FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of February 2011
Commission File Number 2 - 68279
RICOH COMPANY, LTD.
-----------------------------------------------
(Translation of Registrant's name into English)
13-1, Ginza 8-Chome, Chuo-ku, Tokyo 104-8222, Japan
---------------------------------------------------
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.)
Form 20-F X Form 40-F __
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): __ )
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): __ )
(Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.)
Yes __ No X
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-__ )
--------------------------------------------------------------------------------
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Ricoh Company, Ltd.
------------------------------
(Registrant)
By: /S/ Zenji Miura
------------------------------
Zenji Miura
Director, Chief Financial Officer
Corporate Executive Vice President
February 10, 2011
--------------------------------------------------------------------------------
RICOH COMPANY, LTD.
Consolidated Financial Statements
For the nine months Ended December 31, 2010
This is an English translation of the Quarterly Securities Report (Shihanki
Hokokusho) for the nine months ended December 31, 2010 pursuant to the Japanese
Financial Instrument and Exchange Law.
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, 2010 and March 31, 2010
Millions of Yen
------------------------------------------------------------------------------------------------
ASSETS December 31, 2010 March 31, 2010
------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents 147,816 242,165
Time deposits 1,744 1,723
Trade receivables:
Notes 46,873 45,277
Accounts 403,101 443,089
Less- Allowance for doubtful receivables (16,682) (16,896)
Current maturities of long-term finance receivables, net 198,892 196,144
Inventories:
Finished goods 95,443 95,436
Work in process and raw materials 87,828 73,815
Deferred income taxes and other 61,207 63,859
------------------------------------------------------------------------------------------------
Total current assets 1,026,222 1,144,612
------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land 44,371 44,998
Buildings 263,001 246,469
Machinery and equipment 712,605 656,962
Construction in progress 3,176 27,682
------------------------------------------------------------------------------------------------
Total 1,023,153 976,111
Less- accumulated depreciation (767,461) (713,090)
------------------------------------------------------------------------------------------------
Net property, plant and equipment 255,692 263,021
------------------------------------------------------------------------------------------------
Investments and other assets:
Long-term finance receivables, net 445,294 445,896
Investment securities 47,040 49,049
Investments in and advances to affiliates 703 819
Goodwill 214,027 246,637
Other intangible assets 128,552 147,886
Lease deposits and other 73,476 86,023
------------------------------------------------------------------------------------------------
Total investments and other assets 909,092 976,310
------------------------------------------------------------------------------------------------
Total assets 2,191,006 2,383,943
------------------------------------------------------------------------------------------------
1
Millions of Yen
------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, 2010 March 31, 2010
------------------------------------------------------------------------------------------------
Current liabilities:
Short-term borrowings 43,534 75,701
Current maturities of long-term indebtedness 80,980 94,026
Trade payables:
Notes 18,029 12,211
Accounts 226,012 261,186
Accrued income taxes 8,409 15,263
Accrued expenses and other 175,218 202,017
------------------------------------------------------------------------------------------------
Total current liabilities 552,182 660,404
------------------------------------------------------------------------------------------------
Long-term liabilities:
Long-term indebtedness 503,343 514,718
Accrued pension and severance costs 138,896 140,460
Deferred income taxes and other 36,378 44,487
------------------------------------------------------------------------------------------------
Total long-term liabilities 678,617 699,665
------------------------------------------------------------------------------------------------
Equity:
Ricoh Company, Ltd. shareholders' equity:
Common stock 135,364 135,364
Additional paid-in capital 186,083 186,083
Retained earnings 816,688 820,701
Accumulated other comprehensive loss (193,719) (132,051)
Treasury stock at cost (36,824) (36,756)
------------------------------------------------------------------------------------------------
Total Ricoh Company, Ltd. shareholders' equity 907,592 973,341
------------------------------------------------------------------------------------------------
Noncontrolling interests 52,615 50,533
------------------------------------------------------------------------------------------------
Total equity 960,207 1,023,874
------------------------------------------------------------------------------------------------
Total liabilities and equity 2,191,006 2,383,943
------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of consolidated financial
statements.
2
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
For the Nine Months Ended December 31, 2009 and 2010
Millions of Yen
-------------------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2009 December 31, 2010
-------------------------------------------------------------------------------------------------------
Net Sales:
Products 686,038 685,860
Post sales and rentals 714,184 677,001
Other revenue 74,509 76,190
-------------------------------------------------------------------------------------------------------
Total 1,474,731 1,439,051
-------------------------------------------------------------------------------------------------------
Cost of sales:
Products 481,952 455,759
Post sales and rentals 326,827 323,895
Other revenue 57,546 59,918
-------------------------------------------------------------------------------------------------------
Total 866,325 839,572
-------------------------------------------------------------------------------------------------------
Gross profit 608,406 599,479
Selling, general and administrative expenses 570,674 545,490
-------------------------------------------------------------------------------------------------------
Operating income 37,732 53,989
-------------------------------------------------------------------------------------------------------
Other (income) expenses:
Interest and dividend income (2,216) (2,154)
Interest expense 6,156 5,816
Foreign currency exchange (gain) loss, net 3,412 8,206
Other, net (443) 777
-------------------------------------------------------------------------------------------------------
Total 6,909 12,645
-------------------------------------------------------------------------------------------------------
Income before income taxes and equity in earnings of affiliates 30,823 41,344
Provision for income taxes:
Current 21,664 15,216
Deferred (6,726) 2,934
-------------------------------------------------------------------------------------------------------
Total 14,938 18,150
-------------------------------------------------------------------------------------------------------
Equity in earnings of affiliates 6 (15)
Consolidated net income 15,891 23,179
-------------------------------------------------------------------------------------------------------
Net income attributable to noncontrolling interests 1,475 2,839
-------------------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd. 14,416 20,340
-------------------------------------------------------------------------------------------------------
Yen Yen
-------------------------------------------------------------------------------------------------------
Per share of common stock:
Net income attributable to Ricoh Company, Ltd.
-------------------------------------------------------------------------------------------------------
Basic 19.87 28.03
Diluted 19.32 27.30
-------------------------------------------------------------------------------------------------------
Cash dividends paid per share 31.50 33.00
-------------------------------------------------------------------------------------------------------
Per American Depositary Share, each representing 5 shares
of common stock:
Net income attributable to Ricoh Company, Ltd.
-------------------------------------------------------------------------------------------------------
Basic 99.35 140.15
Diluted 96.60 136.50
-------------------------------------------------------------------------------------------------------
Cash dividends paid per share 157.50 165.00
-------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
3
For the Three Months Ended December 31, 2009 and 2010
Millions of Yen
---------------------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2009 December 31, 2010
---------------------------------------------------------------------------------------------------------
Net Sales:
Products 221,842 218,751
Post sales and rentals 239,381 224,545
Other revenue 24,717 24,899
---------------------------------------------------------------------------------------------------------
Total 485,940 468,195
---------------------------------------------------------------------------------------------------------
Cost of sales:
Products 148,270 140,772
Post sales and rentals 108,546 111,228
Other revenue 18,920 19,634
---------------------------------------------------------------------------------------------------------
Total 275,736 271,634
---------------------------------------------------------------------------------------------------------
Gross profit 210,204 196,561
Selling, general and administrative expenses 186,467 180,584
---------------------------------------------------------------------------------------------------------
Operating income 23,737 15,977
---------------------------------------------------------------------------------------------------------
Other (income) expenses:
Interest and dividend income (474) (779)
Interest expense 2,085 1,905
Foreign currency exchange (gain) loss, net (1,451) 776
Other, net (480) 796
---------------------------------------------------------------------------------------------------------
Total (320) 2,698
---------------------------------------------------------------------------------------------------------
Income before income taxes and equity in earnings of affiliates 24,057 13,279
Provision for income taxes:
Current 12,164 2,443
Deferred (1,100) 2,113
---------------------------------------------------------------------------------------------------------
Total 11,064 4,556
---------------------------------------------------------------------------------------------------------
Equity in earnings of affiliates (6) (8)
Consolidated net income 12,987 8,715
---------------------------------------------------------------------------------------------------------
Net income attributable to noncontrolling interest 379 887
---------------------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd. 12,608 7,828
---------------------------------------------------------------------------------------------------------
Yen Yen
---------------------------------------------------------------------------------------------------------
Per share of common stock:
---------------------------------------------------------------------------------------------------------
Basic 17.38 10.79
Diluted 16.91 10.54
---------------------------------------------------------------------------------------------------------
Cash dividends paid per share 16.50 16.50
---------------------------------------------------------------------------------------------------------
Per American Depositary Share, each representing 5 shares
of common stock:
---------------------------------------------------------------------------------------------------------
Basic 86.90 53.95
Diluted 84.55 52.70
---------------------------------------------------------------------------------------------------------
Cash dividends paid per share 82.50 82.50
---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
4
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended December 31, 2009 and 2010
Millions of Yen
---------------------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2009 December 31, 2010
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income 15,891 23,179
Adjustments to reconcile consolidated net income to net cash
provided by operating activities
Depreciation and amortization 73,402 69,518
Equity in earnings of affiliates, net of dividends received (6) 15
Deferred income taxes (6,726) 2,934
Losses on disposals and sales of property, plant and
equipment 606 813
Pension and severance costs, less payment 2,890 889
Changes in assets and liabilities, net of effects from
acquisition-
Decrease in trade receivables 27,035 9,820
(Increase) Decrease in inventories 7,403 (29,139)
Decrease in finance receivables 16,684 11,903
Decrease in trade payables (31,160) (20,183)
Decrease in accrued income taxes and
accrued expenses and other (15,453) (6,111)
Other, net 18,377 10,718
---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 108,943 74,356
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment 909 732
Expenditures for property, plant and equipment, including
interest capitalized (48,338) (48,674)
Expenditures for intangible assets including interest
capitalized (10,063) (12,153)
Payments for purchases of available-for-sale securities (695) (230)
Proceeds from sales of available-for-sale securities 938 17
(Increase) Decrease in time deposits, net 665 (192)
Purchase of business, net of cash acquired (4,760) (477)
Other, net (5,358) (3,187)
---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (66,702) (64,164)
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term indebtedness 35,055 43,691
Repayment of long-term indebtedness (60,825) (75,039)
Decrease in short-term borrowings, net (57,767) (28,110)
Proceeds from issuance of long-term debt securities 35,000 79,741
Repayment of long-term debt securities (10,000) (88,307)
Dividends paid (22,858) (23,943)
Payment for purchase of treasury stock (127) (138)
Other, net (393) (551)
---------------------------------------------------------------------------------------------------------
Net cash used in financing activities (81,915) (92,656)
---------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,685) (11,885)
---------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (41,359) (94,349)
---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 258,484 242,165
---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 217,125 147,816
---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
5
Ricoh Company, Ltd. and Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
According to the article 93 of the "Regulations Regarding Terms, Forms and
Preparation of Interim Consolidated Financial Statements" (Cabinet office
Ordinance No.64, 2007), the accompanying consolidated financial statements of
Ricoh (Ricoh Company, Ltd. and its consolidated subsidiaries) have been prepared
in conformity with U.S. generally accepted accounting principles. Significant
accounting and reporting policies are summarized below:
The accompanying consolidated financial statements for the nine months ended
December 31, 2010 are presented in Japanese yen, the functional currency of the
Company and its domestic subsidiaries.
The books of the Company and its domestic subsidiaries are maintained in
conformity with Japanese accounting principles and practices, while foreign
subsidiaries maintain their books in conformity with the standards of their
country of domicile.
The accompanying consolidated financial statements reflect necessary
adjustments, not recorded in the books, to present them in conformity with U.S.
generally accepted accounting principles.
(A) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. The accounts of variable interest
entity 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 (generally 20% to
50% ownership) are accounted for on an equity basis. All significant
inter-company 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 December 31.
(B) 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.
Products sales are 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
6
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 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, 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.
(C) FOREIGN CURRENCY TRANSLATION
For foreign operations with functional currencies other than the Japanese yen,
assets and liabilities are translated at the exchange rates in effect at each
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 Ricoh Company, Ltd. shareholders' equity.
All foreign currency transaction gains and losses are included in other income
and expenses in the period incurred.
(D) CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with maturities of
three months or less at the date of purchase such as time deposits and
short-term investment securities which are available-for-sale at any time,
present insignificant risk of changes in value due to being readily convertible
into cash and have an original maturity of three months or less, such as money
management funds and free financial funds.
(E) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
As discussed further in Note 8, 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.
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
7
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) 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.
(G) SECURITIES
Ricoh's investments in debt and marketable equity securities are classified as
available-for-sale securities. 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).
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: 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 funds are stated at cost unless indication of impairment
exist, which require the investment to be written down to its estimated fair
value.
8
(H) INVENTORIES
Inventories are mainly stated at the lower of average cost or net realizable
values. Inventory costs include raw materials, labor and manufacturing
overheads.
(I) PROPERTY, PLANT AND EQUIPMENT
For the Company and its domestic subsidiaries, depreciation of property, plant
and equipment is computed principally by using the declining-balance method over
the estimated useful lives. Most of the foreign subsidiaries have adopted the
straight-line method for computing depreciation. The depreciation period
generally ranges from 5 years to 50 years for buildings and 2 years to 12 years
for machinery and equipment.
Ordinary maintenance and repairs are charged to expense as incurred. Major
replacements and improvements are capitalized. When properties are retired or
otherwise disposed of, the property and related accumulated depreciation
accounts are relieved of the applicable amounts, and any differences are
included in earnings.
(J) CAPITALIZED SOFTWARE COSTS
Ricoh capitalizes certain internal and external costs incurred to acquire or
create internal use software during the application development stage as well as
upgrades and enhancements that result in additional functionality. The
capitalized software is amortized on a straight line basis generally from 3
years to 5 years.
(K) GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill is not amortized and is required to be tested at least annually for
impairment. Acquired intangible assets with a definite useful life are amortized
over their respective estimated useful lives and reviewed for impairment when an
indication of impairment is identified. Other intangible assets with definite
useful lives, consisting primarily of software, 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. The first
step requires a comparison of the carrying amount of the reporting units to the
fair value of these units. If the carrying amount 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.
(L) PENSION AND RETIREMENT ALLOWANCES PLANS
Ricoh recognizes the overfunded or underfunded status of the defined benefit
plans as an asset or liability in the consolidated balance sheet, with a
corresponding adjustment to accumulated other comprehensive income (loss), net
of tax. The expected long-term rate of return on plan assets used for pension
accounting is determined based on the historical long-term rate of return on
plan assets. The discount rate is determined based on the rates of return of
high-quality fixed-income investments currently available and expected to be
available during the period to maturity of the pension benefits.
9
(M) INCOME TAXES
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 the guidance on accounting for uncertainty in
income taxes 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.
(N) RESEARCH AND DEVELOPMENT EXPENSES AND ADVERTISING COSTS
Research and development expenses and advertising costs are expensed as
incurred.
(O) 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.
(P) 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.
(Q) NET INCOME ATTRIBUTABLE TO RICOH COMPANY, LTD. PER SHARE
Basic net income attributable to Ricoh Company, Ltd. per share of common stock
is calculated by dividing net income attributable to Ricoh Company, Ltd. by the
weighted-average number of shares of common stock outstanding during the period.
The calculation of diluted net income attributable to Ricoh Company, Ltd. per
share of common stock is similar to the calculation of basic net income
attributable to Ricoh Company, Ltd. per share, except that the weighted-average
number of shares outstanding includes the additional dilution from potential
common stock equivalents such as convertible bonds.
(R) NON-CASH INVESTING AND FINANCING TRANSACTIONS
Non-cash investing and financing transactions are as follows:
10
Millions of Yen
---------------------------------------------------------------------------------
Nine months ended
---------------------------------------------------------------------------------
2009 2010
December 31 December 31
---------------------------------------------------------------------------------
Debt assumed in connection with business acquisition Yen 3,941 --
Debt assumed with adoption of new accounting
standards regarding consolidation of VIE -- Yen 20,229
---------------------------------------------------------------------------------
(S) 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 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 business combinations and pension accounting.
(T) RECENTLY ADOPTED NEW ACCOUNTING STANDARDS
In December 2009, the FASB issued Accounting Standard Update ("ASU") 2009-16.
This ASU eliminates the concept of a qualifying special-purpose entity,
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. It is effective for fiscal years
beginning after November 15, 2009 and for subsequent interim and annual
reporting periods, and was adopted by Ricoh in the first quarter beginning April
1, 2010.
In December 2009, the FASB issued ASU 2009-17. This ASU requires an enterprise
to perform an analysis to identify the primary beneficiary of a variable
interest entity and also requires ongoing reassessments of whether an enterprise
is the primary beneficiary of a variable interest entity. It is effective for
fiscal years beginning after November 15, 2009 and for subsequent interim and
annual reporting periods and earlier application is prohibited. It was adopted
by Ricoh in the first quarter beginning April 1, 2010.
Regarding an effect on Ricoh's consolidated financial position or results of
operations by adoption of ASU 2009-16 and ASU 2009-17, refer to Note 12-variable
interest entity.
In July 2010, the FASB issued ASU 2010-20. This ASU enhances disclosures about
the credit quality of financing receivables and the allowance for credit losses,
by requiring an entity to provide disaggregated and class information, credit
quality indicators, past due information, and information about modifications of
its financing receivables, and other information. The disclosures as of the end
of a reporting period are effective for interim and annual reporting periods
ending on and after December 15, 2010. This adoption of ASU 2010-20 did not have
any effect on Ricoh's consolidated financial position and results of operations.
The disclosure required by ASU2010-20 was omitted.
(U) NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In October 2009, the FASB issued ASU 2009-13. This ASU eliminates the residual
method of revenue recognition and allows the use of management's best estimate
of selling price for individual elements of an arrangement when vendor specific
objective evidence (VSOE) or third-party evidence (TPE) is unavailable.
11
This ASU is effective for fiscal years beginning on or after June 15, 2010 and
early adoption is permitted. If Ricoh does not elect early adoption, this ASU
will be adopted by Ricoh in the first quarter beginning April 1, 2011. Ricoh is
currently evaluating the effect that adoption of this ASU will have on its
consolidated results of operations and financial condition.
In October 2009, the FASB issued ASU 2009-14. This ASU amends the scope of
pre-existing software revenue guidance by removing from the guidance
non-software components of tangible products and certain software components of
tangible products. It is effective for fiscal years beginning on or after June
15, 2010 and early adoption is permitted. If Ricoh does not elect early
adoption, this ASU will be adopted by Ricoh in the first quarter beginning April
1, 2011. Ricoh is currently evaluating the effect that adoption of this ASU will
have on its consolidated results of operations and financial condition.
12
2. SECURITIES
Investment securities as of December 31, 2010 and March 31, 2010 consist of the
following:
Millions of Yen
--------------------------------------------------------------------------------------------------
December 31, 2010 March 31, 2010
--------------------------------------------------------------------------------------------------
Investment securities:
Available-for-sale securities 45,000 46,624
Non-marketable equity securities 2,040 2,425
--------------------------------------------------------------------------------------------------
47,040 49,049
--------------------------------------------------------------------------------------------------
The 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 December 31, 2010 and March 31, 2010 are as follows:
Millions of Yen
---------------------------------------------------------------------------------------------------------------------
December 31, 2010 March 31, 2010
---------------------------------------------------------------------------------------------------------------------
Gross Gross Gross Gross
unrealized unrealized unrealized unrealized
holding holding holding holding
Cost gains losses Fair value Cost gains losses Fair value
---------------------------------------------------------------------------------------------------------------------
Noncurrent:
Equity securities 41,136 4,326 2,291 43,171 40,552 5,300 1,093 44,759
Corporate debt
securities 1,772 57 -- 1,829 1,778 87 -- 1,865
---------------------------------------------------------------------------------------------------------------------
42,908 4,383 2,291 45,000 42,330 5,387 1,093 46,624
---------------------------------------------------------------------------------------------------------------------
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 December 31,
2010 and March 31, 2010 are as follows:
Millions of Yen
------------------------------------------------------------------------------------------------------
December 31, 2010
------------------------------------------------------------------------------------------------------
Less than 12 months 12 months or longer Total
------------------------------------------------------------------------------------------------------
Gross Gross Gross
unrealized unrealized unrealized
holding holding holding
Fair value losses Fair value losses Fair value losses
------------------------------------------------------------------------------------------------------
Noncurrent:
Available-for-sale:
Equity securities 26,987 1,960 1,084 331 28,071 2,291
------------------------------------------------------------------------------------------------------
Millions of Yen
------------------------------------------------------------------------------------------------------
March 31, 2010
------------------------------------------------------------------------------------------------------
Less than 12 months 12 months or longer Total
------------------------------------------------------------------------------------------------------
Gross Gross Gross
unrealized unrealized unrealized
holding holding holding
Fair value losses Fair value losses Fair value losses
------------------------------------------------------------------------------------------------------
Noncurrent:
Available-for-sale:
Equity securities 26,871 836 985 257 27,856 1,093
------------------------------------------------------------------------------------------------------
13
Gross unrealized holding losses of available-for-sale securities as of December
31, 2010 and March 31, 2010 consist of 44 and 37 kinds of securities. Ricoh
judged the decline in fair value of investment securities at period end 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 December 31, 2010 are as follows:
Millions of Yen
------------------
Cost Fair value
----------------------------------------------------------
Due after one year through five years 482 485
Over five years 1,290 1,344
----------------------------------------------------------
1,772 1,829
----------------------------------------------------------
Proceeds from the sales of available-for-sale securities were Yen 938 million
and Yen 17 million for the nine months ended December 31, 2009 and 2010,
respectively.
There were no significant realized gains or losses on sales of
available-for-sale securities for the nine months ended December 31, 2009 and
2010.
There were no significant realized gains or losses on valuation of
available-for-sale securities for the nine months ended December 31, 2009 and
2010.
3. INCOME TAXES
The estimated annual effective tax rate for fiscal year ending March 31, 2011
was approximately 44 percent as of December 31, 2010. The estimated rate
differed from the approximately 41 percent statutory tax rate due primarily to
the net increase in valuation allowance for deferred tax assets.
4. PENSION AND RETIREMENT ALLOWANCE PLANS
The net periodic benefit costs of the pension plans consist of the following
components:
Millions of Yen
---------------------------------------------------------------------------------
Nine months ended Three months ended
December 31, 2010 December 31, 2010
---------------------------------------------------------------------------------
Service cost 9,563 3,220
Interest cost 11,031 3,635
Expected return on plan assets (6,446) (2,153)
Net amortization 2,277 747
---------------------------------------------------------------------------------
Total net periodic pension cost 16,425 5,449
---------------------------------------------------------------------------------
14
5. EQUITY
The change in Ricoh shareholders' equity, noncontrolling interests and total
equity for the nine months ended December 31, 2009 and 2010 is as follow:
Ricoh adopted ASU 2009-17 on April 1, 2010. The adoption of this ASU resulted in
adjustments to change in Ricoh shareholders' equity, noncontrolling interests
and total equity as of April 1, 2010.
Millions of Yen
--------------------------------------------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2009 December 31, 2010
--------------------------------------------------------------------------------------------------------------------------------
Ricoh Ricoh
Shareholders' Noncontrolling Shareholders' Noncontrolling
Equity Interests Total Equity Equity Interests Total Equity
--------------------------------------------------------------------------------------------------------------------------------
Equity, Beginning of Period 975,373 48,977 1,024,350 973,341 50,533 1,023,874
--------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of a change
in accounting principle -
adoption of accounting
guidance for a variable
interest entity, net of tax -- -- -- (410) (392) (802)
--------------------------------------------------------------------------------------------------------------------------------
Equity, Beginning of Period as
adjusted 975,373 48,977 1,024,350 972,931 50,141 1,023,072
--------------------------------------------------------------------------------------------------------------------------------
Net income 14,416 1,475 15,891 20,340 2,839 23,179
Unrealized gains (losses) on
securities 1,711 90 1,801 (1,271) (3) (1,274)
Pension liability adjustments 1,003 8 1,011 1,540 1 1,541
Unrealized losses on
derivatives (1,150) (16) (1,166) (85) (23) (108)
Foreign currency translation
adjustments (6,330) (36) (6,366) (61,852) 310 (61,542)
--------------------------------------------------------------------------------------------------------------------------------
Comprehensive income(loss) 9,650 1,521 11,171 (41,328) 3,124 (38,204)
--------------------------------------------------------------------------------------------------------------------------------
Cash dividends on Common stock (22,858) -- (22,858) (23,943) -- (23,943)
Distributions to Noncontrolling
interests -- (557) (557) -- (650) (650)
Payment to acquire Treasury stock (33) -- (33) (68) -- (68)
Other 132 (70) 62 -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Equity, End of Period 962,264 49,871 1,012,135 907,592 52,615 960,207
--------------------------------------------------------------------------------------------------------------------------------
Comprehensive incomes were Yen 18,874 million (gains) and Yen 7,382 million
(losses) for the three months ended December 31, 2009 and 2010, respectively.
Comprehensive incomes attributable to Ricoh Company, Ltd. were Yen 18,446
million (gains), and Yen 8,261 million (losses), and comprehensive incomes
attributable to noncontrolling interests were Yen 428 million (gains) and Yen
879 million (gains) for the three months ended December 31, 2009 and 2010,
respectively.
6. DIVIDENDS
Cash dividends paid during the nine months ended December 31, 2010 is as
follows:
Resolved at the General meetings of Shareholders on June 25, 2010
----------------------------------------------------------------
Total amount of dividends (millions of yen) 11,972
Dividend per share of common stock (yen) 16.50
Record date March 31, 2010
Effective date June 28, 2010
Resource for dividend Retained earnings
----------------------------------------------------------------
15
Resolved at the Board meeting on October 28, 2010
----------------------------------------------------------------
Total amount of dividends (millions of yen) 11,971
Dividend per share of common stock (yen) 16.50
Record date September 30, 2010
Effective date December 1, 2010
Resource for dividend Retained earnings
----------------------------------------------------------------
7. PER SHARE DATA
Ricoh shareholders' equity per share was Yen 1,250.96 and Yen 1,341.45 as of
December 31, 2010 and March 31, 2010, respectively. Dividends per share shown in
the consolidated statement of income are computed based on dividends paid for
the third quarter ended December 31, 2010 and the year ended March 31, 2010.
A reconciliation of the numerator and the denominators of the basic and diluted
per share computations for net income attributable to Ricoh Company, Ltd. are as
follows:
Thousands of shares
---------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2009 December 31, 2010
---------------------------------------------------------------------------------------------
Weighted average number of shares of common stock 725,624 725,570
outstanding
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds
- Due December 2011 19,741 17,992
---------------------------------------------------------------------------------------------
Diluted shares of common stock outstanding 745,365 743,562
---------------------------------------------------------------------------------------------
Millions of Yen
---------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2009 December 31, 2010
---------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd. 14,416 20,340
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds
- Due December 2011 (19) (38)
---------------------------------------------------------------------------------------------
Diluted net income attributable to Ricoh Company, Ltd. 14,397 20,302
---------------------------------------------------------------------------------------------
Yen
---------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2009 December 31, 2010
---------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd.
per share:
Basic:
Basic: Net income attributable to Ricoh
Company, Ltd. 19.87 28.03
Diluted:
Diluted: Net income attributable to Ricoh
Company, Ltd. 19.32 27.30
---------------------------------------------------------------------------------------------
16
Thousands of shares
-----------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2009 December 31, 2010
-----------------------------------------------------------------------------------------------
Weighted average number of shares of common stock 725,606 725,554
outstanding
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds
- Due December 2011 19,741 14,672
-----------------------------------------------------------------------------------------------
Diluted shares of common stock outstanding 745,347 740,226
-----------------------------------------------------------------------------------------------
Millions of Yen
-----------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2009 December 31, 2010
-----------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd. 12,608 7,828
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds
- Due December 2011 (6) (25)
-----------------------------------------------------------------------------------------------
Diluted net income attributable to Ricoh Company, Ltd. 12,602 7,803
-----------------------------------------------------------------------------------------------
Yen
-----------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2009 December 31, 2010
-----------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd.
per share:
Basic:
Basic: Net income attributable to Ricoh
Company, Ltd. 17.38 10.79
Diluted:
Diluted: Net income attributable to Ricoh
Company, Ltd. 16.91 10.54
-----------------------------------------------------------------------------------------------
17
8. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Policy
Ricoh enters into various derivative financial instrument contracts in the
normal course of business in connection with the management of its assets and
liabilities.
Ricoh uses derivative instruments to reduce risk and protect market value of
assets and liabilities in conformity with the Ricoh's policy. Ricoh does not use
derivative financial instruments for trading or speculative purposes, nor is it
a party to leveraged derivatives.
All derivative instruments are exposed to credit risk arising from the inability
of counterparties to meet the terms of the derivative contracts. However, Ricoh
does not expect any counterparties to fail to meet their obligations because
these counterparties are financial institutions with satisfactory credit
ratings. Ricoh utilizes a number of counterparties to minimize the concentration
of credit risk.
Foreign Exchange Risk Management
Ricoh conducts business on a global basis and holds assets and liabilities
denominated in foreign currencies. Ricoh enters into foreign exchange contracts
and foreign currency options to hedge against the potentially adverse impacts of
foreign currency fluctuations on these assets and liabilities denominated in
foreign currencies.
Interest Rate Risk Management
Ricoh enters into interest rate swap agreements to hedge against the potential
adverse impacts of changes in fair value or cash flow fluctuations on interest
of its outstanding debt.
Fair Value Hedges
Changes in the fair value of derivative instruments and the related hedged items
designated and qualifying as fair value hedges are included in other (income)
expenses in the consolidated statements of income. There is no hedging
ineffectiveness nor are net gains or losses excluded from the assessment of
hedge effectiveness for the nine months ended December 31, 2010 mainly because
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 nine months ended December 31, 2010 as the critical terms of the interest
rate swap match the terms of the hedged debt obligations. Ricoh expects that it
will reclassify into earnings through other (income) expenses during the next 12
months approximately Yen 63 million of the balance of accumulated other
comprehensive income as of December 31, 2010.
Undesignated Derivative Instruments
Derivative instruments not designated as hedging instruments are held mainly to
reduce the risk relating to the variability in exchange rates on assets and
liabilities denominated in foreign currencies. Changes in the fair value of
these instruments are included in other (income) expenses in the consolidated
statement of income.
18
Contract amounts of derivative instruments at March 31, 2010 and December 31,
2010 are shown in the following tables:
Millions of Yen
------------------------------------------------------------------------
December 31, 2010 March 31, 2010
------------------------------------------------------------------------
Interest rate swap agreements 282,597 297,501
Foreign currency contracts 202,270 138,283
Foreign currency options 25,016 29,143
------------------------------------------------------------------------
The location and fair value amounts of derivatives in consolidated balance sheet
are shown in the following tables:
Derivatives designated as hedging instruments
------------------------------------------------------------------------------------------------------------------------------
Current Long-term
------------------------------------------------------------------------------------------------------------------------------
Fair value Fair value
------------------------------------------------------------------------------------------------------------------------------
Balance sheet Balance sheet
Location Millions of Yen Location Millions of Yen
------------------------------------------------------------------------------------------------------------------------------
Asset Derivatives December 31, 2010 March 31, 2010 December 31, 2010 March 31, 2010
------------------------------------------------------------------------------------------------------------------------------
Interest rate swap Deferred income Lease deposits
agreements taxes and other Yen -- Yen 40 and other Yen -- Yen 12
------------------------------------------------------------------------------------------------------------------------------
Liability Derivatives December 31, 2010 March 31, 2010 December 31, 2010 March 31, 2010
------------------------------------------------------------------------------------------------------------------------------
Interest rate Accrued expenses Deferred income
swap agreements and other Yen 51 Yen 10 taxes and other Yen 3,247 Yen 2,564
------------------------------------------------------------------------------------------------------------------------------
Derivatives not designated as hedging instruments
------------------------------------------------------------------------------------------------------------------------------
Current Long-term
------------------------------------------------------------------------------------------------------------------------------
Fair value Fair value
------------------------------------------------------------------------------------------------------------------------------
Balance sheet Balance sheet
Location Millions of Yen Location Millions of Yen
------------------------------------------------------------------------------------------------------------------------------
Asset Derivatives December 31, 2010 March 31, 2010 December 31, 2010 March 31, 2010
------------------------------------------------------------------------------------------------------------------------------
Interest rate swap
agreements Yen -- Yen -- Yen -- Yen --
Foreign currency Deferred income Lease deposits
contracts taxes and other 2,838 356 and other 523 --
------------------------------------------------------------------------------------------------------------------------------
Foreign currency
options 535 128 -- --
------------------------------------------------------------------------------------------------------------------------------
Total Yen 3,373 Yen 484 Yen 523 Yen --
------------------------------------------------------------------------------------------------------------------------------
Liability Derivatives December 31, 2010 March 31, 2010 December 31, 2010 March 31, 2010
------------------------------------------------------------------------------------------------------------------------------
Interest rate swap Accrued expenses Deferred income
agreements and other Yen 77 Yen 46 taxes and other Yen 80 Yen 117
Foreign currency
contracts 3,525 4,076 484 347
Foreign currency
options 33 426 -- --
------------------------------------------------------------------------------------------------------------------------------
Total Yen 3,635 Yen 4,548 Yen 564 Yen 464
------------------------------------------------------------------------------------------------------------------------------
19
Total fair value amounts of derivatives
Millions of Yen
----------------------------------------------------------------------
Fair value
----------------------------------------------------------------------
December 31, 2010 March 31, 2010
----------------------------------------------------------------------
Total Asset Derivatives Yen 3,896 Yen 536
Total Liability Derivatives Yen 7,497 Yen 7,586
----------------------------------------------------------------------
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of income for the nine months ended December 31, 2009
are shown in the following tables:
Derivatives designated as hedging instruments
Millions of Yen
-----------------------------------------------------------------------------------------------------------
Gain or (Loss) Gain or (Loss) Reclassified
Recognized in OCI from Accumulated OCI Gain or (Loss) Recognized
on Derivative Into Income in Income on Derivative
(Effective Portion) (Effective Portion) (Ineffective Portion)
-----------------------------------------------------------------------------------------------------------
Amount Location Amount Location Amount
-----------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements (1,216) Interest expense (64) -- --
-----------------------------------------------------------------------------------------------------------
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 and
Interest rate swap agreements dividend income 145 Interest expense (235)
----------------------------------------------------------------------------------------
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on
Derivative
----------------------------------------------------------------------
Location Millions of Yen
----------------------------------------------------------------------
December 31, 2009
----------------------------------------------------------------------
Interest rate swap agreements Other, net Yen (14)
Foreign currency
exchange (gain)
Foreign currency contracts loss, net 563
Foreign currency
exchange (gain)
Foreign currency options loss, net 1,451
----------------------------------------------------------------------
Total Yen 2,000
----------------------------------------------------------------------
20
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of for the three months ended December 31, 2009 are
shown in the following tables:
Derivatives designated as hedging instruments
Millions of Yen
-----------------------------------------------------------------------------------------------------------
Gain or (Loss) Gain or (Loss) Reclassified
Recognized in OCI from Accumulated OCI Gain or (Loss) Recognized
on Derivative Into Income in Income on Derivative
(Effective Portion) (Effective Portion) (Ineffective Portion)
-----------------------------------------------------------------------------------------------------------
Amount Location Amount Location Amount
-----------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements (766) Interest expense (27) -- --
-----------------------------------------------------------------------------------------------------------
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 and
Interest rate swap agreements dividend income 34 Interest expense (51)
----------------------------------------------------------------------------------------
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on
Derivative
----------------------------------------------------------------------
Location Millions of Yen
----------------------------------------------------------------------
December 31, 2009
----------------------------------------------------------------------
Interest rate swap agreements Other, net Yen 79
Foreign currency
exchange (gain)
Foreign currency contracts loss, net (1,174)
Foreign currency
exchange (gain)
Foreign currency options loss, net (214)
----------------------------------------------------------------------
Total Yen (1,309)
----------------------------------------------------------------------
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of income for the nine months ended December 31, 2010
are shown in the following tables:
Derivatives designated as hedging instruments
21
Millions of Yen
-----------------------------------------------------------------------------------------------------------
Gain or (Loss) Gain or (Loss) Reclassified
Recognized in OCI from Accumulated OCI Gain or (Loss) Recognized
on Derivative Into Income in Income on Derivative
(Effective Portion) (Effective Portion) (Ineffective Portion)
-----------------------------------------------------------------------------------------------------------
Amount Location Amount Location Amount
-----------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements (496) Interest expense (165) -- --
-----------------------------------------------------------------------------------------------------------
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 and
Interest rate swap agreements dividend income 68 Interest expense (90)
----------------------------------------------------------------------------------------
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on
Derivative
----------------------------------------------------------------------
Location Millions of Yen
----------------------------------------------------------------------
December 31, 2010
----------------------------------------------------------------------
Interest rate swap agreements Other, net Yen (133)
Foreign currency
exchange (gain)
Foreign currency contracts loss, net 3,810
Foreign currency
exchange (gain)
Foreign currency options loss, net 800
----------------------------------------------------------------------
Total Yen 4,477
----------------------------------------------------------------------
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of income for the three months ended December 31,
2010 are shown in the following tables:
Derivatives designated as hedging instruments
Millions of Yen
-----------------------------------------------------------------------------------------------------------
Gain or (Loss) Gain or (Loss) Reclassified
Recognized in OCI from Accumulated OCI Gain or (Loss) Recognized
on Derivative Into Income in Income on Derivative
(Effective Portion) (Effective Portion) (Ineffective Portion)
-----------------------------------------------------------------------------------------------------------
Amount Location Amount Location Amount
-----------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements 98 Interest expense (32) -- --
-----------------------------------------------------------------------------------------------------------
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 and
Interest rate swap agreements dividend income 13 Interest expense (17)
----------------------------------------------------------------------------------------
22
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on
Derivative
----------------------------------------------------------------------
Location Millions of Yen
----------------------------------------------------------------------
December 31, 2010
----------------------------------------------------------------------
Interest rate swap agreements Other, net Yen (40)
Foreign currency
exchange (gain)
Foreign currency contracts loss, net 1,544
Foreign currency
exchange (gain)
Foreign currency options loss, net 1,114
----------------------------------------------------------------------
Total Yen 2,618
----------------------------------------------------------------------
9. COMMITMENTS AND CONTINGENT LIABILITIES
Ricoh was contingently liable for certain guarantees including employees housing
loans of Yen 77 million as of December 31, 2010.
As of December 31, 2010 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.
10. 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) INVESTMENT SECURITIES
The fair value of the investment securities is principally based on quoted
market price. Ricoh have not estimated the fair value of non-marketable equity
securities, as it is not practicable. Because there were no quoted market prices
for non-marketable equity securities and each security had different nature and
characteristics, reasonable estimates of fair values could not be made without
incurring excessive costs. The acquisition cost of non-marketable equity
securities was Yen 2,040 million and Yen 2,425 million as of December 31, 2010
and March 31, 2010, respectively.
(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.
23
(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.
Ricoh newly recognized Yen 13,249 million as Long-term indebtedness conform
with adoption of New Accounting Standards, refer to Note 12-variable interest
entity.
(E) INTEREST RATE SWAP AGREEMENTS, FOREIGN CURRENCY CONTRACTS AND FOREIGN
CURRENCY OPTIONS
The fair value of interest rate swap agreements, foreign currency contracts and
foreign currency options is estimated by obtaining quotes from brokers or
suitable valuation method based on available data.
(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 December 31, 2010
and March 31, 2010 are summarized as follows:
Millions of Yen
-------------------------------------------------------------------------------------
December 31, 2010 March 31, 2010
-------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
-------------------------------------------------------------------------------------
Investment securities 47,040 47,040 49,049 49,049
Installment loans 69,974 69,969 67,505 68,739
Long-term indebtedness (503,343) (497,913) (514,718) (501,311)
Interest rate swap agreements, net (3,455) (3,455) (2,685) (2,685)
Foreign currency contracts, net (648) (648) (4,067) (4,067)
Foreign currency options, net 502 502 (298) (298)
-------------------------------------------------------------------------------------
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.
11. FAIR VALUE MEASUREMENTS
Fair value is 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. The three levels fair value hierarchy that prioritizes the
inputs used to measure fair value is established. 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.
24
Level 3 - Inputs are derived from valuation techniques in which one or more
significant inputs or value drivers are unobservable.
The following tables present the fair-value hierarchy levels of Ricoh's assets
and liabilities that are measured at fair value on a recurring basis as of
December 31, 2010 and March 31, 2010.
Millions of Yen
----------------------------------------------------------------------------
December 31, 2010
----------------------------------------------------------------------------
Level 1 Level 2 Level 3 Total
----------------------------------------------------------------------------
Assets:
Available-for-sale securities:
Domestic equity securities 36,383 -- -- 36,383
Foreign equity securities 6,788 -- -- 6,788
Foreign corporate bonds 1,829 -- -- 1,829
Derivative instruments
Interest rate swap agreements -- -- -- --
Foreign currency contracts -- 3,361 -- 3,361
Foreign currency options -- 535 -- 535
----------------------------------------------------------------------------
Total assets 45,000 3,896 -- 48,896
----------------------------------------------------------------------------
Liabilities:
Derivatives instruments
Interest rate swap agreements -- 3,455 -- 3,455
Foreign currency contracts -- 4,009 -- 4,009
Foreign currency options -- 33 -- 33
----------------------------------------------------------------------------
Total liabilities -- 7,497 -- 7,497
----------------------------------------------------------------------------
Millions of Yen
----------------------------------------------------------------------------
March 31, 2010
----------------------------------------------------------------------------
Level 1 Level 2 Level 3 Total
----------------------------------------------------------------------------
Assets:
Available-for-sale securities:
Domestic equity securities 36,946 -- -- 36,946
Foreign equity securities 7,813 -- -- 7,813
Foreign corporate bonds 1,865 -- -- 1,865
Derivative instruments
Interest rate swap agreements -- 52 -- 52
Foreign currency contracts -- 356 -- 356
Foreign currency options -- 128 -- 128
Other investments -- -- 5,816 5,816
----------------------------------------------------------------------------
Total assets 46,624 536 5,816 52,976
----------------------------------------------------------------------------
Liabilities:
Derivatives instruments
Interest rate swap agreements -- 2,737 -- 2,737
Foreign currency contracts -- 4,423 -- 4,423
Foreign currency options -- 426 -- 426
----------------------------------------------------------------------------
Total liabilities -- 7,586 -- 7,586
----------------------------------------------------------------------------
Available-for-sale securities
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.
25
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 till March 31, 2010. Ricoh adopted the FASB New
Accounting Standards as of beginning of fiscal year ending March 31, 2011, Ricoh
consolidated this retained interests by this adoption, and Ricoh offset and
eliminated it. The detail of this New Accounting Standards is summarized as
follow Note 12-variable interest entity.
The following table presents the Other investments classified as Level 3 in the
fair value hierarchy as of December 31, 2009.
Millions of Yen
-----------------------------------------------------------------------
Nine months ended
December 31, 2009
-----------------------------------------------------------------------
Other investments
-----------------------------------------------------------------------
Balance at beginning of period 4,293
Total gains or losses (realized and unrealized)
Included in net income --
Included in other comprehensive income (loss) --
Sales, collections and repurchases, net (5)
-----------------------------------------------------------------------
Balance at end of period 4,288
-----------------------------------------------------------------------
Millions of Yen
-----------------------------------------------------------------------
Three months ended
December 31, 2009
-----------------------------------------------------------------------
Other investments
-----------------------------------------------------------------------
Balance at beginning of period 4,291
Total gains or losses (realized and unrealized)
Included in net income --
Included in other comprehensive income (loss) --
Sales, collections and repurchases, net (3)
-----------------------------------------------------------------------
Balance at end of period 4,288
-----------------------------------------------------------------------
12. VARIABLE INTEREST ENTITY
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. Ricoh's retained interests were considered as variable
interest, because Ricoh's retained interests were subordinate to the investors'
interests and had the liability with received the potential losses. And, Ricoh
was considered as primary beneficiary, because Ricoh was special servicer for
the program. As a result, Ricoh consolidated the interests as VIE and recorded
the assets and liabilities at their carrying
26
amount as of beginning of fiscal year ending March 31, 2011. Adoption of the new
accounting standards did not have a material effect on Ricoh's results of
operation. The main impact of adopting the new accounting standards on Ricoh's
consolidated financial position is as follows:
Millions of Yen
------------------------------------------------------------------
Third quarter ended
December 31, 2010
------------------------------------------------------------------
Current maturities of long-term finance
receivables, net 8,377
Long-term finance receivables, net 15,905
Current maturities of long-term indebtedness 6,979
Long-term indebtedness 13,249
------------------------------------------------------------------
Also, Ricoh decreased at their carrying amount as cumulative effect adjustment
Yen 410 million to the opening balance of Retained earnings, and Yen 392 million
to the opening balance of Noncontrolling interests as of April 1, 2010.
27
13. SEGMENT INFORMATION
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.
Segment Profit (loss) is determined by subtracting cost of sales and selling,
general and administrative expenses from sales, and is used by Ricoh's
management in deciding how to allocate resources and in assessing performance.
Segment Profit (loss) excludes certain corporate expenses, such as costs related
to human resources, legal relations, investor relations, public relations,
corporate planning and environmental activities.
The following tables present certain information regarding Ricoh's operating
segments and by geographic areas for the nine and three months ended December
31, 2009 and 2010, respectively.
(A) OPERATING SEGMENT INFORMATION
Millions of Yen
--------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2009 December 31, 2010
--------------------------------------------------------------------------------------------
Segment Sales:
Imaging & Solutions 1,306,090 1,264,407
Industrial Products 79,510 86,283
Other 92,284 92,508
Intersegment transaction (3,153) (4,147)
--------------------------------------------------------------------------------------------
Total Segment Sales 1,474,731 1,439,051
--------------------------------------------------------------------------------------------
Segment Profit (loss):
Imaging & Solutions 92,985 108,104
Industrial Products (1,034) 775
Other (1,986) (1,533)
--------------------------------------------------------------------------------------------
Total Segment Profit (loss) 89,965 107,346
--------------------------------------------------------------------------------------------
Reconciling Items:
Corporate expenses and Elimination (52,233) (53,357)
Interest and dividend income 2,216 2,154
Interest expense (6,156) (5,816)
Foreign currency exchange loss, net (3,412) (8,206)
Other, net 443 (777)
--------------------------------------------------------------------------------------------
Income before Income Taxes and Equity in Earnings of
Affiliates 30,823 41,344
--------------------------------------------------------------------------------------------
Millions of Yen
----------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2009 December 31, 2010
----------------------------------------------------------------------------------------------
Segment Sales:
Imaging & Solutions 430,961 413,424
Industrial Products 26,268 27,949
Other 29,823 28,378
Intersegment transaction (1,112) (1,556)
----------------------------------------------------------------------------------------------
Total Segment Sales 485,940 468,195
----------------------------------------------------------------------------------------------
Segment Profit (loss):
Imaging & Solutions 41,432 35,103
Industrial Products (267) (271)
Other (889) (1,069)
----------------------------------------------------------------------------------------------
Total Segment Profit (loss) 40,276 33,763
----------------------------------------------------------------------------------------------
Reconciling Items:
Corporate expenses and Elimination (16,539) (17,786)
Interest and dividend income 474 779
Interest expense (2,085) (1,905)
Foreign currency exchange loss, net 1,451 (776)
Other, net 480 (796)
----------------------------------------------------------------------------------------------
Income before Income Taxes and Equity in Earnings of
Affiliates 24,057 13,279
----------------------------------------------------------------------------------------------
28
Intersegment sales represent sales of Industrial Products segment to Imaging &
Solutions segment.
(B) GEOGRAPHIC INFORMATION
Sales which are attributed to countries based on location of customers are as
follows:
Millions of Yen
----------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2009 December 31, 2010
----------------------------------------------------------------------------------------------
Sales-
Japan 626,527 649,422
The Americas 416,397 389,424
Europe 341,467 303,531
Other 90,340 96,674
----------------------------------------------------------------------------------------------
Consolidated 1,474,731 1,439,051
----------------------------------------------------------------------------------------------
Millions of Yen
----------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2009 December 31, 2010
----------------------------------------------------------------------------------------------
Sales-
Japan 204,838 210,357
The Americas 135,239 124,567
Europe 115,321 102,480
Other 30,542 30,791
----------------------------------------------------------------------------------------------
Consolidated 485,940 468,195
----------------------------------------------------------------------------------------------
29
14. SUPPLEMENTARY INFORMATION TO THE STATEMENT OF INCOME
The following amounts were charged to selling, general and administrative
expenses for the Nine months and three months ended December 31, 2009 and 2010:
Millions of Yen
--------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2009 December 31, 2010
--------------------------------------------------------------------------------------------
Research and development costs 81,887 81,349
Advertising costs 7,484 8,853
Shipping and handling costs 12,773 13,834
--------------------------------------------------------------------------------------------
Millions of Yen
----------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2009 December 31, 2010
----------------------------------------------------------------------------------------------
Research and development costs 25,897 27,352
Advertising costs 2,933 3,662
Shipping and handling costs 4,220 4,925
----------------------------------------------------------------------------------------------
30