corporate
tax of 30%, an inhabitant tax of approximately 6% and a deductible Enterprise
tax approximately 8%, which in the aggregate resulted in the normal statutory
tax rate of approximately 41%. The normal statutory tax rate differs from the
effective tax rate for the years ended March 31, 2007, 2008 and 2009 as a result
of the following:
2007 2008 2009
---------------------------------------------------------------------------------------------------------
Normal statutory tax rate 41% 41% 41%
Nondeductible expenses and tax-exempt income 0 1 1
Tax benefits not recognized on operating losses of certain consolidated subsidiaries 1 2 45
Utilization of net operating loss carryforwards not previously recognized (1) (3) (8)
Tax credit for increased research and development expense (3) (4) (3)
Unrecognized tax benefits - 3 13
Taxes on undistributed earnings of overseas subsidiaries 1 (1) (8)
Prior period tax accrual adjustment 0 0 (5)
Other, net (2) (3) (4)
---------------------------------------------------------------------------------------------------------
Effective tax rate 37% 36% 72%
---------------------------------------------------------------------------------------------------------
Nondeductible expenses include directors' bonuses and entertainment expenses.
The tax effects of temporary differences and carryforwards giving rise to the
consolidated deferred tax assets and liabilities as of March 31, 2008 and 2009
are as follows:
Thousands of
Millions of Yen U.S. Dollars
------------------------- ------------
2008 2009 2009
-----------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Accrued expenses Yen 24,263 Yen 23,830 $ 240,707
Property, plant and equipment 3,858 2,892 29,212
Accrued pension and severance costs 40,341 61,632 622,545
Net operating loss carryforwards 12,684 26,308 265,737
Other 23,193 23,713 239,525
-----------------------------------------------------------------------------------------------------------------
Total gross deferred tax assets Yen 104,339 Yen 138,375 $1,397,727
F-32
Thousands of
Millions of Yen U.S. Dollars
------------------------- ------------
2008 2009 2009
-----------------------------------------------------------------------------------------------------------------
Less - Valuation allowance (10,661) (24,172) (244,161)
-----------------------------------------------------------------------------------------------------------------
Total deferred tax assets Yen 93,678 Yen 114,203 $1,153,566
=================================================================================================================
Deferred tax liabilities:
Sales-type leases Yen (6,555) Yen (5,657) $ (57,141)
Undistributed earnings of foreign subsidiaries and affiliates (20,664) (11,574) (116,909)
Net unrealized holding gains on available-for-sale securities (333) (278) (2,808)
Basis difference of acquired intangible assets (10,498) (24,194) (244,384)
Other (7,673) (7,151) (72,233)
-----------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities Yen (45,723) Yen (48,854) $ (493,475)
=================================================================================================================
Net deferred tax assets Yen 47,955 Yen 65,349 $ 660,091
=================================================================================================================
Net deferred tax assets as of March 31, 2008 and 2009 are included in the
consolidated balance sheets as follows:
Thousands of
Millions of Yen U.S. Dollars
------------------------- ------------
2008 2009 2009
-----------------------------------------------------------------------------------------------------------------
Deferred income taxes and other (Current Assets) Yen 41,581 Yen 43,774 $ 442,162
Lease deposits and other (Non-current Assets) 43,528 53,740 542,828
Accrued expenses and other (Current Liabilities) (781) (1,701) (17,182)
Deferred income taxes and other (Long-Term Liabilities) (36,373) (30,464) (307,717)
-----------------------------------------------------------------------------------------------------------------
Yen 47,955 Yen 65,349 $ 660,091
=================================================================================================================
The net changes in the total valuation allowance for the years ended March 31,
2007, 2008 and 2009 were an increase of Yen 4,202 million, a decrease of Yen
1,738 million and an increase of Yen 13,511 million ($136,475 thousand),
respectively. The valuation allowance primarily relates to deferred tax assets
of the consolidated subsidiaries with net operating loss carryforwards for tax
purposes that are not expected to be realized.
In assessing the realizability of deferred tax assets, Ricoh considers whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible and whether loss
carryforwards are utilizable. Ricoh considers the scheduled reversal of deferred
tax liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the deferred tax
assets are deductible, Ricoh believes it is more likely than not that the
benefits of these deductible differences, net of the existing valuation
allowance will be realized. The amount of the deferred tax asset considered
realizable, however, would be reduced if estimates of future taxable income
during the carryforward period are reduced.
As of March 31, 2009, certain subsidiaries had net operating losses carried
forward for income tax purposes of approximately Yen 98,028 million ($990,182
thousand) which were available to reduce future taxable income, if any.
Approximately Yen 1,576 million ($15,919 thousand) of the operating losses will
expire within 3 years, Yen 12,151 million ($122,737 thousand) will expire within
4 years to 7 years and Yen 63,060 million ($636,970 thousand) will expire over 7
years. The remainder have indefinite carryforward period.
Ricoh has not recognized a deferred tax liability for certain portion of the
undistributed earnings of its foreign subsidiaries of Yen 167,769 million
($1,694,636 thousand) as of March 31, 2009 because Ricoh
F-33
considers these earnings to be indefinitely reinvested. The calculation of the
related unrecognized deferred tax liability is not practicable.
Ricoh adopted FIN48 effective April 1, 2007. Total unrecognized tax benefits as
of the date of adoption were Yen 8,508 million, and a cumulative-effect
adjustment was not required as a result of the adoption of FIN 48.
A reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows:
Thousands of
Millions of Yen U.S. Dollars
------------------------- ------------
2008 2009 2009
--------------------------------------------------------------------------------------
Beginning balance Yen 8,508 Yen 5,623 $56,798
Additions due to acquisition -- 1,917 19,364
Additions for tax positions of current year 2,972 4,350 43,939
Additions for tax positions of prior years 2,456 1,538 15,535
Reductions for tax positions of prior years (1,768) (546) (5,515)
Settlements (5,662) (721) (7,283)
Other (883) (345) (3,484)
--------------------------------------------------------------------------------------
Ending balance Yen 5,623 Yen 11,816 $119,354
======================================================================================
Total amount of unrecognized tax benefits as of March 31, 2008 and 2009 that
would reduce the effective tax rate, if recognized, are Yen 4,503 and Yen 11,071
million ($111,828 thousand), respectively.
Although Ricoh believes its estimates and assumptions of unrecognized tax
benefits are reasonable, uncertainty regarding the final determination of tax
audit settlements and any related litigation could affect the effective tax rate
in the future periods. Based on each of the items of which Ricoh is aware as of
March 31, 2009, no significant changes to the unrecognized tax benefits are
expected within the next twelve months.
Ricoh recognizes interest and penalties related to unrecognized tax benefits in
provision for income taxes in the consolidated statements of income. Both
interest and penalties accrued as of March 31, 2008 and 2009 and interest and
penalties included in provision for income taxes for the years ended March 31,
2008 and 2009 are not material.
Ricoh files income tax returns in Japan and various foreign tax jurisdictions.
In Japan, Ricoh is no longer subject to regular income tax examinations by the
tax authority for fiscal years before 2007. While there has been no specific
indication by the tax authority that Ricoh will be subject to a transfer pricing
examination in the near future, the tax authority could conduct a transfer
pricing examination for fiscal years after 2003. In other major foreign tax
jurisdictions, including the United States and United Kingdom, Ricoh is no
longer subject to income tax examinations by tax authorities for fiscal years
before 2006 with few exceptions.
F-34
10. SHORT=TERM BORROWINGS
Short=term borrowings as of March 31, 2008 and 2009 consist of the following:
Weighted average Thousands of
interest rate Millions of Yen U.S. Dollars
---------------- ---------------------------------------
2008 2009 2008 2009 2009
-----------------------------------------------------------------------------------------------
Borrowings, principally from banks 1.3% 1.0% Yen 5,599 Yen 63,127 $ 637,646
Commercial paper 2.3 0.5 67,070 121,083 1,223,061
Medium-Term Notes 3.5 -- 3,114 -- --
-----------------------------------------------------------------------------------------------
Yen 75,784 Yen 184,210 $1,860,707
===============================================================================================
These short=term borrowings included borrowings, principally from banks,
commercial paper and medium=term notes denominated in foreign currencies
amounting to Yen 41,413 million and Yen 63,474 million ($641,152 thousand) as of
March 31, 2008 and 2009, respectively.
The Company and certain of its subsidiaries enter into the contracts with
financial institutions regarding lines of credit and overdrawing. Those same
financial institutions hold the issuing programs of commercial paper and
medium=term notes. Ricoh had aggregate lines of credit of Yen 784,645 million
and Yen 664,314 million ($6,710,242 thousand) as of March 31, 2008 and 2009,
respectively. Unused lines of credit amounted to Yen 675,959 million and Yen
483,901 million ($4,887,889 thousand) as of March 31, 2008 and 2009,
respectively, of which Yen 232,023 million and Yen 158,386 million ($1,599,859
thousand) related to commercial paper and Yen 101,957 million and Yen 98,230
million ($992,222 thousand) related to medium=term notes programs at prevailing
interest rates and the unused portion is available for immediate borrowings.
F-35
11. LONG-TERM INDEBTEDNESS
Long-term indebtedness as of March 31, 2008 and 2009 consists of the followings:
Thousands of
Millions of Yen U.S. Dollars
------------------------- ------------
2008 2009 2009
-------------------------------------------------------------------------------------------------------
Bonds:
1.34%, straight bonds, payable in yen, due March 2009 Yen 25,000 Yen -- $ --
1.10%, straight bonds, payable in yen, due March 2012 -- 20,000 202,020
1.39%, straight bonds, payable in yen, due March 2014 -- 50,000 505,051
2.08%, straight bonds, payable in yen, due March 2019 -- 15,000 151,515
2.10%, straight bonds, payable in yen, due October 2009
issued by a consolidated subsidiary 10,000 10,000 101,010
1.10%, straight bonds, payable in yen, due March 2010
issued by a consolidated subsidiary 10,000 10,000 101,010
1.30%, straight bonds, payable in yen, due December 2010
issued by a consolidated subsidiary 9,999 9,999 101,000
6.75%, straight bonds, payable in yen, due December
2025 issued by a consolidated subsidiary -- 25,149 254,030
7.30%, straight bonds, payable in yen, due November
2027 issued by a consolidated subsidiary -- 9,058 91,495
Euro Yen Zero Coupon Convertible Bonds,
due December 2011 55,202 55,147 557,040
-------------------------------------------------------------------------------------------------------
Total bonds 110,201 204,353 2,064,171
-------------------------------------------------------------------------------------------------------
Unsecured loans-
Banks and insurance companies,
1.30% weighted average, due through 2017 196,353 375,494 3,792,869
-------------------------------------------------------------------------------------------------------
Secured loans-
Banks, insurance companies and other financial
institution, 4.73% weighted average, due through 2013 465 13,167 133,000
-------------------------------------------------------------------------------------------------------
Capital lease obligations (see Note 2(j)) 1,177 1,758 17,758
-------------------------------------------------------------------------------------------------------
Total 308,196 594,772 6,007,798
SFAS 133 fair value adjustment 392 213 2,152
Less - Current maturities included in current liabilities (82,658) (85,582) (864,465)
-------------------------------------------------------------------------------------------------------
Yen 225,930 Yen 509,403 $5,145,485
=======================================================================================================
Secured loans are collateralized by land, buildings and lease receivables with a
book value of Yen 14,664 million ($148,121 thousand) as of March 31, 2009.
All bonds outstanding as of March 31, 2009 are redeemable at the option of Ricoh
at 100% of the principal amounts under certain conditions as provided in the
applicable agreements.
Bonds are subject to certain covenants such as restrictions on certain
additional secured indebtedness, as defined in the agreements. Ricoh was in
compliance with such covenants as of March 31, 2009.
The Company issued Euro Yen Zero Coupon Convertible Bonds of Yen 55,275 million
in December 2006. Bondholders are able to convert their holdings into common
stock under certain circumstances. As of March 31, 2009, the conversion price
was Yen 2,800 per share and 19,741 thousand shares would have been issued on
conversion of all convertible debt. The conversion price shall be adjusted for
certain events such as a stock split, consolidation of stock or issuance of
stock at less than the current market price of the shares.
As is customary in Japan, substantially all of the bank borrowings are subject
to general agreements with each bank which provide, among other things, that the
banks may request additional security for these loans if there is reasonable and
probable cause and may treat any security furnished to the banks as well as cash
F-36
deposited as security for all present and future indebtedness. Ricoh has never
been requested to submit such additional security with respect to any material
borrowings.
F-37
The aggregate annual maturities of long-term indebtedness subsequent to March
31, 2009 are as follows:
Thousands of
Years ending March 31 Millions of Yen U.S. Dollars
------------------------------------------------------
2010 Yen 85,505 $ 863,687
2011 98,556 995,515
2012 146,242 1,477,192
2013 56,933 575,081
2014 158,304 1,599,030
2015 and thereafter 49,232 497,293
------------------------------------------------------
Total Yen 594,772 $6,007,798
======================================================
12. PENSION AND RETIREMENT ALLOWANCE PLANS
The Company and certain of its subsidiaries have various contributory and
noncontributory employees' pension fund plans in trust 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.
Contributions to these plans have been made to provide future pension payments
in conformity with an actuarial calculation determined by the current basic rate
of pay.
On March 31, 2007, Ricoh adopted the recognition and disclosure provisions of
SFAS No.158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans," for the measurement of pension liabilities. Upon
adoption, Ricoh recognized the funded status (i.e., the difference between the
fair value of plan assets and the projected benefit obligations) of its pension
fund plans in the consolidated balance sheets as of March 31, 2007, with a
corresponding adjustment in initially applying SFAS 158 to accumulated other
comprehensive income, net of tax. The adjustment to accumulated other
comprehensive income at adoption represents the unrecognized net actuarial loss,
unrecognized prior service cost, and unrecognized transition obligations, all of
which were previously netted against the plans' funded status in the
consolidated balance sheets pursuant to the provisions of SFAS 87. These amounts
will be subsequently recognized as net periodic benefit cost pursuant to Ricoh's
historical accounting policy for amortizing such amounts. Furthermore, actuarial
gains and losses that arise in subsequent periods and are not recognized as net
periodic benefit cost in the same periods will be recognized as a component of
other comprehensive income (loss). Those amounts will be subsequently recognized
as a component of total net periodic benefit cost on the same basis as the
amounts recognized in accumulated other comprehensive income (loss) at adoption
of SFAS 158.
For periods prior to the year ended March 31, 2009, Ricoh used a December 31
measurement date for determining benefit obligations and fair value of plan
assets. Ricoh adopted the measurement date provisions of SFAS No. 158 as of
March 31, 2009. The adoption of the measurement date provisions resulted in
adjustments to decrease retained earnings by Yen 643 million, and increase other
comprehensive loss by Yen 6 million as of April 1, 2008.
F-38
The changes in the benefit obligations and plan assets of the pension plans for
the years ended March 31, 2008 and 2009 are as follows:
Thousands of
Millions of Yen U.S. Dollars
-------------------------- ------------
2008 2009 2009
--------------------------------------------------------------------------------------------------------
Change in benefit obligations:
Benefit obligations at beginning of year Yen 397,971 Yen 388,404 $ 3,923,273
Adjustment to apply measurement date provisions of SFAS
No.158 -- 2,030 20,505
Service cost 15,592 14,700 148,485
Interest cost 12,335 13,427 135,626
Plan participants' contributions 780 683 6,899
Actuarial loss (7,394) (4,814) (48,626)
Settlement (23) (217) (2,192)
Benefits paid (19,512) (22,267) (224,919)
Foreign exchange impact (13,563) (20,892) (211,030)
Benefit obligations assumed in connection with business
acquisition 2,218 51,767 522,898
--------------------------------------------------------------------------------------------------------
Benefit obligations at end of year Yen 388,404 Yen 422,821 $ 4,270,919
--------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year Yen 320,580 Yen 291,425 $ 2,943,687
Actual return on plan assets (20,781) (53,592) (541,333)
Employer contribution 14,505 14,753 149,020
Plan participants' contributions 780 683 6,899
Partial withdrawal of plan assets -- (759) (7,667)
Settlement (9) -- --
Benefits paid (12,447) (14,864) (150,141)
Foreign exchange impact (13,081) (19,759) (199,586)
Plan assets acquired in connection with business
acquisition 1,878 51,662 521,838
--------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year Yen 291,425 Yen 269,549 $ 2,722,717
--------------------------------------------------------------------------------------------------------
Funded status Yen (96,979) Yen (153,272) $(1,548,202)
========================================================================================================
Net amounts recognized in the consolidated balance sheet as of March 31, 2008
and 2009 consist of:
Thousands of
Millions of Yen U.S. Dollars
-------------------------- ------------
2008 2009 2009
--------------------------------------------------------------------------------------------------------
Lease deposits and other Yen 9,085 Yen 10,152 $ 102,545
Accrued expenses and other (7,441) (8,311) (83,949)
Accrued pension and severance costs (98,623) (155,113) (1,566,798)
--------------------------------------------------------------------------------------------------------
Net amount recognized Yen (96,979) Yen (153,272) $(1,548,202)
========================================================================================================
F-39
Net amounts recognized in accumulated other comprehensive loss as of March 31,
2008 and 2009 consist of:
Thousands of
Millions of Yen U.S. Dollars
------------------------- ------------
2008 2009 2009
--------------------------------------------------------------------------------
Net actuarial loss Yen 82,328 Yen 133,922 $1,352,747
Prior service credit (46,895) (42,103) (425,283)
--------------------------------------------------------------------------------
Net amount recognized Yen 35,433 Yen 91,819 $ 927,465
================================================================================
The accumulated benefit obligations are as follows:
Thousands of
Millions of Yen U.S. Dollars
------------------------- ------------
2008 2009 2009
--------------------------------------------------------------------------------
Accumulated benefit obligations Yen 371,460 Yen 414,537 $4,187,242
Weighted-average assumptions used to determine benefit obligations as of March
31, 2008 and 2009 are as follows:
Domestic plans Foreign plans
-------------- -------------
2008 2009 2008 2009
--------------------------------------------------------------------------------
Discount rate 2.2% 1.9% 5.1% 6.9%
Rate of compensation increase 6.5% 6.5% 3.7% 3.9%
Weighted-average assumptions used to determine the net periodic benefit cost for
the years ended March 31, 2007, 2008 and 2009 are as follows:
Domestic plans Foreign plans
------------------ ------------------
2007 2008 2009 2007 2008 2009
--------------------------------------------------------------------------------
Discount rate 2.2% 2.2% 2.2% 4.3% 4.8% 5.7%
Rate of compensation increase 6.5% 6.5% 6.5% 3.5% 3.7% 3.8%
Expected long-term return on plan assets 1.7% 1.6% 1.4% 6.6% 6.2% 6.0%
The net periodic benefit costs of the pension plans for the years ended March
31, 2007, 2008 and 2009 consist of the following components:
Thousands of
Millions of Yen U.S. Dollars
-------------------------------------- ------------
2007 2008 2009 2009
--------------------------------------------------------------------------------
Service cost Yen 15,687 Yen 15,592 Yen 14,700 $ 148,485
Interest cost 11,121 12,335 13,427 135,626
Expected return on plan
assets (9,186) (10,234) (10,158) (102,606)
Net amortization (1,420) (982) 1,015 10,253
Settlement benefit (18) -- (87) (879)
--------------------------------------------------------------------------------
Total net periodic
pension cost Yen 16,184 Yen 16,711 Yen 18,897 $ 190,879
================================================================================
F-40
The projected benefit obligations and the fair value of plan assets for the
pension plans with projected benefit obligations in excess of plan assets, and
the accumulated benefit obligations and the fair value of plan assets for the
pension plans with accumulated benefit obligations in excess of plan assets are
as follows:
Thousands of
Millions of Yen U.S. Dollars
----------------------------------------
2008 2009 2009
-------------------------------------------------------------------------------------
Plans with projected benefit obligations
in excess of plan assets:
Projected benefit obligations Yen 379,662 Yen 418,332 $4,225,576
Fair value of plan assets 284,268 265,816 2,685,010
Plans with accumulated benefit obligations
in excess of plan assets:
Accumulated benefit obligations Yen 362,827 Yen 408,348 $4,124,727
Fair value of plan assets 279,585 262,501 2,651,525
Ricoh's benefit plan asset allocation as of March 31, 2008 and 2009 are as
follows:
2008 2009
---------------------------------------------------------
Equity securities 45.7% 33.6%
Debt securities 20.9% 40.4%
Life insurance company general accounts 15.1% 17.5%
Other 18.3% 8.5%
---------------------------------------------------------
Total 100.0% 100.0%
=========================================================
Common stock and bonds of the Company and certain of its domestic subsidiaries
included in plan assets were immaterial at March 31, 2008 and 2009.
Ricoh's investment policies and strategies for the pension benefits do not use
target allocations for the individual asset categories. Ricoh's investment goals
are to maximize returns subject to specific risk management policies. Its risk
management policies permit investments in mutual funds and debt and equity
securities and prohibit speculative investment in derivative financial
instruments. Ricoh addresses diversification by the use of mutual fund
investments whose underlying investments are in domestic and international fixed
income securities and domestic and international equity securities. These mutual
funds are readily marketable and can be sold to fund benefit payment obligations
as they become payable.
Ricoh expects to contribute Yen 15,760 million to its pension plans for the year
ending March 31, 2010. The estimated net actuarial loss and prior service credit
for Ricoh's pension fund plans that will be
amortized from accumulated other comprehensive income (loss) into net periodic
pension cost over the next year ending March, 2010 are Yen 9,732 million and Yen
(4,078) million, respectively.
F-41
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:
Thousands of
Years ending March 31 Millions of Yen U.S. Dollars
------------------------------------------------------
2010 Yen 23,803 $ 240,434
2011 21,518 217,354
2012 21,866 220,869
2013 23,255 234,899
2014 21,837 220,576
2015- 2019 127,939 1,292,313
Ricoh and certain subsidiaries have defined contribution plans. The cost of
defined contribution plans for the years ended March 31, 2007, 2008 and 2009
were Yen 3,795 million, Yen 5,108 million and Yen 6,768 million ($68,364
thousand), respectively.
13. SHAREHOLDERS' INVESTMENT
The Corporation Law of Japan provides that an amount equal to 10% of cash
dividends and other distributions from retained earnings paid by the Company and
its domestic subsidiaries be appropriated as additional paid-in capital or legal
reserve. No further appropriation is required when the total amount of the
additional paid-in capital and legal reserve equals to 25% of common stock.
Certain foreign subsidiaries are also required to appropriate their earnings to
legal reserves under the laws of the respective countries. Legal reserves
included in retained earnings as of March 31, 2008 and 2009 were Yen 17,462
million and Yen 18,345 million ($185,303 thousand), respectively, and are
restricted from being used as dividends.
The Corporation Law of Japan requires a company to obtain the approval of
shareholders for transferring on amount between common stock and additional
paid-in capital. The Law also permits a company to transfer an amount of common
stock or additional paid-in capital to retained earnings in principle upon
approval of shareholders.
Cash dividends are approved by the shareholders after the end of each fiscal
period or are declared by the Board of Directors after the end of each interim
six-month period. Such dividends are payable to shareholders of record at the
end of each such fiscal or interim six-month period. At the Ordinary General
Meeting of Shareholders held on June 25, 2009, the shareholders approved the
declaration of a cash dividend (Yen 15 per share) on the common stock totaling
Yen 10,885 million ($109,949 thousand), which would be paid to shareholders of
record as of March 31, 2009. The declaration of this dividend has not been
reflected in the consolidated financial statements as of March 31, 2009.
The amount of retained earnings legally available for dividend distribution is
that recorded in the Company's non-consolidated books and amounted to Yen
430,717 million ($4,350,677 thousand) as of March 31, 2009.
F-42
14. OTHER COMPREHENSIVE INCOME (LOSS)
Tax effects allocated to each component of other comprehensive income (loss) are
as follows:
Millions of Yen
---------------------------------------
Before-tax Tax Net-of-tax
amount expense amount
---------------------------------------------------------------------------------------------------------
2007:
Foreign currency translation adjustments Yen 24,724 Yen 50 Yen 24,774
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the year 197 (65) 132
Less - Reclassification adjustment for (gains) losses
realized in net income (99) 40 (59)
Net unrealized gains (losses) 98 (25) 73
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) arising during the year (749) 307 (442)
Less - Reclassification adjustment for (gains) losses
realized in net income 436 (179) 257
Net unrealized gains (losses) (313) 128 (185)
Minimum pension liability adjustments 1,663 (693) 970
---------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) Yen 26,172 Yen (540) Yen 25,632
---------------------------------------------------------------------------------------------------------
2008:
Foreign currency translation adjustments Yen (38,478) Yen (78) Yen (38,556)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the year (12,147) 4,709 (7,438)
Less - Reclassification adjustment for (gains) losses
realized in net income (417) 170 (247)
Net unrealized gains (losses) (12,564) 4,879 (7,685)
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) arising during the year (767) 311 (456)
Less - Reclassification adjustment for (gains) losses
realized in net income 128 (52) 76
Net unrealized gains (losses) (639) 259 (380)
Pension liability adjustments:
Unrealized holding gains (losses) arising during the year (20,361) 9,556 (10,805)
Less - Reclassification adjustment for (gains) losses
realized in net income (1,035) 458 (577)
Net unrealized gains (losses) (21,396) 10,014 (11,382)
---------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) Yen (73,077) Yen 15,074 Yen (58,003)
---------------------------------------------------------------------------------------------------------
2009:
Foreign currency translation adjustments Yen (61,189) Yen 19 Yen (61,170)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the year (25,601) 10,440 (15,161)
Less - Reclassification adjustment for (gains) losses
realized in net income 26,499 (10,806) 15,693
Net unrealized gains (losses) 898 (366) 532
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) arising during the year (655) 250 (405)
Less - Reclassification adjustment for (gains) losses
realized in net income 686 (246) 440
Net unrealized gains (losses) 31 4 35
Pension liability adjustments:
Unrealized holding gains (losses) arising during the year (57,401) 23,293 (34,108)
Less - Reclassification adjustment for (gains) losses
realized in net income 1,015 (414) 601
Net unrealized gains (losses) (56,386) 22,879 (33,507)
---------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) Yen (116,646) Yen 22,536 Yen (94,110)
---------------------------------------------------------------------------------------------------------
F-43
Thousands of U.S. Dollars
---------------------------------------
Before-tax Tax Net-of-tax
amount expense amount
---------------------------------------------------------------------------------------------------------
2009
Foreign currency translation adjustments $ (618,071) $ 192 $ (617,879)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the year (258,596) 105,455 (153,141)
Less - Reclassification adjustment for (gains) losses
realized in net income 267,667 (109,152) 158,515
Net unrealized gains (losses) 9,071 (3,697) 5,374
Unrealized gains (losses) on derivatives:
Unrealized holding gains (losses) arising during the year (6,616) 2,525 (4,091)
Less - Reclassification adjustment for (gains) losses
realized in net income 6,929 (2,485) 4,444
Net unrealized gains (losses) 313 40 3534
Pension liability adjustments:
Unrealized holding gains (losses) arising during the year (579,808) 235,283 (344,525)
Less - Reclassification adjustment for (gains) losses
realized in net income 10,253 (4,182) 6,071
Net unrealized gains (losses) (569,555) 231,101 (338,454)
---------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) $(1,178,242) $ 227,636 $ (950,606)
---------------------------------------------------------------------------------------------------------
For fiscal year 2009, pension liability adjustments included Yen (57,401)
million ($(579,808) thousand) of gains (losses) arising during the year, Yen
(5,807) million ($(58,657) thousand) of amortization of gains (losses) and Yen
4,792 million ($48,404 thousand) of amortization of prior service cost - net of
deferred taxes of Yen 23,293 million ($235,283 thousand), Yen 2,367 million
($23,909 thousand) and Yen (1,953) million ($(19,727) thousand), respectively.
F-44
Changes in accumulated other comprehensive income (loss) are as follows:
Thousands of
Millions of Yen U.S. Dollars
--------------------------------------- ------------
2007 2008 2009 2009
------------------------------------------------------------------------------------------------------------
Foreign currency translation adjustments:
Beginning balance Yen 2,657 Yen 27,431 Yen (11,125) $ (112,374)
Change during the year 24,774 (38,556) (61,170) (617,879)
------------------------------------------------------------------------------------------------------------
Ending balance Yen 27,431 Yen (11,125) Yen (72,295) $ (730,253)
------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities:
Beginning balance Yen 8,928 Yen 9,001 Yen 1,316 $ 13,293
Change during the year 73 (7,685) 532 5,374
------------------------------------------------------------------------------------------------------------
Ending balance Yen 9,001 Yen 1,316 Yen 1,848 $ 18,667
------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on derivatives:
Beginning balance Yen 157 Yen (28) Yen (408) $ (4,121)
Change during the year (185) (380) 35 354
------------------------------------------------------------------------------------------------------------
Ending balance Yen (28) Yen (408) Yen (373) $ (3,767)
------------------------------------------------------------------------------------------------------------
Minimum pension liability adjustments:
Beginning balance Yen (7,643) Yen -- Yen -- $ --
Change during the year 970 -- -- --
Adjustment to initially apply SFAS 158 6,673 -- -- --
------------------------------------------------------------------------------------------------------------
Ending balance Yen -- Yen -- Yen -- $ --
------------------------------------------------------------------------------------------------------------
Pension liability adjustments:
Beginning balance Yen -- Yen (9,406) Yen (20,788) $ (209,980)
Adjustment to apply measurement date
provisions of SAFS No.158 -- -- (6) (61)
------------------------------------------------------
Adjusted beginning balance -- (9,406) (20,794) (210,041)
Change during the year -- (11,382) (33,507) (338,455)
Adjustment to initially apply SFAS 158 (9,406) -- -- --
------------------------------------------------------------------------------------------------------------
Ending balance Yen (9,406) Yen (20,788) Yen (54,301) $ (548,496)
------------------------------------------------------------------------------------------------------------
Total accumulated other comprehensive income (loss)
Beginning balance Yen 4,099 Yen 26,998 Yen (31,005) $ (313,182)
Adjustment to apply measurement date
provisions of SAFS No.158 -- -- (6) (61)
------------------------------------------------------
Adjusted beginning balance 4,099 26,998 (31,011) (313,243)
Change during the year 25,632 (58,003) (94,110) (950,606)
Adjustment to initially apply SFAS 158 (2,733) -- -- --
------------------------------------------------------------------------------------------------------------
Ending balance Yen 26,998 Yen (31,005) Yen (125,121) $(1,263,849)
------------------------------------------------------------------------------------------------------------
F-45
15. PER SHARE DATA
Dividends per share shown in the consolidated statements of income are computed
based on dividends paid for the year.
A reconciliation of the numerator and the denominators of the basic and diluted
per share computations for net income are as follows:
Thousands of shares
---------------------------
2007 2008 2009
----------------------------------------------------------------------------
Weighted average number of shares of common
stock outstanding 729,745 729,010 723,925
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds -
Due December 2011 5,758 19,741 19,741
----------------------------------------------------------------------------
Diluted shares of common stock outstanding 735,503 748,752 743,666
============================================================================
Thousands of
Millions of Yen U.S. Dollars
------------------------------------- ------------
2007 2008 2009 2009
------------------------------------------------------------------------------------------------------
Income from continuing operations Yen 106,224 Yen 106,463 Yen 6,530 $65,960
Income from discontinued operations, net of tax 5,500 -- -- --
------------------------------------------------------------------------------------------------------
Net income 111,724 106,463 6,530 65,960
------------------------------------------------------------------------------------------------------
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds -
Due December 2011 (8) (25) (25) (253)
------------------------------------------------------------------------------------------------------
Diluted net income Yen 111,716 Yen 106,438 Yen 6,505 $65,707
======================================================================================================
Yen U.S. Dollars
--------------------------------- ------------
2007 2008 2009 2009
----------------------------------------------------------------------------------------------
Earnings per share:
Basic:
Income from continuing operations Yen 145.56 Yen 146.04 Yen 9.02 $0.09
Income from discontinued operations,
net of tax 7.54 -- -- --
----------------------------------------------------------------------------------------------
Net income 153.10 146.04 9.02 0.09
----------------------------------------------------------------------------------------------
Diluted:
Income from continuing operations Yen 144.41 Yen 142.15 Yen 8.75 $0.09
Income from discontinued operations,
net of tax 7.48 -- -- --
----------------------------------------------------------------------------------------------
Net income 151.89 142.15 8.75 0.09
==============================================================================================
F-46
16. 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 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 those 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 on 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 years ended March 31, 2007, 2008 and 2009 as the
critical terms of the interest rate swap match the terms of the hedged debt
obligations.
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 years ended March 31, 2007, 2008 and 2009 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 expenses during the next 12
months approximately Yen 116 million ($1,172 thousand) of the balance of
accumulated other comprehensive income as of March 31, 2009.
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 on the consolidated
statements of income.
F-47
Contract amounts of derivative instruments at March 31, 2009 are shown in the
following tables:
Thousands of
March 31, 2009 Millions of Yen U.S. Dollars
--------------------------------------------------------------
Interest rate swap agreements Yen 298,665 $3,016,818
Foreign currency contracts 110,196 1,113,091
Foreign currency options 30,744 310,545
The location and fair value amounts of derivatives in consolidated balance sheet
are shown in the following tables:
Derivatives designated as hedging instruments under SFAS No. 133
Thousands of Thousands of
Millions of Yen U.S. Dollars Millions of Yen U.S. Dollars
----------------------------- ------------ -------------------------- ------------
Current Long-term
-------------------------------------------- -----------------------------------------
Balance Sheet Balance Sheet
Location Fair Value Fair Value Location Fair Value Fair Value
----------------------------------------------------------------------------------------------------------------
Asset Derivatives
Interest rate swap Deferred income Lease deposits
agreements taxes and other Yen 77 $778 and other Yen 139 $1,404
Liability Derivatives
Interest rate swap Accrued expenses Deferred income
agreements and other Yen 19 $192 taxes and other Yen 795 $8,030
Derivatives not designated as hedging instruments under SFAS No. 133
Thousands of Thousands of
Millions of Yen U.S. Dollars Millions of Yen U.S. Dollars
----------------------------- ------------ -------------------------- ------------
Current Long-term
-------------------------------------------- -----------------------------------------
Balance Sheet Balance Sheet
Location Fair Value Fair Value Location Fair Value Fair Value
---------------------------------------------------------------------------------------------------------------------------
Asset Derivatives
Interest rate swap agreements Deferred income Yen 16 $ 162 Yen -- $ --
Foreign currency contracts taxes and other 1,102 11,131 Lease deposits -- --
Foreign currency options 25 253 and other -- --
---------------------------------------------------------------------------------------------------------------------------
Total Yen 1,143 $11,546 Yen -- --
---------------------------------------------------------------------------------------------------------------------------
Liability Derivatives
Interest rate swap agreements Accrued expenses Yen 54 $ 545 Deferred income Yen 395 $ 3,990
Foreign currency contracts and other 1,826 18,444 taxes and other 2,270 22,929
Foreign currency options 1,468 14,828 -- --
---------------------------------------------------------------------------------------------------------------------------
Total Yen 3,348 $33,817 Yen 2,665 $26,919
===========================================================================================================================
Thousands of
Millions of Yen U.S. Dollars
--------------- ------------
Fair Value Fair Value
------------------------------------------------------------
Total Asset Derivatives Yen 1,359 $13,727
----------------------- --------- -------
Total Liability Derivatives Yen 6,827 $68,960
--------------------------- --------- -------
F-48
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of income for the 4th quarter of fiscal year 2009 are
shown in the following tables:
Derivatives designated as hedging instruments under SFAS No. 133
Millions of Yen
---------------------------------------------------------------------------------
Gain or (Loss)
Recognized in
OCI on Derivative Gain or (Loss) Reclassified from Gain or (Loss) Recognized in
(Effective Accumulated OCI Into Income Income on Derivative
Portion) (Effective Portion) (Ineffective Portion)
---------------------------------------------------------------------------------
Amount Location Amount Location Amount
----------------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements Yen (165) Interest expense Yen (13) -- Yen --
Thousands of U.S. Dollars
---------------------------------------------------------------------------------
Gain or (Loss)
Recognized in
OCI on Derivative Gain or (Loss) Reclassified from Gain or (Loss) Recognized in
(Effective Accumulated OCI Into Income Income on Derivative
Portion) (Effective Portion) (Ineffective Portion)
---------------------------------------------------------------------------------
Amount Location Amount Location Amount
----------------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements $(1,667) Interest expense $(131) -- $--
Millions of Yen
--------------------------------------------------------
Gain or (Loss) Recognized Gain or (Loss) on Hedged Item
in Income on Derivative Recognized in Income
--------------------------------------------------------
Location Amount Location Amount
---------------------------------------------------------------------------------------
Fair value hedge
Interest rate swap agreements Interest income Yen 44 Interest expense Yen (92)
Thousands of U.S. Dollars
----------------------------------------------------
Gain or (Loss) Recognized Gain or (Loss) on Hedged
in Income on Derivative Item Recognized in Income
----------------------------------------------------
Location Amount Location Amount
-----------------------------------------------------------------------------------
Fair value hedge
Interest rate swap agreements Interest income $444 Interest expense $(929)
Derivatives not designated as hedging instruments under SFAS No. 133
Thousands of
Millions of Yen U.S. Dollars
-------------------------- ------------
Location Amount Amount
-----------------------------------------------------------------------
Interest rate swap agreements Other income Yen 291 $ 2,939
Foreign currency contracts Other expenses (3,072) (31,030)
Foreign currency options Other expenses (570) (5,758)
-----------------------------------------------------------------------
Total Yen (3,351) $(33,849)
-----------------------------------------------------------------------
F-49
17. COMMITMENTS AND CONTINGENT LIABILITIES
As of March 31, 2009, Ricoh had outstanding contractual commitments for
acquisition or construction of property, plant and equipment and other assets
aggregating Yen 36,485 million ($368,535 thousand).
As of March 31, 2009, Ricoh was also contingently liable for certain guarantees
including employees housing loans of Yen 318 million ($3,212 thousand).
Ricoh made rental payments totaling Yen 40,722 million, Yen 45,379 million and
Yen 54,347 million ($548,960 thousand) for the years ended March 31, 2007, 2008
and 2009, respectively, under cancelable and non-cancelable operating lease
agreements for office space and machinery and equipment.
The minimum rental payments required under operating lease that have lease terms
in excess of one year as of March 31, 2009 are as follows:
Thousands of
Years ending March 31 Millions of Yen U.S. Dollars
----------------------------------------------------
2010 Yen 24,208 $ 244,525
2011 20,894 211,051
2012 17,010 171,818
2013 13,916 140,566
2014 10,016 101,172
2015 and thereafter 13,399 135,343
----------------------------------------------------
Total Yen 99,443 $1,004,475
----------------------------------------------------
As of March 31, 2009, 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.
F-50
18. 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 is
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 interest 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
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 is
estimated by obtaining quotes from brokers.
The estimated fair value of the financial instruments as of March 31, 2008 and
2009 is summarized as follows:
Millions of Yen Thousands of U.S. Dollars
--------------------------------------------------------- -------------------------
2008 2009 2009
--------------------------- --------------------------- -------------------------
Carrying Estimated Carrying Estimated Carrying Estimated
amount fair value amount fair value amount fair value
--------------------------------------------------------------------------------------------------------------------------
Marketable securities and
Investment securities Yen 71,244 Yen 71,244 Yen 48,540 Yen 48,540 $ 490,303 $ 490,303
Installment loans 54,863 54,852 60,781 60,754 613,949 613,677
Long-term indebtedness (225,930) (221,792) (509,403) (500,774) (5,145,485) (5,058,323)
Interest rate swap agreements, net (594) (594) (1,031) (1,031) (10,414) (10,414)
Foreign currency contracts, net 1,349 1,349 (2,994) (2,994) (30,242) (30,242)
Foreign currency options, net 100 100 (1,443) (1,443) (14,576) (14,576)
F-51
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.
19. FAIR VALUE MEASUREMENTS
In September 2006, the FASB issued SFAS 157, which defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. SFAS 157 applies under other accounting pronouncements
that require or permit fair value measurements, where fair value is the relevant
measurement attribute. SFAS 157 does not require any new fair value
measurements. SFAS 157 is effective for fiscal years beginning after November
15, 2007, and was adopted by Ricoh in the fiscal year beginning April 1, 2008.
Pursuant to the provisions of FSP 157-2, Ricoh have decided to defer adoption of
SFAS 157 for one year for nonfinancial assets and nonfinancial liabilities that
are recognized or disclosed at fair value in the financial statements on a
nonrecurring basis.
SFAS 157 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. SFAS 157 establishes a three-level fair
value hierarchy that prioritizes the inputs used to measure fair value. The
three levels of inputs used to measure fair value are as follows:
Level 1 - Inputs are quoted prices in active markets for identical assets or
liabilities.
Level 2 - Inputs are quoted prices for similar assets or liabilities in an
active market, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than quoted
prices that are observable and market-corroborated inputs which are
derived principally from or corroborated by observable market data.
Level 3 - Inputs are derived from valuation techniques in which one or more
significant inputs or value drivers are unobservable.
The following table presents the fair-value hierarchy levels of Ricoh's assets
and liabilities that are measured at fair value on a recurring basis as of March
31, 2009.
Millions of Yen
-------------------------------------
March 31, 2009
-------------------------------------
Level 1 Level 2 Level 3 Total
------------------------------------------------------------------------------------
Assets:
Trading and Available-for-sale securities 45,761 -- -- 45,761
Derivative instruments -- 1,359 -- 1,359
Other investments -- -- 4,293 4,293
------------------------------------------------------------------------------------
Total assets 45,761 1,359 4,293 51,413
====================================================================================
Liabilities:
Derivatives instruments -- 6,827 -- 6,827
------------------------------------------------------------------------------------
Total liabilities -- 6,827 -- 6,827
====================================================================================
F-52
Thousands of Dollars
-------------------------------------
March 31, 2009
-------------------------------------
Level 1 Level 2 Level 3 Total
------------------------------------------------------------------------------------
Assets:
Trading and Available-for-sale securities 462,232 -- -- 462,232
Derivative instruments -- 13,727 -- 13,727
Other investments -- -- 43,364 43,364
------------------------------------------------------------------------------------
Total assets 462,232 13,727 43,364 519,323
====================================================================================
Liabilities:
Derivatives instruments -- 68,960 -- 68,960
------------------------------------------------------------------------------------
Total liabilities -- 68,960 -- 68,960
====================================================================================
Trading and Available-for-sale securities
Trading and Available-for-sale securities classified Level 1 in the fair value
hierarchy contains marketable securities and bonds. Marketable securities and
bonds are valued using a market approach based on the quoted market prices of
identical instruments in active markets.
Derivative instruments
Ricoh uses foreign exchange contracts, foreign currency options and interest
rate swap agreements to manage exposure to the variability of cash flow. These
derivative instruments are classified as Level 2 in the fair value hierarchy,
since they are valued using observable market data such as LIBOR--based yield
curves.
Other investments
Other investments classified as Level 3 in the fair value hierarchy represent
the retained interests in securitizations of finance lease receivables in which
Ricoh valued using cash flows discounted by an estimated interest rate
reflecting underlying risks. The following table presents a reconciliation of
activity for such retained interests on a net basis.
Millions of yen Thousands of Dollars
--------------- --------------------
Other investments 2009 2009
--------------------------------------------------------------------------------------------
Balance at beginning of period 5,887 59,465
Total gains or losses (realized and unrealized)
Included in net income -- --
Included in other comprehensive income (loss) -- --
Sales, collections and repurchases, net (1,594) (16,101)
--------------------------------------------------------------------------------------------
Balance at end of period 4,293 43,364
============================================================================================
20. 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 2.
Ricoh's operating segments are comprised of Imaging & Solutions, including
copiers and related supplies, communications and information systems, Industrial
Products, including thermal media and semiconductors, and Other, including
digital cameras and so on.
F-53
The following tables present certain information regarding Ricoh's operating
segments and operations by geographic areas for the years ended March 31, 2007,
2008 and 2009. During the year ended March 31, 2007, a subsidiary of the Company
sold its content distribution business. As a result of such sale, sales and
operating income of such business were reclassified as a discontinued operation
and was excluded from the segment data for the years ended March 31, 2007.
F-54
(a) OPERATING SEGMENT INFORMATION
Thousands of
Millions of Yen U.S. Dollars
---------------------------------------------------------
2007 2008 2009 2009
----------------------------------------------------------------------------------------------------
Sales:
Imaging & Solutions Yen 1,774,467 Yen 1,909,573 Yen 1,833,098 $18,516,141
Industrial Products 138,112 148,883 119,671 1,208,798
Other 161,071 166,076 143,048 1,444,929
Intersegment transaction (4,725) (4,543) (4,121) (41,626)
----------------------------------------------------------------------------------------------------
Consolidated Yen 2,068,925 Yen 2,219,989 Yen 2,091,696 $21,128,242
----------------------------------------------------------------------------------------------------
Operating expenses:
Imaging & Solutions Yen 1,549,156 Yen 1,674,940 Yen 1,687,732 $17,047,798
Industrial Products 135,164 144,708 124,597 1,258,555
Other 158,868 163,529 142,690 1,441,313
Intersegment transaction (4,727) (4,545) (4,128) (41,697)
Unallocated expense 56,084 59,851 66,269 669,384
----------------------------------------------------------------------------------------------------
Consolidated Yen 1,894,545 Yen 2,038,483 Yen 2,017,160 $20,375,353
----------------------------------------------------------------------------------------------------
Operating income:
Imaging & Solutions Yen 225,311 Yen 234,633 Yen 145,366 $ 1,468,343
Industrial Products 2,948 4,175 (4,926) (49,757)
Other 2,203 2,547 358 3,616
Elimination and unallocated expense (56,082) (59,849) (66,262) (669,313)
----------------------------------------------------------------------------------------------------
Consolidated Yen 174,380 Yen 181,506 Yen 74,536 $ 752,889
----------------------------------------------------------------------------------------------------
Other income (expenses) Yen 139 Yen (6,837) Yen (43,597) $ (440,374)
----------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes, minority interests
and equity in earnings of affiliates Yen 174,519 Yen 174,669 Yen 30,939 $ 312,515
====================================================================================================
Thousands of
Millions of Yen U.S. Dollars
---------------------------------------------------------
2007 2008 2009 2009
----------------------------------------------------------------------------------------------------
Total assets:
Imaging & Solutions Yen 1,570,757 Yen 1,643,500 Yen 1,870,110 $18,890,000
Industrial Products 93,346 91,635 83,411 842,535
Other 112,255 106,233 97,092 980,727
Elimination (1,327) (1,063) (612) (6,182)
Corporate assets 468,375 374,063 463,494 4,681,758
----------------------------------------------------------------------------------------------------
Consolidated Yen 2,243,406 Yen 2,214,368 Yen 2,513,495 $25,388,838
----------------------------------------------------------------------------------------------------
Expenditure for segment assets:
Imaging & Solutions Yen 72,465 Yen 74,758 Yen 87,658 $ 885,434
Industrial Products 8,580 6,503 4,581 46,273
Other 2,630 2,140 2,776 28,040
Corporate assets 2,125 1,814 1,943 19,626
----------------------------------------------------------------------------------------------------
Consolidated Yen 85,800 Yen 85,215 Yen 96,958 $ 979,373
====================================================================================================
F-55
Thousands of
Millions of Yen U.S. Dollars
------------------------------------ ------------
2007 2008 2009 2009
----------------------------------------------------------------------------
Depreciation:
Imaging & Solutions Yen 62,862 Yen 63,162 Yen 64,356 $650,060
Industrial Products 6,099 5,820 6,131 61,929
Other 2,072 2,128 2,442 24,667
Corporate assets 1,399 1,652 1,957 19,768
----------------------------------------------------------------------------
Consolidated Yen 72,432 Yen 72,762 Yen 74,886 $756,424
============================================================================
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.
(B) GEOGRAPHIC INFORMATION
Sales which are attributed to countries based on location of customers and
long-lived assets by location for the years ended March 31, 2007, 2008 and 2009
are as follows:
Thousands of
Millions of Yen U.S. Dollars
--------------------------------------------- ------------
2007 2008 2009 2009
---------------------------------------------------------------------------------------------
Sales:
Japan Yen 1,002,251 Yen 1,016,034 Yen 938,331 $ 9,478,091
The Americas 426,453 434,799 502,862 5,079,414
Europe 507,158 603,219 523,407 5,286,939
Other 133,063 165,937 127,096 1,283,798
=============================================================================================
Consolidated Yen 2,068,925 Yen 2,219,989 Yen 2,091,696 $21,128,242
---------------------------------------------------------------------------------------------
Property, plant and equipment:
Japan Yen 199,308 Yen 197,290 Yen 204,761 $ 2,068,293
The Americas 18,102 17,552 27,115 273,889
Europe 28,345 20,505 16,830 170,000
Other 18,913 19,286 20,630 208,384
---------------------------------------------------------------------------------------------
Consolidated Yen 264,668 Yen 254,633 Yen 269,336 $ 2,720,566
=============================================================================================
(C) ADDITIONAL INFORMATION
The following information shows net sales and operating income recognized by
geographic origin for the years ended March 31, 2007, 2008 and 2009. 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
Financial Instrument and Exchange Law, which a Japanese public company is
subject to.
F-56
Thousands of
Millions of Yen U.S. Dollars
--------------------------------------------- ------------
2007 2008 2009 2009
-------------------------------------------------------------------------------------------------------
Sales:
Japan
External customers Yen 1,026,663 Yen 1,050,923 Yen 960,658 $ 9,703,616
Intersegment 495,304 484,590 432,538 4,369,071
-------------------------------------------------------------------------------------------------------
Total 1,521,967 1,535,513 1,393,196 14,072,687
-------------------------------------------------------------------------------------------------------
The Americas
External customers 426,009 432,287 502,338 5,074,121
Intersegment 3,253 3,496 4,451 44,959
-------------------------------------------------------------------------------------------------------
Total 429,262 435,783 506,789 5,119,080
-------------------------------------------------------------------------------------------------------
Europe
External customers 508,200 602,224 521,062 5,263,253
Intersegment 3,595 2,585 2,477 25,020
-------------------------------------------------------------------------------------------------------
Total 511,795 604,809 523,539 5,288,273
-------------------------------------------------------------------------------------------------------
Other
External customers 108,053 134,555 107,638 1,087,253
Intersegment 160,990 183,043 158,006 1,596,020
-------------------------------------------------------------------------------------------------------
Total 269,043 317,598 265,644 2,683,273
-------------------------------------------------------------------------------------------------------
Elimination of intersegment sales (663,142) (673,714) (597,472) (6,035,071)
-------------------------------------------------------------------------------------------------------
Consolidated Yen 2,068,925 Yen 2,219,989 Yen 2,091,696 $21,128,242
-------------------------------------------------------------------------------------------------------
Operating expenses:
Japan Yen 1,411,653 Yen 1,427,575 Yen 1,331,638 $13,450,889
The Americas 408,150 433,429 532,734 5,381,151
Europe 478,380 565,736 504,116 5,092,081
Other 251,486 291,141 252,951 2,555,061
-------------------------------------------------------------------------------------------------------
Elimination of intersegment sales (655,124) (679,398) (604,279) (6,103,828)
-------------------------------------------------------------------------------------------------------
Consolidated Yen 1,894,545 Yen 2,038,483 Yen 2,017,160 $20,375,354
-------------------------------------------------------------------------------------------------------
Operating income:
Japan Yen 110,314 Yen 107,938 Yen 61,558 $ 621,798
The Americas 21,112 2,354 (25,945) (262,071)
Europe 33,415 39,073 19,423 196,192
Other 17,557 26,457 12,693 128,212
-------------------------------------------------------------------------------------------------------
Elimination of intersegment profit (8,018) 5,684 6,807 68,758
-------------------------------------------------------------------------------------------------------
Consolidated Yen 174,380 Yen 181,506 Yen 74,536 $ 752,889
-------------------------------------------------------------------------------------------------------
Other expenses income (expenses) Yen 139 Yen (6,837) Yen (43,597) $ (440,374)
-------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes, minority interests
and equity in earnings of affiliates Yen 174,519 Yen 174,669 Yen 30,939 $ 312,515
=======================================================================================================
Total assets:
Japan Yen 1,282,085 Yen 1,272,110 Yen 1,240,775 $12,533,081
The Americas 256,049 310,028 524,511 5,298,091
Europe 314,815 326,824 318,032 3,212,444
Other 101,550 102,451 91,875 928,030
Elimination (179,468) (171,108) (125,192) (1,264,566)
Corporate assets 468,375 374,063 463,494 4,681,758
-------------------------------------------------------------------------------------------------------
Consolidated Yen 2,243,406 Yen 2,214,368 Yen 2,513,495 $25,388,838
=======================================================================================================
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.
F-57
No single customer accounted for 10% or more of the total revenues for - the
periods ended as of March 31, 2007, 2008 and 2009.
21. SUPPLEMENTARY INFORMATION TO THE STATEMENT OF INCOME
The following amounts are charged to selling, general and administrative
expenses for the years ended March 31, 2007, 2008 and 2009:
Thousands of
Millions of Yen U.S. Dollars
--------------------------------------- ------------
2007 2008 2009 2009
---------------------------------------------------------------------------------------
Research and development costs Yen 114,985 Yen 126,033 Yen 124,406 $1,256,626
Advertising costs 14,456 16,700 13,453 135,889
Shipping and handling costs 19,280 23,970 19,914 201,152
=======================================================================================
22. SIGNIFICANT SUBSEQUENT EVENTS
Subsidiary of the Company, Ricoh Leasing Company, Ltd. issued unsecured straight
bonds on April 22, 2009 based on the resolution passed at its Board of
Directors' meeting held on March 27, 2009 to issue corporate bonds.
Unsecured Bonds No. 11 (with Limited Inter-Bond Pari Passu Clause)
(i) Issue amount: Yen 35.0 billion
(ii) Issue price: Full price: Yen 100 per Yen 100 bond
(iii) Payment date: April 22, 2009
(iv) Redemption date: April 22, 2014
(v) Interest rate: 1.473% per annum
(vi) Appropriation of proceeds: To redeem CP (commercial paper)
F-58
Ricoh Company, Ltd. and Consolidated Subsidiaries
SCHEDULE II. - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Three Years Ended March 31, 2009
(Millions of Yen)
Additions
-----------------------
Balance at Charged to Charged to Deduction Balance at
beginning of costs and other from Translation end of
Description period expenses accounts reserves/(2)/ /(3)/ adjustment period
------------------------------------------------------------------------------------------------------------------------------------
For the year ended March 31, 2007:
Allowance for doubtful receivables(1):
Trade receivables Yen 16,031 Yen 716 Yen 2,224 Yen (3,076) Yen 660 Yen 16,555
Finance receivables 16,394 324 -- (3,016) 77 13,779
Deferred tax assets valuation allowance 8,197 2,160 2,483 (1,136) 695 12,399
For the year ended March 31, 2008:
Allowance for doubtful receivables(1)-
Trade receivables 16,555 2,473 -- (1,734) (628) 16,666
Finance receivables 13,779 449 -- (3,542) (151) 10,535
Deferred tax assets valuation allowance 12,399 3,545 -- (4,692) (591) 10,661
For the year ended March 31, 2009:
Allowance for doubtful receivables(1)-
Trade receivables 16,666 7,254 604 (1,451) (1,540) 21,533
Finance receivables 10,535 3,013 638 (2,459) (201) 11,526
Deferred tax assets valuation allowance 10,661 14,041 3,368 (2,414) (1,484) 24,172
Notes:
(1) See Note 2(g) to Consolidated Financial Statements.
(2) Receivables - Write-offs
(3) Deferred tax - Realization of tax benefits
F-59