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 2012
Commission File Number 2 - 68279
RICOH COMPANY, LTD.
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(Translation of Registrant's name into English)
13-1, Ginza 8-Chome, Chuo-ku, Tokyo 104-8222, Japan
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(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.)
Form 20-F X Form 40-F __
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): __ )
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): __ )
(Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.)
Yes __ No X
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-__ )
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Ricoh Company, Ltd.
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(Registrant)
By: /S/ Zenji Miura
------------------------------
Zenji Miura
Director, Chief Financial Officer
Corporate Executive Vice President
February 13, 2012
RICOH COMPANY, LTD.
Consolidated Financial Statements
For the nine months Ended December 31, 2011
This is an English translation of the Quarterly Securities Report (Shihanki
Hokokusho) for the nine months ended December 31, 2011 pursuant to the Japanese
Financial Instrument and Exchange Law.
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31, 2011 and December 31, 2011
Millions of Yen
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ASSETS March 31, 2011 December 31, 2011
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Current assets:
Cash and cash equivalents 179,169 156,699
Time deposits 2,010 2,550
Trade receivables:
Notes 46,355 42,244
Accounts 419,351 388,547
Less- Allowance for doubtful receivables (16,560) (16,190)
Current maturities of long-term finance receivables, net 208,671 210,730
Inventories:
Finished goods 85,800 98,564
Work in process and raw materials 85,233 103,365
Deferred income taxes and other 63,990 54,903
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Total current assets 1,074,019 1,041,412
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Property, plant and equipment, at cost:
Land 44,444 46,016
Buildings 262,523 263,093
Machinery and equipment 737,270 809,526
Construction in progress 5,230 7,690
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Total 1,049,467 1,126,325
Less- accumulated depreciation (784,727) (861,383)
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Net property, plant and equipment 264,740 264,942
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Investments and other assets:
Long-term finance receivables, net 445,782 453,733
Investment securities 48,909 41,712
Investments in and advances to affiliates 213 377
Goodwill 221,063 182,776
Other intangible assets 130,648 111,531
Lease deposits and other 77,022 96,772
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Total investments and other assets 923,637 886,901
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Total assets 2,262,396 2,193,255
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1
Millions of Yen
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LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2011 December 31, 2011
------------------------------------------------------------------------------------------------
Current liabilities:
Short-term borrowings 39,927 145,897
Current maturities of long-term indebtedness 111,096 69,185
Trade payables:
Notes 12,216 14,535
Accounts 238,267 219,472
Accrued income taxes 13,414 6,758
Accrued expenses and other 199,780 165,391
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Total current liabilities 614,700 621,238
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Long-term liabilities:
Long-term indebtedness 479,422 537,065
Accrued pension and severance costs 140,975 137,646
Deferred income taxes and other 44,535 37,030
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Total long-term liabilities 664,932 711,741
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Equity:
Ricoh Company, Ltd. shareholders' equity:
Common stock 135,364 135,364
Additional paid-in capital 186,083 186,083
Retained earnings 815,970 739,874
Accumulated other comprehensive loss (170,702) (219,519)
Treasury stock at cost (36,838) (36,821)
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Total Ricoh Company, Ltd. shareholders' equity 929,877 804,981
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Noncontrolling interests 52,887 55,295
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Total equity 982,764 860,276
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Total liabilities and equity 2,262,396 2,193,255
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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, 2010 and 2011
Millions of Yen
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Nine months ended Nine months ended
December 31, 2010 December 31, 2011
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Net Sales:
Products 685,860 637,648
Post sales and rentals 677,001 680,135
Other revenue 76,190 78,758
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Total 1,439,051 1,396,541
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Cost of sales:
Products 455,759 444,836
Post sales and rentals 323,895 324,211
Other revenue 59,918 58,472
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Total 839,572 827,519
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Gross profit 599,479 569,022
Selling, general and administrative expenses 545,490 578,175
Loss on impairment of goodwill -- 27,464
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Operating income (loss) 53,989 (36,617)
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Other (income) expenses:
Interest and dividend income (2,154) (1,940)
Interest expense 5,816 4,883
Foreign currency exchange loss, net 8,206 4,274
Other, net 777 4,104
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Total 12,645 11,321
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Income (loss) before income taxes and equity in earnings of 41,344 (47,938)
affiliates
Provision for income taxes:
Current 15,216 16,063
Deferred 2,934 (15,219)
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Total 18,150 844
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Equity in earnings of affiliates (15) 17
Consolidated net income (loss) 23,179 (48,765)
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Net income attributable to noncontrolling interests 2,839 3,370
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Net income (loss) attributable to Ricoh Company, Ltd. 20,340 (52,135)
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Yen Yen
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Per share of common stock:
Net income (loss) attributable to Ricoh Company, Ltd.
---------------------------------------------------------------------------------------------------
Basic 28.03 (71.86)
Diluted 27.30 (71.86)
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Cash dividends paid per share 33.00 33.00
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Per American Depositary Share, each representing 5 shares
of common stock:
Net income (loss) attributable to Ricoh Company, Ltd.
---------------------------------------------------------------------------------------------------
Basic 140.15 (359.30)
Diluted 136.50 (359.30)
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Cash dividends paid per share 165.00 165.00
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The accompanying notes are an integral part of these consolidated financial
statements.
3
For the Three Months Ended December 31, 2010 and 2011
Millions of Yen
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Three months ended Three months ended
December 31, 2010 December 31, 2011
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Net Sales:
Products 218,751 202,859
Post sales and rentals 224,545 228,224
Other revenue 24,899 26,573
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Total 468,195 457,656
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Cost of sales:
Products 140,772 143,277
Post sales and rentals 111,228 111,899
Other revenue 19,634 19,720
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Total 271,634 274,896
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Gross profit 196,561 182,760
Selling, general and administrative expenses 180,584 190,137
Loss on impairment of goodwill -- 27,464
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Operating income (loss) 15,977 (34,841)
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Other (income) expenses:
Interest and dividend income (779) (438)
Interest expense 1,905 1,465
Foreign currency exchange (gain) loss, net 776 (56)
Other, net 796 4,372
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Total 2,698 5,343
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Income (loss) before income taxes and equity in earnings of 13,279 (40,184)
affiliates
Provision for income taxes:
Current 2,443 4,625
Deferred 2,113 (1,239)
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Total 4,556 3,386
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Equity in earnings of affiliates (8) 18
Consolidated net income (loss) 8,715 (43,552)
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Net income attributable to noncontrolling interest 887 1,220
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Net income (loss) attributable to Ricoh Company, Ltd. 7,828 (44,772)
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Yen Yen
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Per share of common stock:
Net income (loss) attributable to Ricoh Company, Ltd.
---------------------------------------------------------------------------------------------------------
Basic 10.79 (61.71)
Diluted 10.54 (61.71)
---------------------------------------------------------------------------------------------------------
Cash dividends paid per share 16.50 16.50
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Per American Depositary Share, each representing 5 shares of common stock:
Net income (loss) attributable to Ricoh Company, Ltd.
---------------------------------------------------------------------------------------------------------
Basic 53.95 (308.55)
Diluted 52.70 (308.55)
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Cash dividends paid per share 82.50 82.50
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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, 2010 and 2011
Millions of Yen
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Nine months ended Nine months ended
December 31, 2010 December 31, 2011
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss) 23,179 (48,765)
Adjustments to reconcile consolidated net income (loss) to net
cash provided by operating activities
Depreciation and amortization 69,518 65,968
Equity in earnings of affiliates, net of dividends received 15 (17)
Deferred income taxes 2,934 (15,217)
Losses on disposals and sales of property, plant and
equipment 813 506
Loss on impairment of long-lived assets -- 9,898
Loss on impairment of securities 205 5,024
Loss on impairment of goodwill -- 27,464
Pension and severance costs, less payment 889 (5,478)
Changes in assets and liabilities, net of effects from
acquisition-
Decrease in trade receivables 9,820 16,723
Increase in inventories (29,139) (33,766)
(Increase) Decrease in finance receivables 11,903 (13,751)
Decrease in trade payables (20,183) (21,847)
Decrease in accrued income taxes and
accrued expenses and other (6,111) (27,421)
Other, net 10,513 14,062
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Net cash used in (provided by) operating activities 74,356 (26,617)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment 732 829
Expenditures for property, plant and equipment, including
interest capitalized (48,674) (53,871)
Expenditures for intangible assets including interest
capitalized (12,153) (10,421)
Payments for purchases of available-for-sale securities (230) (127)
Proceeds from sales of available-for-sale securities 17 32
Increase in time deposits, net (192) (631)
Purchase of business, net of cash acquired (477) (15,089)
Other, net (3,187) (9,278)
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Net cash used in investing activities (64,164) (88,556)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term indebtedness 43,691 81,396
Repayment of long-term indebtedness (75,039) (59,102)
(Increase) Decrease in short-term borrowings, net (28,110) 103,949
Proceeds from issuance of long-term debt securities 79,741 --
Repayment of long-term debt securities (88,307) (226)
Dividends paid (23,943) (23,942)
Payment for purchase of treasury stock (138) (20)
Other, net (551) (585)
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Net cash provided by (used in) financing activities (92,656) 101,470
---------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (11,885) (8,767)
---------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (94,349) (22,470)
---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 242,165 179,169
---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 147,816 156,699
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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, 2011 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. Service revenues are recognized in accordance with the
contract period of each service contract.
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. 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.
6
(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 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.
7
(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.
(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.
8
(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.
(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.
9
(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.
Tangible assets and intangible assets of Production Printing business and
Digital Camera business are impaired to recoverable amount by Yen 9,898 million
which is included in selling and general administrative expenses in the
consolidated statement of income, as a result of worsening economic
circumstances. Ricoh estimated that the carrying amounts will not be recoverable
through future cash flows. The impairment losses are included in the results of
Imaging & Solutions and Other segment.
(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) 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.
(S) NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In June 2011, the FASB issued Accounting Standards Update ("ASU") 2011-05. This
ASU requires entities to present comprehensive income in either: (i) one
continuous financial statement or (ii) two separate but consecutive statements
that display net income and the components of other comprehensive income. Totals
and individual components of both net income and other comprehensive income must
be included in either presentation. It is effective for fiscal years beginning
on or after December 16, 2011 and
10
early adoption is permitted. However, ASU 2011-12 was issued in December 2011
that defers the effective date of the requirement to present separate line items
on the income statement for reclassification adjustments of items out of other
comprehensive income into net income. The FASB has not yet established a
timetable for its reconsideration. This adoption of ASU 2011-05 will not have
any effect on Ricoh's consolidated financial position and results of operations.
(T) RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform with the current year's presentation.
Loss on impairment of securities was included in other, net of cash flows from
operating activities in the consolidated statement of cash flows for the nine
months ended December 31, 2010, has been reclassified to conform with the
current year's presentation.
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2. SECURITIES
Investment securities as of March 31, 2011 and December 31, 2011 consist of the
following:
Millions of Yen
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March 31, 2011 December 31, 2011
--------------------------------------------------------------------------------------------------
Investment securities:
Available-for-sale securities 46,938 39,723
Non-marketable equity securities 1,971 1,989
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48,909 41,712
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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 March 31, 2011 and December 31, 2011 are as follows:
Millions of Yen
---------------------------------------------------------------------------------------------------------------------
March 31, 2011 December 31, 2011
---------------------------------------------------------------------------------------------------------------------
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 40,765 4,655 327 45,093 35,784 2,592 368 38,008
Corporate debt
securities 1,802 43 -- 1,845 1,629 86 -- 1,715
---------------------------------------------------------------------------------------------------------------------
42,567 4,698 327 46,938 37,413 2,678 368 39,723
---------------------------------------------------------------------------------------------------------------------
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, 2011
and December 31, 2011 are as follows:
Millions of Yen
------------------------------------------------------------------------------------------------------
March 31, 2011
------------------------------------------------------------------------------------------------------
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 1,341 261 238 66 1,579 327
------------------------------------------------------------------------------------------------------
Millions of Yen
------------------------------------------------------------------------------------------------------
December 31, 2011
------------------------------------------------------------------------------------------------------
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 1,957 286 336 82 2,293 368
------------------------------------------------------------------------------------------------------
12
Gross unrealized holding losses of available-for-sale securities as of March 31,
2011 and December 31, 2011 consist of 39 and 43 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, 2011 are as follows:
Millions of Yen
------------------
Cost Fair value
---------------------------------------------------------
Due after one year through five years 518 514
Over five years 1,111 1,201
---------------------------------------------------------
1,629 1,715
---------------------------------------------------------
There were no significant proceeds from the sales of available-for-sale
securities for the nine months ended December 31, 2010 and 2011.
There were no significant realized gains or losses on sales of
available-for-sale securities for the nine months ended December 31, 2010 and
2011.
There were no significant realized gains or losses on valuation of
available-for-sale securities for the nine months ended December 31, 2010. The
losses on impairment of available-for-sale securities are Yen 5,024 million and
Yen 4,952 million for the nine months ended December 31, 2011 and three months
ended December 31, 2011. The losses on impairment are included in other expense
in consolidated statement of income. The numbers of impaired available-for-sale
securities are 16 and 5 for the nine months ended December 31, 2011 and three
months ended December 31, 2011. The cause of the impairment is the decline of
the stock markets. Ricoh regards these losses as other-than-temporary
impairments because it does not believe that the quoted market price of such
securities would recover to its cost basis within the near term, as of December
31, 2011.
3. GOODWILL
In accordance with Accounting Standards Codification (ASC) 350, Ricoh performs
an annual impairment test of goodwill at December 31, which is the annual
goodwill impairment test date, instead of amortizing of goodwill.
ASC 350 requires a company to evaluate fair value of each reporting unit
including goodwill. In addition, a company is required to perform a
reconciliation of the aggregate fair value of reporting units and market
capitalization at the goodwill impairment test date. Ricoh uses Discounted Cash
Flow (DCF) method as one of income approach for evaluating fair value of each
reporting unit. Primarily because Ricoh's business plan which is used for DCF
method is not fully available at this time, the annual goodwill impairment test
has not been completed yet. However, Ricoh recognized the best estimate of the
impairment loss in amount of Yen 27,464 million in the third quarter financial
statements.
13
4. INCOME TAXES
The estimated annual effective tax rate for fiscal year ending March 31, 2012
was approximately (2) percent as of December 31, 2011. The estimated annual
effective tax rate differed from the statutory tax rate of approximately 41
percent, due primarily to the decrease of deferred tax assets in accordance with
the corporate tax rate change and the net increase in valuation allowance for
deferred tax assets.
The corporate tax rate has been changed due to new laws passed by the Japanese
government on November 30, 2011. As a result of this law, the statutory tax rate
applied when calculating deferred tax assets and liabilities of temporary
differences that are expected to be eliminated, after the fiscal year ending
March 31, 2013 and 2016 decreased from 40.8% to 38.6% and 35.8% respectively.
As a result, "Provision for income taxes" in consolidated statements of income
increased by 7,246 million yen in the third quarter ended December 31, 2011.
5. 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, 2011
---------------------------------------------------------------------------------
Service cost 9,563 9,307
Interest cost 11,031 10,617
Expected return on plan assets (6,446) (6,618)
Net amortization 2,277 1,641
---------------------------------------------------------------------------------
Total net periodic pension cost 16,425 14,947
---------------------------------------------------------------------------------
Millions of Yen
---------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2010 December 31, 2011
---------------------------------------------------------------------------------
Service cost 3,220 3,166
Interest cost 3,635 3,496
Expected return on plan assets (2,153) (2,162)
Net amortization 747 549
---------------------------------------------------------------------------------
Total net periodic pension cost 5,449 5,049
---------------------------------------------------------------------------------
6. EQUITY
The change in Ricoh shareholders' equity, noncontrolling interests and total
equity for the nine months ended December 31, 2010 and 2011 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.
14
Millions of Yen
--------------------------------------------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2010 December 31, 2011
--------------------------------------------------------------------------------------------------------------------------------
Ricoh Ricoh
Shareholders' Noncontrolling Shareholders' Noncontrolling
Equity Interests Total Equity Equity Interests Total Equity
--------------------------------------------------------------------------------------------------------------------------------
Equity, Beginning of Period 973,341 50,533 1,023,874 929,877 52,887 982,764
--------------------------------------------------------------------------------------------------------------------------------
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 972,931 50,141 1,023,072 929,877 52,887 982,764
--------------------------------------------------------------------------------------------------------------------------------
Net income (loss) 20,340 2,839 23,179 (52,135) 3,370 (48,765)
Unrealized losses on securities (1,271) (3) (1,274) (1,256) (9) (1,265)
Pension liability adjustments 1,540 1 1,541 (808) 8 (800)
Unrealized gains (losses) on
derivatives (85) (23) (108) (313) 30 (283)
Foreign currency translation
adjustments (61,852) 310 (61,542) (46,440) (190) (46,630)
--------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) (41,328) 3,124 (38,204) (100,952) 3,209 (97,743)
--------------------------------------------------------------------------------------------------------------------------------
Cash dividends on Common stock (23,943) -- (23,943) (23,942) -- (23,942)
Distributions to Noncontrolling
interests -- (650) (650) -- (603) (603)
Net changes in Treasury stock (68) -- (68) 17 -- 17
Wholly owned subsidiaries -- -- -- -- (198) (198)
Other -- -- -- (19) -- (19)
--------------------------------------------------------------------------------------------------------------------------------
Equity, End of Period 907,592 52,615 960,207 804,981 55,295 860,276
--------------------------------------------------------------------------------------------------------------------------------
Comprehensive incomes were Yen 7,382 million (losses) and Yen 43,582 million
(losses) for the three months ended December 31, 2010 and 2011, respectively.
Comprehensive incomes attributable to Ricoh Company, Ltd. were Yen 8,261 million
(losses), and Yen 44,785 million (losses), and comprehensive incomes
attributable to noncontrolling interests were Yen 879 million (gains) and Yen
1,203 million (gains) for the three months ended December 31, 2010 and 2011,
respectively.
7. DIVIDENDS
Cash dividends paid during the nine months ended December 31, 2011 is as
follows:
Resolved at the General meetings of Shareholders on June 24, 2011
-----------------------------------------------------------------
Total amount of dividends (million of yen) 11,971
Dividend per share of common stock (yen) 16.50
Record date March 31, 2011
Effective date June 27, 2011
Resource for dividend Retained earnings
-----------------------------------------------------------------
Resolved at the Board meeting on October 28, 2011
-----------------------------------------------------------------
Total amount of dividends (millions of yen) 11,970
Dividend per share of common stock (yen) 16.50
Record date September 30, 2011
Effective date December 1, 2011
Resource for dividend Retained earnings
-----------------------------------------------------------------
15
8. PER SHARE DATA
Ricoh shareholders' equity per share was Yen 1,281.70 and Yen 1,109.55 as of
March 31, 2011 and December 31, 2011, respectively. Dividends per share shown in
the consolidated statement of income are computed based on dividends paid for
the year ended March 31, 2011 and the third quarter ended December 31, 2011.
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, 2010 December 31, 2011
---------------------------------------------------------------------------------------------
Weighted average number of shares of common stock
outstanding 725,570 725,501
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds
- Due December 2011 17,992 --
---------------------------------------------------------------------------------------------
Diluted shares of common stock outstanding 743,562 725,501
---------------------------------------------------------------------------------------------
Millions of Yen
---------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2010 December 31, 2011
---------------------------------------------------------------------------------------------
Net income (loss) attributable to Ricoh Company, Ltd. 20,340 (52,135)
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds
- Due December 2011 (38) --
---------------------------------------------------------------------------------------------
Diluted net income (loss) attributable to Ricoh
Company, Ltd. 20,302 (52,135)
---------------------------------------------------------------------------------------------
Yen
-------------------------------------
Nine months ended Nine months ended
December 31, 2010 December 31, 2011
---------------------------------------------------------------------------------------------
Net income (loss) attributable to Ricoh Company, Ltd.
per share:
Basic:
Basic: Net income (loss) attributable to Ricoh
Company, Ltd. 28.03 (71.86)
Diluted:
Diluted: Net income (loss) attributable to Ricoh
Company, Ltd. 27.30 (71.86)
---------------------------------------------------------------------------------------------
Thousands of shares
---------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2010 December 31, 2011
---------------------------------------------------------------------------------------------
Weighted average number of shares of common stock
outstanding 725,554 725,500
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds
- Due December 2011 14,672 --
---------------------------------------------------------------------------------------------
Diluted shares of common stock outstanding 740,226 725,500
---------------------------------------------------------------------------------------------
16
Millions of Yen
---------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2010 December 31, 2011
---------------------------------------------------------------------------------------------
Net income (loss) attributable to Ricoh Company, Ltd. 7,828 (44,772)
Effect of dilutive securities:
Euro Yen Zero Coupon Convertible Bonds
- Due December 2011 (25) --
---------------------------------------------------------------------------------------------
Diluted net income attributable to Ricoh Company, Ltd. 7,803 (44,772)
---------------------------------------------------------------------------------------------
Yen
---------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2010 December 31, 2011
---------------------------------------------------------------------------------------------
Net income (loss) attributable to Ricoh Company, Ltd.
per share:
Basic:
Basic: Net income (loss) attributable to Ricoh
Company, Ltd. 10.79 (61.71)
Diluted:
Diluted: Net income (loss) attributable to Ricoh
Company, Ltd. 10.54 (61.71)
---------------------------------------------------------------------------------------------
Euro Yen Zero Coupon Convertible Bonds was excluded as anti-dilutive for the
nine months and three months ended December 31, 2011 due to Ricoh incurring a
net loss attributable to Ricoh Company, Ltd.
9. 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
17
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 are no Fair Value
Hedges derivative instruments effective at December 31, 2011 due to the maturity
of hedged instruments or contract.
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, 2011 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 23 million loss of the balance of accumulated other
comprehensive income (loss) as of December 31, 2011.
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.
Contract amounts of derivative instruments at March 31, 2011 and December 31,
2011 are shown in the following tables:
Millions of Yen
------------------------------------------------------------------------
March 31, 2011 December 31, 2011
------------------------------------------------------------------------
Interest rate swap agreements 284,444 315,671
Foreign currency contracts 211,249 178,956
Foreign currency options 3,555 34,657
------------------------------------------------------------------------
The location and fair value amounts of derivatives in consolidated balance sheet
are shown in the following tables:
18
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 March 31, 2011 December 31, 2011 March 31, 2011 December 31, 2011
------------------------------------------------------------------------------------------------------------------------------
Interest rate swap Deferred income Lease deposits
agreements taxes and other 4 -- and other -- --
------------------------------------------------------------------------------------------------------------------------------
Liability Derivatives March 31, 2011 December 31, 2011 March 31, 2011 December 31, 2011
------------------------------------------------------------------------------------------------------------------------------
Interest rate swap Accrued expenses Deferred income
agreements and other 73 32 taxes and other 2,766 2,520
------------------------------------------------------------------------------------------------------------------------------
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 March 31, 2011 December 31, 2011 March 31, 2011 December 31, 2011
------------------------------------------------------------------------------------------------------------------------------
Foreign currency
contracts Deferred income 1,497 1,590 Lease deposits -- 1,767
Foreign currency taxes and other and other
options 20 582 -- --
------------------------------------------------------------------------------------------------------------------------------
Total 1,517 2,172 -- 1,767
------------------------------------------------------------------------------------------------------------------------------
Liability Derivatives March 31, 2011 December 31, 2011 March 31, 2011 December 31, 2011
------------------------------------------------------------------------------------------------------------------------------
Interest rate swap
agreements 72 10 24 240
Foreign currency
contracts Accrued expenses 3,087 1,008 Deferred income 477 27
Foreign currency and other taxes and other
options 64 54 -- --
------------------------------------------------------------------------------------------------------------------------------
Total 3,223 1,072 501 267
------------------------------------------------------------------------------------------------------------------------------
Total fair value amounts of derivatives
Millions of Yen
----------------------------------------------------------------------
Fair value
----------------------------------------------------------------------
March 31, 2011 December 31, 2011
----------------------------------------------------------------------
Total Asset Derivatives 1,521 3,939
Total Liability Derivatives 6,563 3,891
---------------------------------------------------------------------
19
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
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 (133)
Foreign currency
exchange (gain)
Foreign currency contracts loss, net 3,810
Foreign currency
exchange (gain)
Foreign currency options loss, net 800
----------------------------------------------------------------------
Total 4,477
----------------------------------------------------------------------
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of 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) -- --
-----------------------------------------------------------------------------------------------------------
20
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)
----------------------------------------------------------------------------------------
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 (40)
Foreign currency
exchange (gain)
Foreign currency contracts loss, net 1,544
Foreign currency
exchange (gain)
Foreign currency options loss, net 1,114
----------------------------------------------------------------------
Total 2,618
----------------------------------------------------------------------
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, 2011
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 (353) Interest expense (40) -- --
-----------------------------------------------------------------------------------------------------------
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 -- Interest expense --
----------------------------------------------------------------------------------------
21
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on
Derivative
----------------------------------------------------------------------
Location Millions of Yen
----------------------------------------------------------------------
December 31, 2011
----------------------------------------------------------------------
Interest rate swap agreements Other, net (153)
Foreign currency
exchange (gain)
Foreign currency contracts loss, net 4,389
Foreign currency
exchange (gain)
Foreign currency options loss, net 572
----------------------------------------------------------------------
Total 4,808
----------------------------------------------------------------------
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,
2011 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 (291) Interest expense (7) -- --
-----------------------------------------------------------------------------------------------------------
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 -- Interest expense --
----------------------------------------------------------------------------------------
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on
Derivative
----------------------------------------------------------------------
Location Millions of Yen
----------------------------------------------------------------------
December 31, 2011
----------------------------------------------------------------------
Interest rate swap agreements Other, net 71
Foreign currency
exchange (gain)
Foreign currency contracts loss, net 928
Foreign currency
exchange (gain)
Foreign currency options loss, net 146
----------------------------------------------------------------------
Total 1,145
----------------------------------------------------------------------
22
10. COMMITMENTS AND CONTINGENT LIABILITIES
Ricoh was contingently liable for certain guarantees including employees housing
loans of (Y)60 million as of December 31, 2011.
As of December 31, 2011 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.
11. 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 carrying amounts of non-marketable equity
securities were (Y)1,971 million and (Y)1,989 million as of March 31, 2011 and
December 31, 2011, 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.
(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 , 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.
23
The estimated fair value of the financial instruments as of March 31, 2011 and
December 31, 2011are summarized as follows:
Millions of Yen
-------------------------------------------------------------------------------------
March 31, 2011 December 31, 2011
-------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
-------------------------------------------------------------------------------------
Investment securities 48,909 48,909 41,712 41,712
Installment loans 72,634 73,769 81,178 82,446
Long-term indebtedness (479,422) (475,116) (537,065) (535,041)
Interest rate swap agreements, net (2,931) (2,931) (2,802) (2,802)
Foreign currency contracts, net (2,067) (2,067) 2,322 2,322
Foreign currency options, net (44) (44) 528 528
-------------------------------------------------------------------------------------
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.
12. 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.
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 March
31, 2011 and December 31, 2011.
Millions of Yen
----------------------------------------------------------------------------
March 31, 2011
----------------------------------------------------------------------------
Level 1 Level 2 Level 3 Total
----------------------------------------------------------------------------
Assets:
Available-for-sale securities:
Domestic equity securities 38,243 -- -- 38,243
Foreign equity securities 6,850 -- -- 6,850
Foreign corporate bonds 1,845 -- -- 1,845
Derivative instruments
Interest rate swap agreements -- 4 -- 4
Foreign currency contracts -- 1,497 -- 1,497
Foreign currency options -- 20 -- 20
----------------------------------------------------------------------------
Total assets 46,938 1,521 -- 48,459
----------------------------------------------------------------------------
Liabilities:
Derivatives instruments
Interest rate swap agreements -- 2,935 -- 2,935
Foreign currency contracts -- 3,564 -- 3,564
Foreign currency options -- 64 -- 64
----------------------------------------------------------------------------
Total liabilities -- 6,563 -- 6,563
----------------------------------------------------------------------------
24
Millions of Yen
----------------------------------------------------------------------------
December 31, 2011
----------------------------------------------------------------------------
Level 1 Level 2 Level 3 Total
----------------------------------------------------------------------------
Assets:
Available-for-sale securities:
Domestic equity securities 31,950 -- -- 31,950
Foreign equity securities 6,058 -- -- 6,058
Foreign corporate bonds 1,715 -- -- 1,715
Derivative instruments
Interest rate swap agreements -- -- -- --
Foreign currency contracts -- 3,357 -- 3,357
Foreign currency options -- 582 -- 582
----------------------------------------------------------------------------
Total assets 39,723 3,939 -- 43,662
----------------------------------------------------------------------------
Liabilities:
Derivatives instruments
Interest rate swap agreements -- 2,802 -- 2,802
Foreign currency contracts -- 1,035 -- 1,035
Foreign currency options -- 54 -- 54
----------------------------------------------------------------------------
Total liabilities -- 3,891 -- 3,891
----------------------------------------------------------------------------
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.
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.
Assets and liabilities measured at fair value on a nonrecurring basis
During the nine months ended December 31, 2011, a part of the long-lived assets
associated with the Production Printing business with a carrying amount of Yen
9,898 million, and goodwill of the Production Printing business with a carrying
amount of Yen 27,464 million were fully impaired.
These measurements are classified as level 3 since significant unobservable
inputs, such as the conditions of the assets or projections of future cash
flows, were considered in the fair value measurements.
25
13. 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. 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 Millions of Yen
---------------------------------------------------------------------------------------
Third quarter ended Third quarter ended
March 31, 2011 December 31, 2011
---------------------------------------------------------------------------------------
Current maturities of long-term finance
receivables, net 8,460 8,510
Long-term finance receivables, net 15,849 15,944
Current maturities of long-term indebtedness 7,044 7,050
Long-term indebtedness 13,197 13,210
14. CREDIT QUALITY OF FINANCING RECEIVABLES AND THE ALLOWANCE FOR DOUBTFUL
RECEIVABLES
(A) FINANCING RECEIVABLES AND ALLOWANCE FOR DOUBTFUL RECEIVABLES
The financial subsidiaries of the Company have financing receivables and Ricoh
classifies them into three categories; "lease receivables", "installment loans"
and "installment receivables and other". These receivables consist of a large
number of smaller-balance homogenous loans, lease receivables and installment
receivables. Financing receivables classified as "lease receivables" and
"installment receivables and other" are resulting from sale and lease
transactions of mainly office equipment. Financing receivables classified
as "installment loans" are resulting from financial services.
Ricoh continuously monitors overdue financing receivables, which Ricoh considers
as uncollectible risk receivables. For financing receivables with specific
customer collection issues, Ricoh individually evaluates their collectability in
order to determine the amount of allowance for doubtful receivables. For other
financing receivables, Ricoh categorizes these receivables into groups by their
nature and characteristics. Ricoh collectively evaluates the collectability by
each group, using its historical experience of write-off and determines the
amount of allowance for doubtful receivables.
26
Financing receivables and allowance for doubtful receivables as of December 31,
2011 are as follows:
Millions of Yen
------------------------------------------------------------------------------
December 31, 2011
------------------------------------------------------------------------------
Installment
receivables
Lease Installment and
receivables loans other Total
------------------------------------------------------------------------------
Allowance for doubtful receivables:
Beginning balance 10,527 1,772 2,485 14,784
------------------------------------------------------------------------------
Charge-offs (1,694) (48) (46) (1,788)
Recoveries (2) -- -- (2)
Provision 1,613 150 (23) 1,740
Translation adjustment (291) -- (42) (333)
Ending balance 10,153 1,874 2,374 14,401
------------------------------------------------------------------------------
Allowance for doubtful receivables:
Individually evaluated 4,040 792 1,176 6,008
Collectively evaluated 6,113 1,082 1,198 8,393
------------------------------------------------------------------------------
Financing receivables:
Individually evaluated 62,817 910 3,566 67,293
Collectively evaluated 530,621 82,142 47,266 660,029
------------------------------------------------------------------------------
Total:Financing receivables 593,438 83,052 50,832 727,322
------------------------------------------------------------------------------
(B) AGE ANALYSIS
Ricoh ascribes the fact of past due to credit quality indicators and classifies
financing receivables into Overdue and Current.
Analysis of the age of the recorded financing receivables as of March 31,
2011and December 31, 2011 are as follows:
Millions of Yen
------------------------------------------------------------------------------
March 31, 2011
------------------------------------------------------------------------------
Installment
receivables
Lease Installment and
receivables loans other Total
------------------------------------------------------------------------------
Current 584,913 74,373 48,544 707,830
Overdue 7,433 33 1,661 9,127
------------------------------------------------------------------------------
Total:Financing receivables 592,346 74,406 50,205 716,957
------------------------------------------------------------------------------
Millions of Yen
------------------------------------------------------------------------------
December 31, 2011
------------------------------------------------------------------------------
Installment
receivables
Lease Installment and
receivables loans other Total
------------------------------------------------------------------------------
Current 587,948 83,023 49,012 719,983
Overdue 5,490 29 1,820 7,339
------------------------------------------------------------------------------
Total:Financing receivables 593,438 83,052 50,832 727,322
------------------------------------------------------------------------------
15. 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
27
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, 2010 and 2011, respectively.
(A) OPERATING SEGMENT INFORMATION
Millions of Yen
--------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2010 December 31, 2011
--------------------------------------------------------------------------------------------
Segment Sales:
Imaging & Solutions 1,264,407 1,225,384
Industrial Products 86,283 77,775
Other 92,508 97,070
Intersegment transaction (4,147) (3,688)
--------------------------------------------------------------------------------------------
Total Segment Sales 1,439,051 1,396,541
--------------------------------------------------------------------------------------------
Segment Profit (loss):
Imaging & Solutions 108,104 20,624
Industrial Products 775 (2,605)
Other (1,533) (3,597)
--------------------------------------------------------------------------------------------
Total Segment Profit (loss) 107,346 14,422
--------------------------------------------------------------------------------------------
Reconciling Items:
Corporate expenses and Elimination (53,357) (51,039)
Interest and dividend income 2,154 1,940
Interest expense (5,816) (4,883)
Foreign currency exchange loss, net (8,206) (4,274)
Other, net (777) (4,104)
--------------------------------------------------------------------------------------------
Income (loss) before Income Taxes and Equity in Earnings of
Affiliates 41,344 (47,938)
--------------------------------------------------------------------------------------------
Millions of Yen
--------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2010 December 31, 2011
--------------------------------------------------------------------------------------------
Segment Sales:
Imaging & Solutions 413,424 396,279
Industrial Products 27,949 25,061
Other 28,378 37,740
Intersegment transaction (1,556) (1,424)
--------------------------------------------------------------------------------------------
Total Segment Sales 468,195 457,656
--------------------------------------------------------------------------------------------
Segment Profit (loss):
Imaging & Solutions 35,103 (17,056)
Industrial Products (271) (439)
Other (1,069) (753)
--------------------------------------------------------------------------------------------
Total Segment Profit (loss) 33,763 (18,248)
--------------------------------------------------------------------------------------------
Reconciling Items:
Corporate expenses and Elimination (17,786) (16,593)
Interest and dividend income 779 438
Interest expense (1,905) (1,465)
Foreign currency exchange loss, net (776) 56
Other, net (796) (4,372)
--------------------------------------------------------------------------------------------
Income (loss) before Income Taxes and Equity in Earnings of
Affiliates 13,279 (40,184)
--------------------------------------------------------------------------------------------
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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, 2010 December 31, 2011
----------------------------------------------------------------------------------------------
Sales-
Japan 649,422 644,880
The Americas 389,424 346,588
Europe 303,531 302,631
Other 96,674 102,442
----------------------------------------------------------------------------------------------
Consolidated 1,439,051 1,396,541
----------------------------------------------------------------------------------------------
Millions of Yen
----------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2010 December 31, 2011
----------------------------------------------------------------------------------------------
Sales-
Japan 210,357 210,379
The Americas 124,567 112,348
Europe 102,480 100,691
Other 30,791 34,238
----------------------------------------------------------------------------------------------
Consolidated 468,195 457,656
----------------------------------------------------------------------------------------------
16. 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, 2010 and 2011:
Millions of Yen
--------------------------------------------------------------------------------------------
Nine months ended Nine months ended
December 31, 2010 December 31, 2011
--------------------------------------------------------------------------------------------
Research and development costs 81,349 89,313
Advertising costs 8,853 8,639
Shipping and handling costs 13,834 17,327
----------------------------------------------------------------------------------------------
Millions of Yen
--------------------------------------------------------------------------------------------
Three months ended Three months ended
December 31, 2010 December 31, 2011
--------------------------------------------------------------------------------------------
Research and development costs 27,352 29,806
Advertising costs 3,662 3,156
Shipping and handling costs 4,925 6,116
----------------------------------------------------------------------------------------------
29