-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nn5I0RGvqX6KiF+qPJawskOwMcjUctPGOw7pBje5I7ANN2XgQo9/IiRopd5EN6JD 6FdYtJzssrVQ6ImVmW9vug== 0000317891-08-000023.txt : 20080627 0000317891-08-000023.hdr.sgml : 20080627 20080627172335 ACCESSION NUMBER: 0000317891-08-000023 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20080627 FILED AS OF DATE: 20080627 DATE AS OF CHANGE: 20080627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RICOH CO LTD CENTRAL INDEX KEY: 0000317891 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 000000000 STATE OF INCORPORATION: M0 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 20-F SEC ACT: 1934 Act SEC FILE NUMBER: 002-68279 FILM NUMBER: 08923568 BUSINESS ADDRESS: STREET 1: 13-1, GINZA 8-CHOME STREET 2: CHUO-KU CITY: TOKYO 104-8222 JAPAN STATE: M0 ZIP: 00000 BUSINESS PHONE: 81-3-6278-5241 MAIL ADDRESS: STREET 1: 13-1, GINZA 8-CHOME STREET 2: CHUO-KU CITY: TOKYO 104-8222 JAPAN STATE: M0 ZIP: 00000 20-F 1 r20f.txt FORM 20-F SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 20 - F ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2008 Commission file number 2 - 68279 KABUSHIKI KAISHA RICOH (Exact name of registrant as specified in its charter) RICOH COMPANY, LTD. (Translation of registrant's name into English) Japan (Jurisdiction of incorporation or organization) 13-1, Ginza 8-chome, Chuo-ku, Tokyo 104-8222, Japan (Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act. Name of each exchange on Title of each class which registered None None Securities registered or to be registered pursuant to Section 12(g) of the Act. None (Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. Common Stock* (Title of Class) *922,992 American Depositary Shares evidenced by American Depositary Receipts, each American Depositary Share representing 5 shares of Common Stock of Ricoh Company, Ltd. Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. Common stock outstanding as of March 31, 2008: 729,951,250shares (excluding 23,960,828 shares of Treasury Stock) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [_]. If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes [_] No [X]. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [X] Accelerated filer [_] Non-accelerated filer [_]. Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 [_] Item 18 [X]. If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]. Defined Terms, Conventions and Presentation of Financial Information - -------------------------------------------------------------------- On June 26, 2008, the noon buying rate for cable transfers in New York City as certified for customs purposes by the Federal Reserve Bank of New York for the Japanese Yen to the U.S. Dollar was Yen 107.29 = U.S.$1.00. In this document, the term "Company" refers to Ricoh Company, Ltd., the registrant, and "Ricoh" refers to the Company and its consolidated subsidiaries, unless the context otherwise indicates. Ricoh's fiscal year end is March 31. In this document "fiscal year 2008" refers to Ricoh's fiscal year ended March 31, 2008, and other fiscal years of Ricoh are referred to in a corresponding manner. As used in this annual report, "U.S. GAAP" means U.S. generally accepted accounting principles. Cautionary Statement With Respect to Forward-Looking Statements - --------------------------------------------------------------- Statements made in this annual report with respect to Ricoh's current plans, estimates, strategies and beliefs and other statements that are not historical facts are or may be deemed to be forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, about the future performance of Ricoh. These forward-looking statements are made in reliance upon the protections provided by such acts for forward-looking statements. Forward-looking statements include but are not limited to those using words such as "believe," "expect," "plans," "strategy," "prospects," "forecast," "estimate," "project," "anticipate," "may" or "might" and words of similar meaning in connection with a discussion of future operations or financial performance. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management's assumptions and beliefs in light of the information currently available to it. Ricoh cautions you that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. You also should not rely on any obligation of Ricoh to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Ricoh disclaims any such obligation. Risks and uncertainties that might affect Ricoh include, but are not limited to (i) general economic conditions in Ricoh's markets, particularly levels of consumer spending; (ii) exchange rates, particularly between the Japanese Yen and the U.S. Dollar, the Euro, and other currencies in which Ricoh makes significant sales or in which Ricoh's assets and liabilities are denominated; (iii) Ricoh's ability to continue to design and develop products and services, and win acceptance of its products and services which are offered in highly competitive markets characterized by continual introduction of new products, rapid development in new technology, and consumer preferences that are subjective and likely to change; (iv) Ricoh's ability to successfully implement strategies for its office equipment business, such as further globalization of its operations to increase account sales to corporate clients, reinforcement of the color printer line-up to meet growing demand for color products among its office users, implementation of optimal printing solutions for customers' digitally networked offices and enhancement of printing capabilities centered on multi-functional printers ("MFPs"), and implementation of optimal localization of manufacturing operations so that such operations are closer to the customer; (v) Ricoh's ability to continuously devote sufficient resources to research and development, and capital expenditures for digital and networking equipment, such as digital plain paper copiers ("PPCs"), MFPs, laser printers and GELJET printers; (vi) the success of Ricoh's alliances with various computer manufacturers which Ricoh may engage in alliances with in the future; and (vii) the outcome of contingencies. Important information regarding risks and uncertainties is also set forth elsewhere in this annual report, including in "Risk Factors" included in "Item 3. Key Information," "Item 4. Information on the Company," "Item 5. Operating and Financial Review and Prospects" and "Item 11. Quantitative and Qualitative Disclosures About Market Risk." TABLE OF CONTENTS
PART I Item 1. Identity of Directors, Senior Management and Advisers.................... 1 Item 2. Offer Statistics and Expected Timetable.................................. 1 Item 3. Key Information.......................................................... 1 Item 4. Information on the Company............................................... 10 Item 4A. Unresolved Staff Comments................................................ 28 Item 5. Operating and Financial Review and Prospects............................. 31 Item 6. Directors, Senior Management and Employees............................... 70 Item 7. Major Shareholders and Related Party Transactions........................ 90 Item 8. Financial Information.................................................... 91 Item 9. The Offer and Listing.................................................... 91 Item 10. Additional Information................................................... 94 Item 11. Quantitative and Qualitative Disclosures About Market Risk............... 108 Item 12. Description of Securities Other Than Equity Securities................... 111 PART II Item 13. Defaults, Dividend Arrearages and Delinquencies.......................... 111 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds .................................................. 111 Item 15. Controls and Procedures.................................................. 112 Item 16 [RESERVED] .............................................................. 113 Item 16A. Audit Committee Financial Expert......................................... 113 Item 16B. Code of Ethics........................................................... 113 Item 16C. Principal Accountant Fees and Services................................... 113 Item 16D. Exemptions from the Listing Standards for Audit Committees............... 116 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers... 116 PART III Item 17. Financial Statements..................................................... 116 Item 18. Financial Statements..................................................... 116 Item 19. Exhibits................................................................. 116
Item 1. Identity of Directors, Senior Management and Advisers ----------------------------------------------------- Not applicable. Item 2. Offer Statistics and Expected Timetable --------------------------------------- Not applicable. Item 3. Key Information --------------- A. Selected Financial Data. The following selected consolidated financial data have been derived from the audited consolidated financial statements of Ricoh prepared in accordance with U.S. generally accepted accounting principles as of each of the dates and for each of the periods indicated below. This information should be read in conjunction with Ricoh's audited consolidated balance sheets as of March 31, 2007 and 2008, the related consolidated statements of income, shareholders' investment and cash flows for the three years ended March 31, 2006, 2007 and 2008 and the notes thereto that appear elsewhere in this annual report.
Millions of Yen except per share amounts and number of shares Year ended March 31, --------------------------------------------------------------------------------------- 2004 2005 2006 2007 2008 --------------- --------------- --------------- --------------- --------------- INCOME STATEMENT DATA: Net sales: 1,773,306 1,807,406 1,909,238 2,068,925 2,219,989 Operating income 145,405 131,109 148,584 174,380 181,506 Income from continuing operations 89,049 80,537 95,022 106,224 106,463 Net income 91,766 83,143 97,057 111,724 106,463 PER AMERICAN DEPOSITARY SHARE: Net income (basic) 618.15 563.20 661.65 765.50 730.20 Net income (diluted) 618.15 563.20 661.65 759.45 710.75 BALANCE SHEET DATA: Total assets 1,852,793 1,953,669 2,041,183 2,243,406 2,214,368 Shareholders' investment 795,131 862,998 960,245 1,070,913 1,080,196 Common stock 135,364 135,364 135,364 135,364 135,364 Weighted average number of shares outstanding 742,292,806 738,160,042 733,434,414 729,744,656 729,010,475 Cash dividends declared Per American Depositary Share: Interim 40.00 50.00 60.00 65.00 80.00 ($0.36) ($0.49) ($0.50) ($0.56) ($0.72) Year-end 50.00 50.00 60.00 75.00 85.00 ($0.46) ($0.45) ($0.52) ($0.61) ($0.80)
-1-
Millions of Yen except per share amounts and number of shares Year ended March 31, --------------------------------------------------------------------------------------- 2004 2005 2006 2007 2008 --------------- --------------- --------------- --------------- --------------- At year-end: Cash and cash equivalents 203,039 186,857 187,055 255,737 170,607 Capital investments 75,504 84,699 102,049 85,800 85,215 Long-term indebtedness, excluding current installment 281,570 226,567 195,626 236,801 225,930
Notes: Each American Depositary Share represents five shares of Ricoh Common Stock. In the preceding table, cash dividends declared in U.S. Dollars are based on the exchange rates at each respective payment date, using the noon buying rates for cable transfer in Japanese Yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York. On June 26, 2008, the noon buying rate for cable transfers in New York City as certified for customs purposes by the Federal Reserve Bank of New York for the Japanese Yen to the U.S. Dollar was Yen 107.29 = U.S.$1.00. The following table sets forth the exchange rates for the Japanese Yen and the U.S. Dollar based on the noon buying rate for cable transfers in Japanese Yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York during the previous six months and prior five fiscal years: December January February March April May 2007 2008 2008 2008 2008 2008 -------- ------- -------- ------ ------ ------ High 109.68 105.42 104.19 96.88 100.87 103.01 Low 114.45 109.70 108.15 103.99 104.56 105.52 Year ended March 31, ------------------------------------------ 2004 2005 2006 2007 2008 ------ ------ ------ ------ ------ Year-end 104.18 107.22 117.48 117.56 99.85 Average* 112.75 107.28 104.64 116.55 113.61 High 104.18 102.26 104.41 110.07 96.88 Low 120.55 114.30 120.93 121.81 124.09 * The average Japanese Yen exchange rates represent average noon buying rate on the last business day of each month during the respective period. B. Capitalization and Indebtedness. Not applicable. -2- C. Reasons for the Offer and Use of Proceeds. Not applicable. D. Risk Factors. Ricoh is a global manufacturer of office equipment and conducts business on a global scale. As such, Ricoh is exposed to various risks which include the risks listed below. Although certain risks that may affect Ricoh's businesses are listed in this section, this list is not exhaustive. Ricoh's business may in the future also be affected by other risks that are currently unknown or that are not currently considered significant or material. In addition, this section contains forward-looking statements that are subject to the "Cautionary Statement with Respect to Forward-Looking Statements" appearing elsewhere in this annual report. RICOH'S SUCCESS WILL DEPEND ON ITS ABILITY TO RESPOND TO RAPID TECHNOLOGICAL CHANGES IN THE DOCUMENT IMAGING AND MANAGEMENT INDUSTRY The document imaging and management industry includes products such as copiers, printers, facsimile machines and scanners. The technology used in this industry changes rapidly and products in this industry will often require frequent and timely product enhancements or have a short product life cycle. Most of Ricoh's products are a part of this industry and as such Ricoh's success will depend on its ability to respond to such technological changes in the industry. To remain competitive in this industry, Ricoh invests a significant amount of resources and capital every year in research and development activities. Despite this investment, the process of developing new products or technologies is inherently complex and uncertain and there are a number of risks that Ricoh is subject to, including the following: . No assurances can be made that Ricoh will successfully anticipate whether its products or technologies will satisfy its customers' needs or gain market acceptance; . No assurances can be made that the introduction of more advanced products that also possess the capabilities of existing products will not adversely affect the sales performance of each such product; . No assurances can be made that Ricoh will be able to procure raw materials and parts necessary for new products or technologies from its suppliers at competitive prices; . No assurances can be made that Ricoh will be able to successfully manage the distribution system for its new products to eliminate the risk of loss resulting from a failure to take advantage of market opportunities; . No assurances can be made that Ricoh will succeed in marketing any newly developed product or technology; and . No assurances can be given that Ricoh will be able to respond adequately to changes in the industry. -3- Ricoh's failure to respond to any risks associated with this industry, including those described above, may reduce Ricoh's future growth and profitability and may adversely affect Ricoh's financial results and condition. In addition to the above general risks, Ricoh is exposed to the following specific risks relating to the document imaging and management industry: Digital Technology ------------------ Among the various technologies used in the document imaging and management industry, Ricoh believes the successful development of digital technology is one of the most essential factors in attaining a competitive advantage. Ricoh currently is a leader in digital technology and believes that the importance of digital technology used in office equipment, including copiers, printers, facsimiles and scanners, will continue to grow in the future. While most of Ricoh's PPCs sold in Japan and overseas are already digital, Ricoh believes that the digital technology used in connection with digital copiers and other digital products will continue to develop and that competition with respect to digital products will intensify. There is no assurance that Ricoh will continue to be in the forefront of digital technology despite its commitment to invest in research and development activities in this area. Failure of Ricoh to adequately develop digital technology may adversely affect Ricoh's financial results and condition. Multi-Functional Equipment -------------------------- Ricoh believes that the document imaging and management industry is moving towards a multi-functional office environment where various office equipment (including copiers, facsimile machines, printers, scanners and personal computers) become more interdependent on each other due to the increasing use of digital technology and initiatives taken by many offices to eventually become a "paperless office." As a result, certain existing office equipment may either be consolidated into multi-functional equipment or may be linked together electronically to perform various office functions. Although Ricoh already manufactures certain multi-functional equipment, as a result of this trend towards multi-functional equipment, some of Ricoh's products may become obsolete while other products may require substantial product enhancements, requiring technologies currently unavailable within Ricoh. No assurances can be made that Ricoh will be able to successfully adjust to such changes. RICOH MUST SUCCESSFULLY OPERATE IN HIGHLY COMPETITIVE MARKETS The document imaging and management industry, including the copier industry, is intensely competitive. Ricoh expects to face increased competition in the various markets in which it operates. Currently, Ricoh's competitors include other large manufacturers and distributors of office equipment. In addition, as digital and other new technology develops and as new office equipment products using these newly developed technologies gain increased market acceptance, Ricoh may find itself competing with new competitors that develop such new technologies, including computer software and hardware manufacturers and distributors. Accordingly, it is possible that new -4- competitors or alliances among existing and new competitors may emerge and rapidly acquire significant market share. While Ricoh believes it is a leading manufacturer and distributor in the document imaging and management industry and it intends to maintain its position, no assurances can be made that it will continue to compete effectively in the future. Pricing pressures or loss of potential customers resulting from Ricoh's failure to compete effectively may adversely affect Ricoh's financial results and condition. RICOH IS SUBJECT TO THE RISKS OF INTERNATIONAL OPERATIONS AND THE RISKS OF OVERSEAS EXPANSION A substantial portion of Ricoh's manufacturing and marketing activity is conducted outside of Japan, including in the United States, Europe, and in developing and emerging markets such as China. There are a number of risks inherent in doing business in such overseas markets, including the following: . unfavorable political or economical factors; . fluctuations in foreign currency exchange rates; . potentially adverse tax consequences; . unexpected legal or regulatory changes; . lack of sufficient protection for intellectual property rights; . difficulties in recruiting and retaining personnel, and managing international operations; and . less developed infrastructure. Ricoh's inability to manage successfully the risks inherent in its international activities could adversely affect its business, financial condition and operating results. In addition, while Ricoh plans to continue to expand its business worldwide and increase overseas sales, because of the risks associated with conducting an international operation (including the risks listed above), there can be no assurances that Ricoh's overseas expansion will be successful or have a positive effect on Ricoh's financial results and condition. ECONOMIC TRENDS IN RICOH'S MAJOR MARKETS MAY ADVERSELY AFFECT RICOH'S SALES Demand for Ricoh's products is affected by cyclical changes in the economies of Ricoh's major markets, including Japan, the United States and Europe. Economic downturns and declines in consumption in Ricoh's major markets may adversely affect Ricoh's financial results and condition. FOREIGN EXCHANGE FLUCTUATIONS AFFECT RICOH'S RESULTS Local currency-denominated financial results in each of the Company's subsidiaries around the world are translated into Japanese Yen by applying the average market rate during each financial period and recorded on Ricoh's consolidated statements of income. Local currency-denominated assets and liabilities are translated into Japanese Yen by applying the market rate at the end of each financial period and recorded on -5- Ricoh's consolidated balance sheets. Accordingly, the financial results, assets and liabilities are subject to foreign exchange fluctuations. In addition, operating profits and losses are highly sensitive to the fluctuations in the value of the Japanese Yen because the high volume of Ricoh's production and sales activities in the Americas, Europe and Other, such as China, results in a large proportion of revenues and costs denominated in local currencies. Although Ricoh engages in hedging transactions such as forward contracts with several financial institutions having credit ratings satisfactory to Ricoh to minimize the negative effects of short-term fluctuations in foreign exchange rates among major currencies such as the U.S. Dollar, the Euro and Japanese Yen, mid-to-long-term volatile changes in the exchange rate levels make it difficult for Ricoh to execute planned procurement, production, logistics, and sales activities and may adversely affect Ricoh's financial results and condition. CRUDE OIL PRICE FLUCTUATIONS AFFECT RICOH'S RESULTS Many of the parts or materials used in manufacturing Ricoh's products are made from oil. If the price of crude oil rises, the purchase price of such product parts or materials may increase as well. Furthermore, a rise in the price of crude oil may lead to an increase in shipping and handling costs due in part to a rise in the cost of fuel and the cost of utilities. Ricoh may not be able to pass these incremental costs onto the sales price of its products. Such fluctuations in crude oil prices may therefore adversely affect Ricoh's financial position and results of operations. RICOH IS SUBJECT TO GOVERNMENT REGULATION THAT CAN LIMIT ITS ACTIVITIES OR INCREASE ITS COST OF OPERATIONS Ricoh is subject to various governmental regulations and approval procedures in the countries in which it operates. For example, Ricoh may be required to obtain approvals for its business and investment plans, be subject to export regulations and tariffs, as well as rules and regulations relating to commerce, antitrust, patent, consumer and business taxation, exchange control, and environmental and recycling laws. Ricoh has established a Corporate Social Responsibility Office to heighten awareness of the importance of corporate social responsibility. Through this office, Ricoh involves its employees in various activities designed to ensure compliance with applicable regulations as part of its overall risk management and compliance program. However, if Ricoh is unable to comply with any of these regulations or fails to obtain the requisite approvals, Ricoh's activities in such countries may be restricted. In addition, even if Ricoh is able to comply with these regulations, compliance can result in increased costs. In either event, Ricoh's financial results and condition may be adversely affected. RICOH IS SUBJECT TO INTERNAL CONTROL EVALUATIONS AND ATTESTATION OVER FINANCIAL REPORTING UNDER SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002 The United States Securities and Exchange Commission (the "SEC"), as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every company that files reports with the SEC to include a management report on such -6- company's internal controls over financial reporting in its annual report. In addition, the company's independent registered public accounting firm must publicly attest to the effectiveness of the company's internal control over financial reporting. Ongoing compliance with these requirements is complex, costly and time-consuming. If Ricoh fails to maintain effective internal control over financial reporting, Ricoh's management does not timely assess the adequacy of such internal control, or Ricoh's independent registered public accounting firm does not timely attest to the evaluation or issues a qualified opinion, Ricoh could be subject to regulatory sanctions or could face adverse reactions in the financial markets due to a loss of investor confidence. RICOH'S BUSINESS DEPENDS ON PROTECTING ITS INTELLECTUAL PROPERTY RIGHTS Ricoh owns or licenses a number of intellectual property rights in the field of office equipment automation and, when Ricoh believes it is necessary or desirable, obtains additional licenses for the use of other parties' intellectual property rights. If Ricoh fails to protect, maintain or obtain such rights, its performance and ability to compete may be adversely affected. Ricoh has a program in place under which company employees are compensated for any valuable intellectual property rights arising out of any inventions developed by them during the course of their employment with Ricoh. While unlikely, management believes that there could arise instances in the future where Ricoh may become the subject of legal actions or proceedings where claims alleging inadequate compensation are asserted by company employees. RICOH IS DEPENDENT ON SECURING AND RETAINING SPECIALLY SKILLED PERSONNEL Ricoh believes that it can continue to remain competitive by securing and retaining additional personnel who are highly skilled in the fields of management and information technology. However, the number of skilled personnel is limited and the competition for attracting and retaining such personnel is intense, particularly in the information technology industry. Securing and retaining skilled personnel in the information technology industry is especially important for Ricoh to compete effectively with its competitors as expectations and market standards for office equipment become more technologically advanced. Ricoh cannot assure that it will be able to successfully secure and retain additional skilled personnel. RICOH MAY BE ADVERSELY AFFECTED BY ITS EMPLOYEE BENEFIT OBLIGATIONS With respect to its employee benefit obligations and plan assets, Ricoh accrues the cost of such benefits based on applicable accounting policies and funds such benefits in accordance with governmental regulations. Currently, there is no immediate and significant funding requirement; however, if returns from investment assets decrease due to market conditions, such as the fluctuations in the stock or bond markets, additional funding and accruals may be required. Such additional funding and accruals may adversely affect Ricoh's financial position and results of operations. -7- RICOH'S OPERATIONS ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS Ricoh's operations are subject to many environmental laws and regulations governing, among other things, air emissions, wastewater discharges, the use and handling of hazardous substances, waste disposal, product recycling, and soil and ground-water contamination. Ricoh faces risks of environmental liability in our current and historical manufacturing activities. Costs associated with future additional environmental compliance or remediation obligations could adversely affect Ricoh's business, operating results, and financial condition. RISKS ASSOCIATED WITH RICOH'S EQUIPMENT FINANCING BUSINESS MAY ADVERSELY AFFECT RICOH'S FINANCIAL CONDITION Ricoh provides financing to some of its customers in connection with its equipment sales and leases. Ricoh evaluates the creditworthiness and the amount of credit extended to a customer prior to the financing arrangement and during the financing term on a regular basis. Depending on such evaluations, Ricoh makes adjustments to such extensions of credit as it deems necessary to minimize any potential risks of concentrating credit risk or non-payment of credit. Despite the application of these monitoring procedures, no assurances can be made that Ricoh will be able to fully collect on such extensions of credit due to unforeseeable defaults by its customers. In addition, these financing arrangements that Ricoh enters into with its customers result in long-term receivables bearing a fixed rate of interest. However, Ricoh finances these financing arrangements primarily with short-term borrowings subject to a variable interest rate. Although Ricoh engages in hedging activities, Ricoh is not able to fully hedge this interest rate mismatch. If Ricoh is unable to successfully manage these risks associated with its equipment financing business, Ricoh's financial results and condition may be adversely affected. RICOH MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT COULD SIGNIFICANTLY AFFECT ITS FINANCIAL CONDITION Ricoh may be held responsible for any defects that occur with respect to its products and services. Based on the defect, Ricoh may be liable for significant damages, which may adversely affect its financial results and condition. Furthermore, as Ricoh increasingly provides products and services utilizing sophisticated and complex technologies, such defects may occur more frequently. Such potential increase in defects, which could result in an increase in Ricoh's liability, may adversely affect its financial results and condition. In addition, negative publicity concerning these defects could make it more difficult for Ricoh to attract and maintain customers to purchase Ricoh products and services. As a result, Ricoh's financial results and condition may be adversely affected. -8- RICOH'S PERFORMANCE CAN BE AFFECTED BY ALLIANCES WITH OTHER ENTITIES Ricoh engages in alliances with other entities to create various products and services to fulfill customer demands. Ricoh believes that an alliance is an effective method for timely development of new technology and products using management resources of both parties. However, if Ricoh's interest differs from other parties' interests due to financial or other reasons, Ricoh may be unable to maintain the alliance. Failure to maintain an on-going alliance and failure to establish a necessary alliance in the future may adversely affect Ricoh's financial position and results of operations. INADVERTENT OR ACCIDENTAL LEAKAGE OR DISCLOSURE OF CONFIDENTIAL OR SENSITIVE INFORMATION MAY ADVERSELY AFFECT RICOH'S OPERATIONS Ricoh obtains confidential or sensitive information from various sources, including its customers, in the ordinary course of its business. Ricoh also holds trade secrets regarding its technologies and other confidential or sensitive information relating to marketing. To prevent unauthorized access and/or fraudulent leakage or disclosure of such confidential or sensitive information, Ricoh has implemented an internal management system, which includes measures to improve security and access to its internal database, as well as employee training programs to educate its employees with respect to compliance with applicable regulations relating to information security and data access. Despite Ricoh's efforts, however, confidential or sensitive information may be inadvertently or accidentally leaked or disclosed and any such leakage or disclosure may result in Ricoh incurring damages, which may adversely affect Ricoh's reputation. In addition, Ricoh may incur significant expenses for defending any lawsuits that may arise from such claims. Furthermore, the leakage or disclosure of Ricoh's confidential or sensitive marketing and technological information to a third party may adversely affect Ricoh's financial results and condition. RICOH MAY SUFFER LOSS AS A RESULT OF CATASTROPHIC DISASTER, INFORMATION TECHNOLOGY PROBLEMS OR INFECTIOUS DISEASES Several of Ricoh's manufacturing facilities in Japan could be subject to a catastrophic loss caused by earthquakes as such facilities are located in areas with above average seismic activity. If any of these facilities were to experience a catastrophic loss, Ricoh could experience disruptions in its operations and delays in its production and shipments. If such occurred, Ricoh would likely record a decrease in revenue, and require large expenditures to repair or replace the damaged facility, which would be highly likely to affect Ricoh's financial results and condition. As Ricoh becomes increasingly dependent on information technology, software and hardware defects, computer viruses, as well as internal database problems ( E.G., falsifications or disappearance of information relating to our customers) pose a greater risk to its operations. Although Ricoh has taken various precautionary measures, such as installing firewalls and anti-virus software to detect and eliminate computer viruses, Ricoh may not be able to completely prevent or mitigate the effects of such problems, which may affect Ricoh's performance. -9- In addition, the Ricoh group is continually expanding its worldwide operations to set in place a global supply chain of its products and services so that we can satisfy our local customer needs faster, more effectively and on a regular basis. As Ricoh expands our operations worldwide, additional risks, such as infectious diseases and epidemics, may adversely affect Ricoh's operations and financial positions. Item 4. Information on the Company -------------------------- A. History and Development of the Company The Company was originally incorporated as a joint stock corporation (KABUSHIKI KAISHA) on February 6, 1936 in accordance with Japanese law under the name Riken Kankoshi Co., Ltd. as a manufacturer and distributor of sensitized paper for use in copiers. Since its incorporation, Ricoh has expanded its business into related businesses in the office equipment field. It now manufactures and markets copiers (such as PPCs), facsimile machines, MFPs, laser printers and GELJET printers, personal computers and servers, network related software and other equipment, including semiconductors, measuring equipment and cameras. Historical highlights --------------------- February 1936 Riken Kankoshi Co., Ltd. is formed in Kita-kyushu to manufacture and market sensitized paper. March 1938 The Company's name is changed to Riken Optical Co., Ltd., and starts manufacturing and selling optical devices and equipment. May 1949 The Company lists its securities on the Tokyo and Osaka Stock Exchanges. April 1954 The Company establishes an optical device and equipment plant in Ohmori, Ohta-ku, Tokyo (now known as the Ohmori plant). May 1955 The Company begins manufacturing and selling desktop copiers. May 1961 The Company establishes a sensitized paper plant in Ikeda, Osaka (now known as the Ikeda plant). October 1961 The Company lists its securities on the First Sections of the Tokyo and Osaka Stock Exchanges. June 1962 The Company starts operations of a paper plant in Numazu, Shizuoka, which featured a fully-integrated sensitized paper production system (now known as the Numazu plant). December 1962 The Company establishes Ricoh of America, Inc. (a subsidiary, later known as Ricoh Corporation and now known as Ricoh Americas Corporation). April 1963 The Company changes its corporate name to Ricoh Company, Ltd. July 1967 The Company establishes Tohoku Ricoh Co., Ltd. (a subsidiary) in Shibata-gun, Miyagi. -10- May 1971 The Company completes its manufacturing facility in Atsugi, Kanagawa (now known as the Atsugi plant), to which it transfers some of its office equipment production from the Ohmori plant. June 1971 The Company establishes Ricoh Nederland B.V. (a subsidiary, later known as Ricoh Europe B.V. and now known as Ricoh Europe Holdings B.V.) in Netherlands. January 1973 The Company establishes Ricoh Electronics, Inc. (a subsidiary) in the United States. September 1973 The Company lists its securities on the Amsterdam Stock Exchange. December 1976 The Company forms Ricoh Credit Co., Ltd. (a subsidiary, now known as Ricoh Leasing Co., Ltd.). March 1977 The Company relocates its headquarters to Minato-ku, Tokyo. July 1978 The Company lists its securities on the Frankfurt Stock Exchange. December 1978 The Company establishes Ricoh Business Machines, Ltd. (a subsidiary, now known as Ricoh Hong Kong Ltd.). March 1981 The Company builds the Ricoh Electronics Development Center at the Ikeda plant to develop and manufacture electronic devices. October 1981 The Company lists its securities on the Paris Stock Exchange. May 1982 The Company establishes sensitized paper production facilities in Fukui (now known as the Fukui plant), which takes over some of the sensitized paper production from the Osaka plant. July 1982 The Company launches its information technology equipment facility in Hatano, Kanagawa (now known as the Hatano plant). December 1983 The Company establishes Ricoh UK Products Ltd. (a subsidiary). October 1985 The Company builds a copier manufacturing plant in Gotenba, Shizuoka (now known as the Gotenba plant). April 1986 The Company opens a research and development ("R&D") facility in Yokohama, Kanagawa (now known as the Ricoh Research and Development Center) in commemoration of Ricoh's 50th anniversary, to which it transfers some of its R&D operations from the Ohmori plant. April 1987 The Company establishes Ricoh Industrie France S.A. (a subsidiary, now known as Ricoh Industrie France S.A.S.). April 1989 The Company sets up an electronic devices facility in Yashiro-cho, Kato-gun, Hyogo (now known as the Yashiro plant). January 1991 The Company establishes Ricoh Asia Industry (Shenzhen) Ltd. (a subsidiary) in China. March 1995 Ricoh Corporation acquires Savin Corporation, an American office equipment sales company. -11- September 1995 The Company acquires Gestetner Holdings PLC (now known as NRG Group PLC), a British office equipment sales company. January 1996 Ricoh Leasing Co., Ltd. lists its securities on the Second Section of the Tokyo Stock Exchange (currently listed on the First Section of the Tokyo Stock Exchange). December 1996 The Company establishes Ricoh Asia Pacific Pte Ltd (a subsidiary) in Singapore. March 1997 The Company establishes Ricoh Silicon Valley, Inc. (now known as Ricoh Innovations, Inc.) in the United States. August 1999 Ricoh Hong Kong Ltd. acquires Inchcape NRG Ltd., a Hong Kong-based office equipment sales company. March 2000 Tohoku Ricoh Co., Ltd. lists its securities on the Second Section of the Tokyo Stock Exchange (now a wholly-owned subsidiary of the Company). January 2001 Ricoh Corporation acquires Lanier Worldwide, Inc., an American office equipment sales company. October 2002 The Company establishes Ricoh China Co., Ltd. (a subsidiary). April 2003 Tohoku Ricoh Co., Ltd. becomes a wholly-owned subsidiary of the Company. October 2004 The Company acquires Hitachi Printing Solutions, Ltd. (now known as Ricoh Printing Systems, Ltd.) in Japan. August 2005 The Company opens Ricoh Technology Center in Ebina, Kanagawa to integrate its domestic R&D facilities and offices. November 2005 The Company relocates its headquarters to Chuo-ku, Tokyo. January 2007 Ricoh Europe B.V. acquires the European operations of Danka Business Systems PLC. June 2007 InfoPrint Solutions Company, LLC ("InfoPrint Solutions Company"), a joint venture company of Ricoh and International Business Machines Corporation ("IBM"), commences its operations. The Company's registered office and head office are as follows:
Address Telephone number --------------------------------------- ---------------- Registered Head office 3-6 Naka Magome 1-chome, Ohta-ku, Tokyo +81-3-3777-8111 143-8555, Japan Executive office 13-1, Ginza 8-chome, Chuo-ku, Tokyo +81-3-6278-2111 104-8222, Japan
-12- Principal Capital Investments ----------------------------- Ricoh's capital investments for fiscal years 2006, 2007 and 2008 were Yen 102.0 billion, Yen 85.8 billion and Yen 85.2 billion, respectively. Ricoh directs a significant portion of its capital investments towards digital and networking equipment, such as digital PPCs/MFPs, laser printers and GELJET printers, and manufacturing facilities to maintain or enhance its competitiveness in the industry. Ricoh projects that for fiscal year 2009, its capital investments will amount to approximately Yen 90.0 billion, which will principally be used for investments in manufacturing facilities of digital and networking equipment with new engines, toners, semiconductors and thermal media. B. Business Overview Ricoh is a leading manufacturer of office automation equipment. Ricoh's products include copiers, printers, facsimile machines, and related supplies and services. Ricoh is also a prominent manufacturer of digital and advanced electronic devices such as semiconductor devices. In recent years, Ricoh has been rapidly building a solid presence globally as a comprehensive document solutions provider that helps its customers streamline their businesses and decrease operating costs. PRODUCTS Ricoh's operating segments consist of "Office Solutions," "Industrial Products" and "Other." Ricoh's management analyzes its business operations and its performance based on these segments. The following table sets forth Ricoh's sales by products for fiscal years 2006, 2007 and 2008. SALES BY PRODUCT
Millions of Yen (except for percentages) For the Year Ended March 31, --------------------------------------------------------------------- 2006 2007 2008 --------------------------------------------------------------------- OFFICE SOLUTIONS Imaging Solutions 1,446,635 75.8% 1,580,155 76.4% 1,709,491 77.0% Network System Solutions 190,593 10.0 194,312 9.4 200,082 9.0 INDUSTRIAL PRODUCTS 120,636 6.3 133,387 6.4 144,340 6.5 OTHER 151,374 7.9 161,071 7.8 166,076 7.5 - --------------------------------------------------------------------------------------------------- Total 1,909,238 100.0% 2,068,925 100.0% 2,219,989 100.0% - ---------------------------------------------------------------------------------------------------
Notes: (1) During fiscal year 2007, a subsidiary of the Company sold its content distribution business. As a result of such sale, the operating results of such business were reclassified as a discontinued operation and were excluded from the above consolidated financial data for all periods in accordance with the Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (2) The above consolidated financial data set forth net sales to external customers by product. -13- OFFICE SOLUTIONS - ---------------- This segment consists of products that are widely used in the office environment and are categorized as follows: (1) Imaging Solutions For fiscal year 2008, the Imaging Solutions product category accounted for 77.0% of Ricoh's net sales. The primary functions of products in this category are (i) to produce copies and (ii) to print or produce images using a network. Stand-alone PPCs are representative of products in the first group, and MFPs, laser printers and GELJET printers are representative of products in the second group. The principal products in the Imaging Solutions product category include monochrome and color digital PPCs/MFPs, laser printers and GELJET printers. Ricoh continues to be a global leader in PPCs/MFPs and has been a pioneer in the development of digital machines. Ricoh manufactures a wide range of PPCs/MFPs with a variety of copying speeds and functions such as double-sided printing, sorting, reducing and enlarging, and zoom adjustment based on copy sizes. PPCs/MFPs use a drum or other medium coated with a photo conductive material on which an image of the original document is projected optically and developed by applying a dry powder-based toner. The application of this printing process enables, higher picture quality and is environmentally friendly. GELJET printers utilize "GELJET technology" developed by Ricoh, which allows ultra-fine particle pigment dispersion to produce higher image qualities. All GELJET printers are color printers. In recent years, Ricoh has strengthened its digital PPC/MFP product lineup with new product offerings that range from low-end models to high-end models. Furthermore, in order to meet its customers' needs in the office environment, Ricoh continues to strengthen its capabilities in color laser printers and GELJET printers, and mid- and high-volume or high-speed printers that can be connected to a network. During fiscal year 2008, Ricoh continued to record strong sales growth in printers as Ricoh broadened its product lineup, strengthened its sales and distribution channels, especially in Europe, and expanded its marketing activities. Sales of PPCs/MFPs, laser printers and GELJET printers designed to provide information technology support for all types of office environments by delivering enhanced basic features (i.e., reduction, enlargements), simpler operation, reduced paper consumption through electronic storage, better connectivity with document distribution and storage systems continued to perform particularly well, as such features satisfied the demand of customers. In fact, during fiscal year 2008, Ricoh was named first place in customer satisfaction for both the monochrome and color categories with respect to copier/multifunction product (second consecutive year in the color category) based on a survey conducted by J.D. Power Asia Pacific, Inc. -14- Ricoh also continues to focus on designing products that have enhanced security features and are environmentally friendly. For example, during fiscal year 2008, Ricoh released its imagio MP C7500/C6000 Series (also known as Aficio MP C7500/C6000 Series when sold overseas) as part of its color MFP product lineup. This new color MFP series (1) decreases typical energy consumption by approximately 50% compared to that of earlier models due to the use of energy-efficient "color PxP toners" developed by Ricoh and an improved fusing system, which enables stable printing of images on paper by anchoring toner particles, (2) is suitable for use not only as the main color MFP in an office but also as one of several printing equipment in a central copying center of a large company, (3) has the capacity to respond to high quality printing demands and (4) has security features such as a user authentication system to prevent unauthorized access and an encryption system that encrypts user names and passwords. During fiscal year 2008, Ricoh also introduced imagio Neo 753RC/603RC, which are monochrome MFPs (1) whose environmental impact has been decreased by 94% as compared to earlier models at the manufacturing stage resulting in it having a recycle parts mass ratio of 88%, (2) that have achieved both user-friendliness and energy conservation through the installation on reconditioned machines of "HYBRID QSU (Quick Start-Up)" and "QSU," which enable shorter warm-up and recovery times and (3) has security features such as a user authentication system to prevent unauthorized access and a function that prints documents with security watermarks that appear when copied. HYBRID QSU is a technology that integrates the next-generation electrical storage device "capacitor" and Ricoh's QSU technology. The capacitor stores power during the standby mode and uses such power to restore heat to the fusing roller and transfer images to paper during printing, which enables high-speed printing. The use of HYBRID QSU and QSU enable imagio Neo 753RC/603RC to use less than the maximum recommended power consumption level prescribed by laws and regulations promulgated pursuant to the Law Concerning the Promotion of Eco-friendly Goods and Services by the State and Other Entities (Law on Promoting Green Purchasing) in Japan. In addition, Ricoh introduced during fiscal year 2008 other MFP products that are environmentally friendly and have security features as those discussed above, such as the imagio MP 8000 Series (high speed monochrome digital MFPs that are equipped with HYBRID QSU), the imagio MP 2550/3350/4000/5000 Series (monochrome MFPs that are equipped with a color scanner function that promotes the digitization or document management of paper-based documents in offices) and the imagio MP C1600 Series (low-end digital color MFPs for office use that are equipped with an automatic reverse document feeder that, coupled with Ricoh's GELJET technology, enables high speed printing and improves productivity). By enhancing the environmental features and incorporating higher image quality and advanced security functions in these new products, Ricoh has been able to capture a larger market share in the MFP market in Japan and overseas. In the low-end printer market, Ricoh released IPSiO SP 6220/6210, which are monochrome laser printers featuring (1) improved productivity due to shorter warm-up times and (2) the ability to print on a wide-range of paper sizes, including A3-size paper. Ricoh also released during fiscal year 2008 IPSiO SP C220 (also known as Aficio SP C220N when sold overseas), which is a color laser printer featuring (1) improved productivity due to a high print speed of 16 pages per minute for both color and monochrome printing on A4-size paper fed horizontally, (2) a space-saving compact size -15- comparable to that of a monochrome printer in a stylish design and (3) adaptability for various environments ranging from small office use to use as a desk-side printer in a large office. The introduction by Ricoh of these new laser printer models has enabled Ricoh to continue penetrating the low-end business printer markets. Furthermore, Ricoh launched the IPSiO GX3000SF/GX3000S Series (also known as Aficio GX3000SF/GX3000S/3050sfn Series when sold overseas), a color GELJET printer focused on satisfying the needs of business users. IPSiO GX3000SF/GX3000S Series utilizes Ricoh's advanced GELJET technology to achieve low printing cost (comparable to that of monochrome printers) and to conserve energy. In addition, Ricoh established a joint venture company with IBM called InfoPrint Solutions Company in June 2007. Ricoh entered into this joint venture to expand its business in the "production printing" market, which term refers to the market for high-end laser printers that are primarily used in environments that require high-volume printing, such as offices and data centers. InfoPrint Solutions Company commenced its operations with approximately 1,200 employees worldwide and augmented its business in June 2008 with another 1,000 employees who were focused on printer maintenance. With respect to facsimile equipment, Ricoh marketed the world's first high-speed facsimile equipment in 1973 with a transmission speed of one minute per page. Since then, Ricoh has been manufacturing various high-speed facsimile machines, including compact, low-priced models that feature multiple functions (such as copying capabilities) and higher memory capacities. The market for stand-alone facsimile machines is diminishing, with demand shifting towards small businesses and home offices seeking low-cost models as corporate users tend to prefer multifunctional copiers and printers with networking capabilities. In addition, corporate users also have moved towards electronic forms of transmitting images using portable document formats as an alternative to facsimile transmissions. In response to these trends in the facsimile market, Ricoh has been focusing its efforts on offering MFPs with facsimile capability. (2) Network System Solutions For fiscal year 2008, the Network System Solutions product category accounted for 9.0% of Ricoh's net sales. The primary function of products in this category is to assist customers in establishing a networked environment and provide customized printing solutions that satisfy customers' individual needs. The principal products in the Network System Solutions category include personal computers and servers, network systems, application software, and related services and support. In fiscal year 2008, Ricoh launched its new solutions brand "Operius" in Japan, which is focused on providing solutions to customers to optimize their office environment. Operius is comprised of three key components: (1) hardware, (2) software and (3) support and services. By identifying and utilizing the most appropriate hardware and software to address customers' needs, and supplementing such products with a -16- comprehensive support and service team (such as a 24-hour IT monitoring center, and an expert team of hardware and software engineers), Ricoh is striving to assist its customers in creating a working environment that is more efficient and effective. For example, storage and management solutions can be developed that address the customers' need to organize and keep track of both paper and digital files, and that provide a secure centralized electronic document storage system that enables easy retrieval. Through the seamless integration of hardware and software, customers can utilize and benefit from streamlined document scanning, indexing and electronic document distribution. As part of Operius, Ricoh delivers total cost of ownership ("TCO") consulting that begins with analyzing the customers' document workflow, output devices and document processes. Through support services, Ricoh has been able to lower total printing costs of its customers by assisting them in the set up of their information technology or networks in various environments in Japan (where physical space is costly) and thereby increasing the efficiency of their printing process. With respect to system solutions related products, Ricoh released the Ridoc Document Server Ep Version2 (a document management system compatible with a large network, featuring enhanced document management functions that support the management of the three basic types of documents required to strengthen internal control (work flow diagram, work description sheets and risk control matrix), digitization of vouchers such as estimates and purchase orders, and efficiency of audit services), the Ricoh Personal Authentication System AE Series (optional solution for digital MFPs and laser printers that is designed to prevent information leaks as a result of picking up others' print outs, etc. by enabling machine use or achieving on-demand printing upon personal authentication using contactless IC-cards such as "FeliCa," "MIFARE" or "eLWISE," which have been developed by other companies) and the RIPWAY Image Search (the world's first service that enables a user to search Japanese and U.S. patent publications for patents that contain diagrams or images similar to specific drawings or chemical formulas). INDUSTRIAL PRODUCTS - ------------------- The Industrial Products segment consists of products that are used in the industrial sector. For fiscal year 2008, this segment accounted for 6.5% of Ricoh's net sales. Principal products in this category include thermal media, optical equipment, semiconductor devices, electronic components and measuring equipment. Through technological enhancements in its thermal media business Ricoh has been able to expand its business from the production of thermal paper for use in facsimiles to a variety of business areas, including the production of POS sheets, logistics management sheets, reward cards, identification cards, medical films and other uses. For fiscal year 2008, Ricoh released the RP-K Series, a rewritable printer for "RECO-View" (Ricoh's thermal media product line that uses thermal rewritable film technology developed by Ricoh to form and erase images multiple times by controlling the temperature of the applied media), that is small in size, energy-efficient and lower-priced. -17- This product enables resources to be conserved in the manufacturing industry such as in the management of production schedules, parts and procured materials. Ricoh's optical equipment business utilizes technology originally developed by Ricoh for its copiers and cameras. This business supplies optical equipment and optical supply parts, such as lens units, to third parties. Ricoh also manufactures various types of semiconductor devices. Such devices include application-specific integrated circuits ("ASICs") and application specific standard products ("ASSPs") that are often used in digital copiers, printers, personal computers, PC card and cellular phones. In fiscal year 2008, net sales of semiconductors to third parties increased due primarily to an increase in demand for Ricoh's integrated circuits by manufacturers of electronic devices such as cellular phones and PC card. The electronic components business consists of components supplied to Ricoh's manufacturing plants in connection with the production of its own products, such as copiers and printers, as well as components supplied to third parties. For fiscal year 2008, Ricoh released the R1283 Series (two channel DC/DC converters that generate the two voltages required for charge-coupled devices and liquid-crystal and organic light-emitting diodes, etc.), the RP901/RP902 Series (multi-channel converters having electrical power supply compositions that are suitable for digital devices such as optical disk drives) and the RP400 Series (step-up converters for portable electronic devices such as portable audio devices). In addition, Ricoh is one of the leading manufacturers of measuring equipment in Japan. Ricoh offers a wide range of measuring equipment such as water meters, gas meters and gas leak detectors. Sales in the measuring equipment category are greatly affected by the cyclical nature of market demand for this equipment. OTHER - ----- The Other segment, which accounted for 7.5% of Ricoh's net sales for fiscal year 2008, includes digital cameras, optical discs, financing and logistics services. Ricoh is one of the pioneers in commercializing digital cameras, which have tremendous potential as "image capturing devices." As digital cameras may be used in a variety of ways to input images, Ricoh expects that its sales of digital cameras will continue to grow in the future. Sales of lines of digital cameras that were released during fiscal year 2008 under the name "GR DIGITAL II" and "R8" contributed to the increase in sales in this segment. "GR DIGITAL II" is a compact digital camera that is made to exacting standards featuring high image quality, and was introduced as the successor product to "GR DIGITAL," which received high acclaim from camera fans. "R8" is a digital camera featuring a 10 mega pixel CCD with a 7.1x optical zoom lens. Ricoh also introduced during fiscal year 2008 the "R50," a standard digital camera model. Separately, "Caplio GX100," which was well-received by customers since its -18- introduction, was awarded the "iF International Forum Design" gold award during fiscal year 2008. Ricoh provides certain financing services through Ricoh Leasing Co., Ltd. which leases industrial equipment and medical equipment as well as office equipment, and offers loans, such as support loans, to small businesses and independent doctors. Ricoh Logistics System Co. Ltd. offers logistics services in the delivery, distribution and storage of products such as electronic products, office equipment, and electronic and machinery parts. San-Ai Co., Ltd., a wholly-owned subsidiary of the Company, completed the sale of its content distribution business, which included distribution of ring tones for cellular phones, to Giga Networks Co., Ltd. (former Mobile Alliance Co., Ltd.), a subsidiary of Faith, Inc. on May 31, 2006. Ricoh determined that the sale of this business would be in the best interest of Ricoh and such business. The operating results of this business and the gain recognized by Ricoh upon the sale of this business are presented as "Income from discontinued operations, net of tax" in the Consolidated Statements of Income. GROUP VISION AND MANAGEMENT PLANS - --------------------------------- With "Winner in the 21st Century (Build a strong global RICOH brand)" as its group vision, Ricoh strives to continue growing and developing as a global company by gaining the trust of its customers, which Ricoh intends to achieve by continuously striving towards greater customer productivity and knowledge management. Accordingly, Ricoh plans to conduct its business activities in a way that provides innovative products and services to all of its customers (including those who use information at work and in their lives outside of work) based on Ricoh's values of "harmonizing with the environment", "simplifying your life and work," and "supporting knowledge management." Fiscal year 2008 was the last fiscal year of the 15th Medium-Term Management Plan, which covered the period from fiscal year 2006 through fiscal year 2008. The plan aimed to increase corporate growth and improve the cost-effectiveness and efficiency of Ricoh's businesses. Under this plan, Ricoh allocated its business resources to areas with growth potential and reduced its costs and expenses in order to maximize profits. Ricoh identified the following business areas as the three key areas with future growth potential for this plan: (i) printing, (ii) emerging markets and (iii) the industrial sector. To achieve the goals of this plan, Ricoh enhanced its sales and profits by strengthening its position in the businesses in which it currently operates and by expanding into new businesses in the above areas. For example, as part of this plan, Ricoh took steps to increase its offering of printing products, such as MFPs, laser printers and GELJET printers, during fiscal year 2008 to further enhance its comprehensive offering of printers. Ricoh reallocated some of its resources to concentrate on the printing area in order to reinforce sales of its printing solutions, such as black-color conversion and TCO reduction solution in the office -19- environment. In addition, Ricoh expanded its business scope and size by entering into both the high-end production printing market and the low-end printing market. As part of the 16th Medium Term Management Plan, which covers the period from April 2008 to March 2011, Ricoh has established the following five basic group management strategies: (1) become the top company in targeted business areas, (2) strengthen and accelerate its environmental management, (3) promote "Ricoh Quality" (which means to accelerate the innovation processes to achieve greater customer satisfaction), (4) create new business lines and (5) build a strong global RICOH brand. In connection with this plan, Ricoh plans to earn even greater trust from its customers by placing greater emphasis on customer viewpoints and continuing to provide products and services which exceed customer expectations. More specifically, in the Office Solutions segment, Ricoh plans to utilize its strengths such as customer contacts, broad product lines, ability to propose solutions, ability to conduct business globally and image processing technologies, to respond to the increasingly diverse needs of a greater number of customers, and further solidify its business foundation. Specifically, Ricoh understands that "work flow," "security," "TCO," "compliance" and the "environment" are important issues for customers. By focusing on these issues, Ricoh intends to provide greater value to its customers using its products. To contribute to the overall productivity increase of its customers, Ricoh will develop (1) printing solutions that efficiently network multiple copiers and printers and (2) document solutions that construct and manage a file server system that saves, searches and outputs documents. Furthermore, Ricoh is striving to create new service businesses, such as a service in which customers outsource their business processing to Ricoh, by utilizing its strengths. To achieve these goals, Ricoh will focus on developing solution platforms and enhancing its solution sales organization. Ricoh also plans to expand its business in the printing market by (1) expanding its low-end printing business by offering better color laser printers and color GELJET printers and (2) launching its production printing business off the ground as soon as possible. In the Industrial Products segment, Ricoh will allocate and direct its resources into businesses where large growth is expected. Ricoh will also make an effort to strengthen the cooperation between the technical fields and the business areas in order to develop new businesses that combine diverse fields. In addition, Ricoh plans to make further advances in business development in emerging markets in both the Office Solutions and the Industrial Products segments. In order to enhance or create customer value and increase earning power in each segment, it is important to secure competitive superiority through technology. Accordingly, Ricoh will continue to actively focus on strengthening its technical abilities. SALES AND DISTRIBUTION - ---------------------- Ricoh continues to utilize the following three marketing and sales channels for the distribution of its products to end-user customers in Japan: (1) direct sales by Ricoh to end-user customers through approximately 35 domestic subsidiaries and affiliates, (2) sales through independent dealers of office machinery and (3) sales through independent -20- office supply wholesalers and retailers. Ricoh estimates that over one-half of its domestic copier sales by revenue are derived from its direct sales channels to end-user customers, with the remaining balance being divided between sales through independent dealers of office machinery and independent office supply wholesalers and retailers. These marketing and sales channels are coordinated by Ricoh's seven regional sales subsidiaries located in the Hokkaido, Tohoku, Kanto, Chubu, Kansai, Chugoku and Kyushu areas. One of Ricoh's strategies in expanding its overseas marketing and sales channels has been to acquire office equipment sales companies in various locations around the world through which it can sell its products. Accordingly, in addition to selling Ricoh brand name products through its overseas sales subsidiaries, affiliates and independent dealers (similar to the marketing and sales channels used for the distribution of products in Japan), Ricoh also sells its products through the following two marketing and sales channels in the overseas market: (1) sales of products under brand names which Ricoh purchased through acquisitions (i.e., the "Savin" brand, the "Lanier" brand and the "Infotec" brand) and (2) sales of Ricoh's products as the original equipment manufacturer ("OEM") of copiers and printers of other companies. Savin and Lanier were originally Ricoh's OEM distributors prior to their acquisition. Ricoh has organized sales and distribution channels to accommodate its four operating regions outside of Japan: (1) the Americas, (2) Europe, Africa, and the Middle East, (3) Asia and Oceania and (4) China. Ricoh recognizes revenue for sales upon the delivery and installation of equipment to its end-user customers. Revenue from the sales of equipment under sales-type leases is recognized as product sales at the inception of the lease. Information regarding the methods by which Ricoh recognizes revenue is also set forth in Item 5. Critical Accounting Policies and Note 2 to the Consolidated Financial Statements which are included in this annual report. AFTER-SALES SERVICE - ------------------- Ricoh provides repair and maintenance services for its products to Ricoh's end-user customers under the belief that periodic and timely maintenance services are essential in preserving Ricoh's market share in the relevant products. These maintenance services are provided to customers pursuant to maintenance service contracts customarily entered into at the time the equipment is sold. In Japan, repair and maintenance services are generally provided by Ricoh's service specialists. Ricoh's service network in Japan includes service centers operated by Ricoh and its affiliates and service outlets operated by other companies. Ricoh's Customer Support System is available on a nationwide basis in Japan in order to enhance customer satisfaction and service efficiency. This system allows Ricoh to remotely monitor copiers that are in operation and provide immediate service to such copiers. The total number of Ricoh's sales and service personnel in Japan is approximately 22,700. Similar to Japan, Ricoh employees and contracted maintenance providers provide repair and maintenance services to end-user customers in the overseas market who purchased -21- Ricoh products. The total number of Ricoh's overseas sales and service personnel is approximately 23,700. Additional information regarding the manner in which Ricoh accounts for its after-sales services is set forth in Item 5. Critical Accounting Policies and Note 2 to the Consolidated Financial Statements which are included in this annual report. PRINCIPAL MARKETS - ----------------- Ricoh distributes its products and competes in the following four geographic areas: Japan, the Americas, Europe and Other. In the aggregate, Ricoh's sales expanded in fiscal year 2008. As noted below, for fiscal year 2008, net sales in Japan, the Americas, Europe and Other as a percentage of total net sales were 45.8%, 19.6%, 27.2% and 7.4%, respectively. The table below breaks down for each geographic area the total net sales amount and percentage of such net sales amount as compared against total net sales for each of the last three fiscal years. SALES BY GEOGRAPHIC AREA
Millions of Yen (except for percentages to net sales) For the Year Ended March 31, --------------------------------------------------------------------- 2006 2007 2008 --------------------------------------------------------------------- JAPAN 966,224 50.6% 1,002,251 48.4% 1,016,034 45.8% THE AMERICAS 387,412 20.3 426,453 20.6 434,799 19.6 EUROPE 434,800 22.8 507,158 24.5 603,219 27.2 OTHER 120,802 6.3 133,063 6.5 165,937 7.4 - ------------------------------------------------------------------------------------ Total 1,909,238 100.0% 2,068,925 100.0% 2,219,989 100.0% - ------------------------------------------------------------------------------------
Notes: (1) Sales amounts set forth in the above table are based on the location of the purchaser (external customer) of the product. For example, if the product is manufactured in Japan and sold to an external customer located in the United States, such sale would be recorded as a sale in the Americas geographic segment. (2) During fiscal year 2007, a subsidiary of the Company sold its content distribution business. As a result of such sale, the operating results of such business was reclassified as a discontinued operation was excluded from the above segment data for all periods in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (1) Japan Economic growth in Japan slowed down especially in the second half of fiscal year 2008 due primarily to the increase in the price of crude oil, the decline in the Japanese stock market and the appreciation of the Japanese Yen relative to the U.S. Dollar. As a result, sales in Japan for fiscal year 2008 increased only by 1.4% compared to fiscal year 2007. Market competition in the types of products that Ricoh manufactures and markets continues to intensify. In order to succeed in such environment, Ricoh has consistently strived to change its product lineup from analog stand-alone equipment and -22- monochrome products to digital equipment with network capabilities and color products in order to respond to customers' preferences. To assist customers in managing their Total Document Volume ("TDV") effectively and efficiently in the office, Ricoh also offers business solutions to create a networked environment that meets customers' needs. To capitalize on such demand, in fiscal year 2008, Ricoh launched its new solutions brand "Operius" in Japan, which is focused on providing solutions to customers to maximizing their office environment. (2) The Americas Despite sluggish economic conditions in the Americas resulting from a slowdown in growth in the United States, Ricoh introduced new color MFPs to meet customers' demands for color and high-speed products with networking capabilities. During fiscal year 2008, in an effort to consolidate its operations, Ricoh merged Lanier Worldwide, Inc. into Ricoh Corporation, its parent company, and changed the name of Ricoh Corporation to Ricoh Americas Corporation. Accordingly, Ricoh Americas Corporation started distributing in the United States from April 2007 both Lanier and Savin brand products in addition to Ricoh brand products. While Ricoh Americas Corporation sold Gestetner brand products during fiscal year 2008, it is in the process of phasing such brand out of its product lineup in the United States. In addition, in fiscal year 2008 Ricoh and IBM formed a joint venture company (InfoPrint Solutions Company) based on IBM's Printing Systems Division. The joint venture company and its subsidiaries offer printing solutions for general office, industrial, enterprise and commercial printing environments of small businesses and large enterprises. The sales generated by this joint venture company, which was reflected in Ricoh's financial statements for the first time in fiscal year 2008, contributed to the overall sales for the Americas. (3) Europe With economic conditions in Europe remaining relatively stable during fiscal year 2008, sales of color PPCs/MFPs, color and monochrome laser printers and GELJET printers continued to increase as Ricoh made efforts to introduce new products in such product lines. The continuous enhancement and introduction of products in the Office Solutions segment enabled Ricoh to further improve its sales in Europe as customers were able to fulfill more of their office equipment needs through Ricoh. In particular, Ricoh was able to increase its sales in Europe as a result of the shift from monochrome to color PPCs/MFPs, color laser printers and GELJET printers and the introduction of tailor-made solutions for its customers regardless of the size of their business. Through these efforts Ricoh continued to maintain its top market share position in Europe for copiers and MFPs during fiscal year 2008. To further enhance its sales and service network, Ricoh transferred the headquarter functions in the European region to Ricoh Europe Holdings B.V., a newly established subsidiary of the Company, in April 2007 by consolidating Ricoh Europe B.V. -23- and NRG Management Ltd. In connection with this process, Ricoh also consolidated certain sales and services companies in Europe. The purpose of establishing a holding company structure in Europe and consolidating certain sales and service companies was to optimize the operational structure in each country in this geographic region to respond promptly to new customer demands and to enhance the effectiveness of its business by eliminating duplicative functions, which existed due to certain acquisitions Ricoh made in the past in Europe. (4) Other The Other geographic area includes China, South East Asia and Oceania. Sales in this geographic area increased as a result of the continuing shift from monochrome models to color models during fiscal year 2008. Because this geographic area is expected to continue expanding, Ricoh continues to view this market as strategically important not only as a production site but also as a potential market within which to increase future sales of its products. In line with this strategy, Ricoh plans to establish a new plant in Thailand to secure sufficient production capacity and to reduce its dependence on its production facilities in China. Ricoh continues to strengthen relationships with its customers in this geographic area by working closely with its regional sales network. COMPETITION - ----------- The office equipment industry in which Ricoh primarily competes remains highly competitive and Ricoh continues to encounter intense competition in its Office Solutions segment. Furthermore, competition in each of the product categories in the Office Solutions segment is expected to increase in the future as Ricoh's competitors enhance and expand their product and service offerings. This increase in competition may result in price reductions and decreases in profitability as well as market share in these products. Ricoh cannot provide assurance that it will be able to compete successfully against existing or future competitors. Moreover, Ricoh may face competition from some of its current customers and companies with which Ricoh has strategic business relationships. The size and number of our competitors vary across our product categories, as do the resources allocated by our competitors to the markets Ricoh targets. Ricoh's competitors may have greater financial, personnel and other resources than Ricoh has in a particular market or overall. These competitors may have greater resources available to them to respond quickly to new technologies and may be able to undertake more extensive marketing campaigns than Ricoh. Competitors may also adopt more aggressive pricing policies for their products and make more attractive offers to potential customers, employees, and strategic partners. These competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with third parties to increase their ability to gain market share. Despite this intense competition in the office equipment industry, Ricoh's management believes that Ricoh will be able to maintain and enhance its position in the -24- global market because of its experience, expertise and technical capabilities as a leading provider of office equipment, and dedication to meet customers' needs. SEASONALITY - ----------- Sales in the Office Solutions segment generally increase in March of each year, which is the end of the fiscal year for most Japanese companies. This is due to the increase in demand for these products as many Japanese companies and government entities try to expend their allotted capital expenditure budget for the fiscal year. Sales generated during the month of March each year due to this seasonality accounts for approximately 11.6% of Ricoh's domestic sales in Japan. However, the effect of this seasonality on a consolidated basis is minimal, as only approximately 3.7% of Ricoh's total consolidated sales are generated from domestic sales in Japan during the month of March. SOURCES OF SUPPLY - ----------------- The raw materials, parts and components used in the production of Ricoh's products are procured on a global basis. Generally, Ricoh maintains multiple suppliers for the most significant categories of raw materials, parts and components. Because very few of the raw materials required by Ricoh in manufacturing its products can be procured in Japan, most of the raw materials used by Ricoh come from outside of Japan. Ricoh monitors the availability of raw materials on a regular basis to ensure that it will not encounter any shortages. Ricoh has not experienced any significant difficulty in obtaining the raw materials, parts and components necessary for it to manufacture its products and believes that it will be able to continue to obtain necessary raw materials, parts and components in sufficient quantities to meet its manufacturing needs in the future. The rise in crude oil prices may lead to an increase in the overall cost of procuring raw materials, parts and components. This is due to the fact that the cost of oil-based parts and components, the processing costs of raw materials and fuel costs of shipping and distributing such raw materials, parts and components may increase as a result of higher crude oil prices. However, Ricoh believes that the effect of price volatility with respect to obtaining raw materials, parts and components necessary in manufacturing its products can be managed. INTELLECTUAL PROPERTY - --------------------- Ricoh holds a large number of patents and trademark rights. While Ricoh considers such intellectual property rights to be valuable assets and important for its operations, it believes that its business is not dependent to any material extent upon any single patent or trademark right, or any related group of such rights it holds. -25- Ricoh also has many licenses and technical assistance agreements covering a wide variety of products. Such agreements grant Ricoh the right to use certain Japanese and foreign patents or the right to receive certain technical information. However, Ricoh is not materially dependent on any single such license or agreement. In addition, Ricoh has granted licenses and technical assistance to various companies located in and outside of Japan. In certain instances, Ricoh has entered into cross-licensing agreements with other major international electronics and electrical equipment manufacturers. None of these agreements are likely to materially affect Ricoh's business or profitability. See Item 5.C. Patents and Licenses. GOVERNMENT REGULATIONS - ---------------------- Ricoh's business activities are subject to various government regulations in the various countries in which it operates, including regulations relating to business and investment approvals, export regulations, tariffs, antitrust, intellectual property, consumer and business taxation, exchange controls, and environmental and recycling requirements. Ricoh is also subject to environmental regulations in the jurisdictions in which it operates, particularly those jurisdictions in which it has manufacturing, research, or similar operations. Three environmental regulations which may affect Ricoh's businesses are the European Union Directive on Waste Electrical and Electronic Equipment (the "WEEE Directive"), the European Union Directive on the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (the "RoHS Directive") and the European Union Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals (the "REACH Regulation") and the European Union Regulation on the Registration, Evaluation, Authorization and Restriction of Chemicals (the "REACH Regulation"). Beginning in August 2005, the WEEE Directive, as enacted by individual European Union countries, made manufacturers or importers of electrical and electronic equipment in the European Union financially responsible for the collection, recycling, treatment, recovery and legitimate disposal of collected electrical and electronic equipment. The RoHS Directive prohibits to contain lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB) or polybrominated diphenyl ethers (PBDE) more than specific concentration in electrical and electronic equipment to be sold in the European Union market from July 2006. The REACH Regulation entered into force in June 2007 to improve protection of human health and the environment through the identification of the intrinsic properties of chemical substances and, among other things, requires the registration of chemical substances manufactured or used in products sold in the European Union. This regulation covers almost all forms of chemicals (that is, products in gaseous, liquid, paste or powdery form) and "articles" (newly defined in REACH) manufactured in or imported into the European Union. A variety of similar environmental regulations have been or are expected to be enacted in other regions where Ricoh operates. Ricoh is endeavoring to establish appropriate measures to comply with these new regulations. Ricoh currently operates, and hopes to continue operating, its business without significant difficulty in complying with applicable government regulations. -26- C. Organizational Structure As of March 31, 2008, the Ricoh group includes the Company and 306 subsidiaries and 11 affiliates located worldwide. Ricoh's R&D, manufacturing, sales, and service activities center on office equipment, optical equipment and other devices. The Company is the parent of the Ricoh group. The Company heads the R&D activities of Ricoh products with assistance from its subsidiaries. The Company and its subsidiaries and affiliates maintain an integrated domestic and international manufacturing and distribution structure. The following is a list of the principal subsidiaries of the Company. None of the Company's 11 affiliates are considered material affiliates of Ricoh.
Proportion Country of of ownership Company Name Formation interest Main businesses - -------------------------------------------------------------------------------------------------------------------------- (SUBSIDIARIES) Ricoh Optical Industries Co., Ltd. Japan 100.0 Manufacturing optical equipment Tohoku Ricoh Co., Ltd. Japan 100.0 Manufacturing office equipment Ricoh Unitechno Co., Ltd. Japan 100.0 Manufacturing parts for office equipment Ricoh Elemex Corporation Japan 56.0 Manufacturing and sales of office equipment (56.7) and minuteness equipment Ricoh Microelectronics Co., Ltd. Japan 100.0 Manufacturing parts for office equipment Ricoh Keiki Co., Ltd. Japan 100.0 Manufacturing parts for office equipment Ricoh Printing Systems, Ltd. Japan 100.0 Manufacturing and sale of office equipment Ricoh Tohoku Co., Ltd. Japan 100.0 Sale of office equipment Ricoh Chubu Co., Ltd. Japan 100.0 Sale of office equipment Ricoh Kansai Co., Ltd. Japan 100.0 Sale of office equipment Ricoh Chugoku Co., Ltd. Japan 100.0 Sale of office equipment Ricoh Kyushu Co., Ltd. Japan 100.0 Sale of office equipment Hokkaido Ricoh Co., Ltd. Japan 100.0 Sale of office equipment Ricoh Sales Co., Ltd. Japan 100.0 Sale of office equipment Ricoh Technosystems Co., Ltd. Japan 100.0 Maintenance, service and sale of office equipment Ricoh Logistics System Co., Ltd. Japan 100.0 Logistics services and custom clearances
-27-
Proportion Country of of ownership Company Name Formation interest Main businesses - -------------------------------------------------------------------------------------------------------------------------- Ricoh Leasing Co., Ltd. Japan 51.2 General leasing Ricoh Electronics, Inc. U.S.A. 100.0 Manufacturing office equipment and related supplies Ricoh UK Products Ltd. U.K. 100.0 Manufacturing office equipment Ricoh Industrie France S.A.S. France 100.0 Manufacturing office equipment and related supplies Ricoh Asia Industry (Shenzhen) Ltd. China 100.0 Manufacturing office equipment and related supplies Shanghai Ricoh Digital Equipment Co., Ltd. China 100.0 Manufacturing and sale of office equipment Ricoh Americas Corporation U.S.A. 100.0 Sale of office equipment InfoPrint Solutions Company, LLC U.S.A. 63.3 Sale of office equipment Ricoh Europe Holdings PLC U.K. 100.0 Sale of office equipment NRG Group PLC U.K. 100.0 Sale of office equipment Ricoh Asia Industry Ltd. Hong Kong, China 100.0 Sale of office equipment Ricoh Asia Pacific Pte Ltd Singapore 100.0 Sale of office equipment Ricoh China Co., Ltd. China 100.0 Sale of office equipment Ricoh Finance Nederland B.V. Netherlands 100.0 Corporate finance And 276 other subsidiaries (AFFILIATES) 11 affiliates (none of which are material affiliates)
Notes: (1) Proportion of ownership interest includes indirect ownership. (2) Figures in parentheses indicate portion of voting power if different from portion of ownership interest. (3) Ricoh Leasing Co., Ltd. and NRG Group PLC are the only subsidiaries of the Company that are a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X. D. Property, Plant and Equipment Ricoh manufactures its products primarily in fifteen plants in Japan and six plants overseas. Ricoh owns all of the buildings and the land on which its plants are located, with the exception of certain leases of land and floor space of certain of its subsidiaries. None of these leased land and floor spaces have major encumbrances on them. The following table gives certain information as of March 31, 2008 regarding the Company's and its subsidiaries' principal production and other facilities. With the exceptions of Shanghai Ricoh Digital Equipment Co., Ltd. and GR Advanced Materials Ltd., the production and other facilities listed below have floor space exceeding 10,000 square meters. -28-
Name (Location) Floor space Principal activities and products manufactured - ------------------------------------------------------------------------------------------------------------------------------------ (in thousands of square meters) Japan: Ricoh Company, Ltd. Ohmori Plant (Tokyo) 54 Parts relating to copiers Atsugi Plant (Kanagawa) 73 Office equipment and other products Numazu Plant (Shizuoka) 111 Paper and toner Ikeda Plant (Osaka) 27 Electronic devices Hatano Plant (Kanagawa) 15 Printed circuit boards and electronic components Fukui Plant (Fukui) 34 Papers and toner Gotenba Plant (Shizuoka) 70 Office equipment Yashiro Plant (Hyogo) 34 Electronic devices Ricoh Technology Center (Kanagawa) 71 R&D Head Office (Tokyo) 21 Head office and marketing of office equipment Research & Development Center (Kanagawa) 17 R&D System Center (Tokyo) 10 Information system center, marketing of office equipment and other business Ginza Office (Tokyo) 11 Marketing of office equipment and other business Shin-Yokohama office (Kanagawa) 40 Marketing of office equipment, other business and related services Subsidiaries: Ricoh Optical Industries Co., Ltd. (Iwate) 23 Photographic equipment Tohoku Ricoh Co., Ltd. (Miyagi) 55 Office equipment, parts relating to copiers and duplicators Hasama Ricoh, Inc. (Miyagi) 14 Parts relating to copiers and data processing equipment Ricoh Unitechno Co., Ltd. (Saitama) 18 Office equipment Ricoh Elemex Corporation. (Aichi) 47 Office equipment and measuring equipment Ricoh Microelectronics Co., Ltd. (Tottori) 11 Printed circuit boards and electronic components
-29-
Name (Location) Floor space Principal activities and products manufactured - ------------------------------------------------------------------------------------------------------------------------------------ (in thousands of square meters) Ricoh Keiki Co., Ltd. (Saga) 10 Printed circuit boards and parts relating to copiers Overseas: Ricoh Electronics, Inc. 81 Copiers, parts relating to copiers, toner and thermal paper (Irvine, Santa Ana and Tustin, California and Lawrenceville, Georgia, U.S.A.) Ricoh UK Products Ltd. 34 Copiers, parts relating to copiers and toner (Telford, United Kingdom) Ricoh Industries France S.A.S. 42 Copiers, parts relating to copiers and thermal paper (Colmar, France) Ricoh Asia Industry (Shenzhen) Ltd. (Shenzhen, China) 42 Copiers, parts relating to copiers, and toner Shanghai Ricoh Digital Equipment Co., Ltd. 6 Copiers, facsimile equipment and parts relating to copiers (Shanghai, China) GR Advanced Materials Ltd. 7 Supplies relating to duplicators (Scotland, United Kingdom)
In recognition of Ricoh's overall technological development capabilities, the Ricoh Technology Center, which is a core development facility for Ricoh's major products located in Kanagawa, Japan, was awarded the grand prize of the "Fourth Nikkei Monozukuri Awards (2007)." This award is sponsored by Nikkei Inc. (one of Japan's major media companies providing global business news and information services) and has been established to honor factories and research facilities, or programs or systems utilized at such factories or research facilities, that engage in the "monozukuri (manufacturing)" process. The Ricoh Technology Center was awarded the grand prize in recognition of its efficient development system that centralizes research and development and production functions to encourage cross-functional development. Ricoh considers its manufacturing facilities to be well maintained and believes its plant capacity is adequate for its current needs, though successive investments in manufacturing facilities are being made for its long-term success. -30- Item 4A. Unresolved Staff Comments ------------------------- Not applicable. Item 5. Operating and Financial Review and Prospects -------------------------------------------- OVERVIEW Ricoh is engaged primarily in the development, manufacturing, sales and servicing of office automation equipment, as well as digital cameras, semiconductor devices and thermal media. Ricoh supports its office equipment business by offering customers various "solution" systems that work with personal computers and servers, and related product support and after-sales services to assist customers in fully utilizing the Ricoh products that they purchase. Ricoh's support services include assisting customers in setting up their information technology environment or network administration. Ricoh also offers various supplies and peripheral products to be used with its products and systems. Ricoh distributes its products and competes in the following four geographic areas: (1) Japan, (2) the Americas, (3) Europe and (4) Other, which includes China, South East Asia and Oceania. For additional details on Ricoh's business, see Item 4.B. Information on the Company - Business Overview. Because of the global nature of Ricoh's operations, Ricoh's results of operations and financial conditions are affected both by economic and political developments in Japan and the rest of the world, as well as by demand and competition in its lines of business. Furthermore, competition in the businesses Ricoh operates has increased significantly and is likely to continue increasing in the future. The two most significant trends in the office equipment market continue to be the movement towards digital networking systems from stand-alone models and the shift in customers' demands toward color products from monochrome products. In response to these trends, Ricoh's competitors are introducing color products and digital networking systems, thereby increasing the level of competition in these products. Ricoh seeks to prevail over the intense competition in the office equipment market by continuing to provide customers with equipment that optimizes the TCO of such equipment and enhancing office productivity and efficiency. Historically, Ricoh's revenues have been derived mainly from the manufacturing and sale of equipment (such as copiers and printers). In the current competitive environment, the key factor to achieve revenue growth is the expansion of available product lines and areas of services to address the increase in customer demand for digitization, color printing and high volume printing, which became possible upon the introduction of printers with high-speed printing capabilities. To achieve sustained growth in the current environment, Ricoh's goal is to broaden its revenue and earnings base by increasing the total copying or printing volume of its customers (which Ricoh refers to as "Building Total Document Volume") and the amount of revenue per copy or printed page. To attain this goal, Ricoh's strategies continue to include (1) replacing -31- monochrome products with color models at prices comparable to those of monochrome models, (2) expanding sales of high-speed models and (3) deploying printing solutions so that customers can optimize the total output costs of their copiers and printers. To increase the sale of its products to corporations with global operations, Ricoh expanded its sales structure in the Office Solutions segment through various means during the last few fiscal years, including the acquisition of the European sales and service companies of Danka Business Systems PLC. Ricoh also made further improvements to the features and functions of its product lines in the Office Solutions segment, such as enhancing output speed and improving the user-friendliness of its products, which enabled customers to comprehensively increase their productivity. In addition to its continuing efforts to strengthen its office solutions business, Ricoh and IBM formed a joint venture company, InfoPrint Solutions Company, which commenced its operations in June 2007. At the time this company commenced its operations, Ricoh owned 51 percent of this company. Based on the agreement entered into with IBM, Ricoh's ownership percentage will gradually increase up to 100 percent over the next three years. As of March 31, 2008, Ricoh owned 63.3 percent of this company. Ricoh expects that this company will strengthen its capabilities in output solutions, including large volume printing. Due in part to these initiatives, Ricoh recorded revenue growth for the 14th consecutive year in fiscal year 2008. Ricoh strove to remain competitive and achieve sustained growth by placing a high priority on creating products that added value for customers in new ways (e.g., by increasing printing speeds or allowing easier network connectivity) and managing its operations in a highly efficient manner. To this end, Ricoh continued to reinforce its technological strengths by making capital expenditures and investments in R&D to create products and services that can provide new value for its customers. At the same time, Ricoh continued to steadily increase its operational efficiency through cost-cutting measures across its business units, which included the reduction of production costs and the streamlining of its business structure, as well as supply chain management. As part of its strict cost management policy, Ricoh analyzed the cost structure of its products at the design phase for the purpose of minimizing production costs. Through the application of this policy, Ricoh sought to maximize profits. Ricoh also continued to pursue increased efficiency in the use of financial resources by decreasing its interest-bearing debt by effectively managing and utilizing the funds available to it on a group-wide basis. Ricoh's consolidated net sales increased by 7.3% to Yen 2,219.9 billion for fiscal year 2008, from Yen 2,068.9 billion for fiscal year 2007, due primarily to the increase in net sales of PPCs/MFPs, laser printers and GELJET printers, particularly those with color capabilities. In addition, net sales generated by InfoPrint Solutions Company which became a consolidated subsidiary in fiscal year 2008 (whose net sales were reflected for part of the fiscal year) as well as sales and service companies in Europe which were acquired in fiscal year 2007 (whose net sales were reflected for the full fiscal year for the first time), contributed to the increase in overall net sales for fiscal year 2008. Despite the increase in sales of value-added products, such as color MFPs and color and monochrome -32- laser printers and GELJET printers, the percentage increase in gross profit was lower than the percentage increase in selling, general and administrative expenses due primarily to certain expenses that Ricoh incurred during fiscal year 2008 to expand its business and to improve its operational efficiency. As a result, while Ricoh's operating income increased by 4.1%, operating income as a percentage of net sales decreased from 8.4% to 8.2%. KEY PERFORMANCE INDICATORS The following table shows changes for the last three fiscal years in the key performance indicators that Ricoh's management uses in assessing its performance. For the year ended March 31, ---------------------------- 2006 2007 2008 -------- ------- ------- Net Sales (in billions of Yen) 1,909.2 2,068.9 2,219.9 Operating income to net sales ratio/(1)/ 7.8% 8.4% 8.2% Return on assets/(2)/ 4.9% 5.2% 4.8% Inventory turnover within months/(3)/ 1.82 1.83 1.78 Interest-bearing debt (in billions of Yen) 381.2 415.6 384.3 Notes: (1) Operating income to net sales ratio = Operating income divided by net sales. (2) Return on assets = Net income divided by average total assets for the fiscal year. (3) Inventory turnover within months = Inventory divided by average monthly cost of sales. CRITICAL ACCOUNTING POLICIES The consolidated financial statements of Ricoh are prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. On an ongoing basis, Ricoh evaluates its estimates which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The results of these evaluations form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions. Ricoh considers an accounting policy to be critical if it is important to its financial condition and results, and requires significant judgments and estimates on the part of management in its application. Ricoh believes that the following represent the critical accounting policies of the Company. For a summary of the -33- significant accounting policies, including the critical accounting policies discussed below, see Note 2 to the Consolidated Financial Statements. Revenue Recognition ------------------- Ricoh believes that revenue recognition is critical for its financial statements because net income is directly affected by the timing of revenue recognition. Ricoh generates revenue principally through the sale of equipment, supplies and related services under separate contractual arrangements for each. Generally, Ricoh recognizes revenue when (1) it has a firm contract, (2) the product has been shipped to and accepted by the customer or the service has been provided, (3) the sales price is fixed or determinable and (4) amounts are reasonably assured of collection. Most equipment sales require that Ricoh install the product. As such, revenue is recognized at the time of delivery and installation at the customer location. Equipment revenues are based on established prices by product type and model and are net of discounts. A sales return is accepted only when the equipment is defective and does not meet Ricoh's product performance specifications. Other than installation, there are no customer acceptance clauses in the sales contract. Service revenues result primarily from maintenance contracts that are normally entered into at the time the equipment is sold. Standard service fee prices are established depending on equipment classification and include a cost value for the estimated services to be performed based on historical experience plus a profit margin thereon. As a matter of policy, Ricoh does not discount such prices. On a monthly basis, maintenance service revenues are earned and recognized by Ricoh and billed to the customer in accordance with the contract and include a fixed monthly fee plus a variable amount based on usage. The length of the contract ranges up to five years; however, most contracts can be cancelled at any time by the customer upon a short notice period. Ricoh enters into contractual arrangements with multiple elements, which may include any combination of products, equipment, installation and maintenance. Ricoh allocates revenue to each element based on its relative fair value if such element meets the criteria for treatment as a separate unit of accounting as prescribed in the Emerging Issues Task Force Issue 00-21 ("EITF 00-21"), "Revenue Arrangements with Multiple Deliverables." Pursuant to EITF 00-21, the delivered item in a multiple element arrangement should be considered a separate unit of accounting if all of the following criteria are met: (1) a delivered item has value to customers on a stand-alone basis, (2) there is objective and reliable evidence of fair value of an undelivered item, and (3) the delivery of the undelivered item must be probable and controlled by Ricoh if the arrangement includes the right of return. The price charged when the element is sold separately generally determines fair value. Otherwise, revenue is deferred until the undelivered elements are fulfilled as a single unit of accounting. Allowance for Doubtful Receivables ---------------------------------- -34- Ricoh performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current creditworthiness, as determined by Ricoh's review of the customers' credit information. Ricoh continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon its historical experience and any specific customer collection issues that Ricoh has identified. While such credit losses have historically been within Ricoh's expectations and the provisions established, Ricoh cannot guarantee that it will continue to experience the same credit loss rates that it has in the past. Changes in the underlying financial condition of our customers could result in a material impact on Ricoh's consolidated results of operation and financial position. Pension Accounting ------------------ The total costs for employees' severance payments and pension plans represented approximately 1.1%, 0.9% and 0.8% of Ricoh's total costs and expenses for fiscal years 2006, 2007 and 2008, respectively. The amounts recognized in the consolidated financial statements relating to employees' severance payments and pension plans are determined on an actuarial basis utilizing certain assumptions in the calculation of such amounts. The assumptions used in determining net periodic costs and liabilities for employees' severance payments and pension plans include expected long-term rate of return on plan assets, discount rate, rate of increase in compensation levels, average remaining years of service and other factors. Among these assumptions, the expected long-term rate of return on assets and the discount rate are two critical assumptions. Assumptions are evaluated at least annually, and events may occur or circumstances may change that may have a significant effect on the critical assumptions. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods, thereby reducing the year-to-year volatility in pension expenses. As of March 31, 2008, Ricoh recognized and reflected in its consolidated balance sheets the funded status of its pension plans (equal to the difference between the fair value of plan assets and the projected benefit obligations) in the total amount of Yen 96.9 billion. For fiscal years 2006, 2007 and 2008, Ricoh used expected long-term rates of return on pension plan assets of 3.2%, 3.1% and 3.2%, respectively. In determining the expected long-term rate of return on pension plan assets, Ricoh considers the current and projected asset allocations, as well as expected long-term investment returns and risks for each category of the plan assets based on Ricoh's analysis of historical results. The projected allocation of the plan assets is developed in consideration of the expected long-term investment returns for each category of the plan assets. To moderate the level of volatility in pension plan asset returns and to reduce risks, approximately 45%, 20%, 15% and 20% of the plan assets will be allocated to equity securities, debt securities, life insurance company general accounts and other financial instruments, respectively. As of March 31, 2008, the actual allocation of assets was generally consistent with the projected allocation stated above. The actual returns for fiscal years 2006, 2007 and 2008 were approximately 20.9% (gain), 2.3% (gain) and 6.4% (loss), respectively. The actual returns on pension plan assets may vary in future periods, depending on market conditions. The market-related value of plan assets is measured using fair values on the plan measurement date. -35- With respect to the discount rate used in the annual actuarial valuation of the pension benefit obligations, the other critical assumption, Ricoh's weighted average discount rates for fiscal years 2006, 2007 and 2008 were 2.8%, 3.1% and 3.1%, respectively. In determining the appropriate discount rate, Ricoh considers available information about the current yield on high-quality fixed-income investments that are currently available and are expected to be available during the period corresponding to the expected duration of the pension benefit obligations. The following table illustrates the sensitivity to changes in the discount rate and the expected return on pension plan assets, while holding all other assumptions constant, for Ricoh's pension plans as of March 31, 2008.
CHANGE IN CHANGE IN PRE- PENSION BENEFIT TAX PENSION CHANGE IN ASSUMPTION OBLIGATIONS EXPENSES -------------------- --------------- -------------- (Billions of Yen) 50 basis point increase / decrease in discount rate - / + 24.1 - / + 0.3 50 basis point increase / decrease in expected return on assets - - / + 1.4
Impairment of Long-Lived Assets and Goodwill -------------------------------------------- As of March 31, 2008, the aggregate of Ricoh's property, goodwill and intangible assets was Yen 481.5 billion, which accounted for 21.7% of the total assets. Ricoh believes that impairment of long-lived assets and goodwill are critical to Ricoh's financial statements because the recoverability of the amounts or lack thereof, could significantly affect its results of operations. Ricoh periodically reviews the carrying value of its goodwill for continued appropriateness. This review is based upon Ricoh's projections of anticipated future cashflows and estimated fair value of the reporting units for which goodwill is assigned. Ricoh reviews long-lived assets and acquired intangible assets with a definite life for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. The recoverability of assets to be held and used is assessed by comparing the carrying amount of an asset or asset group to the expected future undiscounted net cashflows of the asset or group of assets. If an asset or group of assets is considered to be impaired, the impairment charge to be recognized is measured as the amount by which the carrying amount of the asset or group of assets exceeds fair value. Long-lived assets meeting the criteria to be considered as held for sale are reported at the lower of their carrying amount or fair value less costs to sell. While Ricoh believes that its estimates of future cashflows are reasonable, different assumptions regarding such cashflows could materially affect Ricoh's evaluations. -36- Impairment of Securities ------------------------ Individual securities classified as available-for-sale securities are reduced to their fair market value by a charge to income for declines in value that are not temporary. Factors considered in assessing whether an impairment other than a temporary impairment exists include: (1) the length of time and extent of decline, (2) the financial condition and near term prospects of the issuer and (3) the intent and ability of Ricoh to retain such investment for a period of time sufficient to allow for any anticipated recovery in market value. Ricoh believes that impairment of securities is critical for its financial statements because it holds significant amounts of securities, the recoverability of which or lack thereof, could significantly affect its results of operations. Realizability of Deferred Tax Assets ------------------------------------ Ricoh records deferred tax assets and liabilities using the effective tax rate taking into consideration the effect of temporary differences between the book and tax bases of assets and liabilities. If the effective tax rate were to change, Ricoh would adjust its deferred tax assets and liabilities, through the provision for income taxes in the period of change, to reflect the effective tax rate expected to be in effect when the deferred tax items reverse. Ricoh records a valuation allowance to reduce Ricoh's deferred tax assets to an amount that is more likely than not to be recoverable. Ricoh considers future market conditions, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which Ricoh operates, and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event Ricoh were to determine that Ricoh would not be able to recover any portion of Ricoh's net deferred tax assets in the future, the unrecoverable portion of the deferred tax assets would be charged to earnings during the period in which such determination is made. Likewise, if Ricoh were to later determine that it is more likely than not that the net deferred tax assets would be recoverable, the previously recovered valuation allowance would be reversed. In order to recover its deferred tax assets, Ricoh must be able to generate sufficient taxable income in the tax jurisdictions in which the deferred tax assets are located. See Note 2 to the Consolidated Financial Statements for "New Accounting Standards." -37- A. Operating Results The following table sets forth selected consolidated financial data, including data expressed as a percentage of total consolidated net sales for the periods indicated, and the change in each consolidated financial line item between the indicated fiscal years:
Millions of Yen (except percentages) Thousands of % Change ------------------------------------------------------------------ U.S. Dollars ----------- 2006 2007 2008 2008/(2)/ 2007 2008 - -------------------------------------------------------------------------------------------------------------------------------- Net sales Products 1,108,746 1,189,548 1,292,228 $12,922,280 7.3 8.6 Post sales and rentals 693,138 768,965 817,230 8,172,300 10.9 6.3 Other revenue 107,354 110,412 110,531 1,105,310 2.8 0.1 - -------------------------------------------------------------------------------------------------------------------------------- Total 1,909,238 100.0% 2,068,925 100.0% 2,219,989 100.0% 22,199,890 8.4 7.3 - -------------------------------------------------------------------------------------------------------------------------------- Cost of sales Products 738,962 783,681 855,852 8,558,520 6.1 9.2 Post sales and rentals 293,559 335,444 346,945 3,469,450 14.3 3.4 Other revenue 81,717 87,394 89,465 894,650 6.9 2.4 - -------------------------------------------------------------------------------------------------------------------------------- Total 1,114,238 58.4% 1,206,519 58.3% 1,292,262 58.2% 12,922,620 8.3 7.1 - -------------------------------------------------------------------------------------------------------------------------------- Gross profit 795,000 41.6% 862,406 41.7% 927,727 41.8% 9,277,270 8.5 7.6 Selling, general and administrative expenses 646,416 33.8% 688,026 33.3% 746,221 33.6% 7,462,210 6.4 8.5 - -------------------------------------------------------------------------------------------------------------------------------- Operating income 148,584 7.8% 174,380 8.4% 181,506 8.2% 1,815,060 17.4 4.1 - -------------------------------------------------------------------------------------------------------------------------------- Other (income) expenses: Interest and dividend income (2,896) (5,501) (6,341) (63,410) Interest expense 5,244 7,350 4,835 48,350 Foreign currency exchange (gain) loss, net (3,748) 1,199 10,901 109,010 Other, net (2,782) (3,187) (2,558) (25,580) - -------------------------------------------------------------------------------------------------------------------------------- Total (4,182) (0.2%) (139) (0.0%) 6,837 0.3% 68,370 -- -- - -------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates 152,766 8.0% 174,519 8.4% 174,669 7.9% 1,746,690 14.2 0.1 - -------------------------------------------------------------------------------------------------------------------------------- Provision for income taxes: 56,165 2.9% 64,326 3.1% 63,396 2.9% 633,960 14.5 (1.4) - -------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before minority interests and equity in earnings of affiliates 96,601 110,193 111,273 1,112,730 Minority interests 4,185 5,508 6,057 60,570 Equity in earnings of affiliates 2,606 1,539 1,247 12,470 - -------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations 95,022 5.0% 106,224 5.1% 106,463 4.8% 1,064,630 11.8 0.2 Income from discontinued operations, net of tax /(1)/ 2,035 0.1% 5,500 0.3% -- -- -- 170.3 -- - -------------------------------------------------------------------------------------------------------------------------------- Net income 97,057 5.1% 111,724 5.4% 106,463 4.8% 1,064,630 15.1 (4.7) - --------------------------------------------------------------------------------------------------------------------------------
-38-
YEN Change ------------------------------------------------------------------ -------------------- Reference: Exchange Rates* 2006 2007 2008 2007 2008 - --------------------------------------------------------------------------------------------------------------------------------- US$ 1 113.26 117.02 114.40 3.76 (2.62) EURO 1 137.86 150.08 161.69 12.22 11.61
* These rates are the annual average exchange rate of the daily average TTM rates published by The Bank of Tokyo-Mitsubishi UFJ, Ltd. These rates are used when consolidating the financial results of Ricoh's overseas subsidiaries with those of the Company. Notes: (1) During fiscal year 2007, a subsidiary of the Company sold its content distribution business. As a result of such sale, the operating results of such business were reclassified as a discontinued operation. Accordingly, sales derived from such business were excluded from the above consolidated financial data for all periods in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (2) The above consolidated financial data set forth under the heading "Thousands of U.S. Dollars 2008," which have been translated from Japanese Yen to U.S. Dollar for the year ended March 31, 2008, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of Yen 100 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Bank of New York on March 31, 2008. -39- SALES BY PRODUCT
Millions of Yen (except for percentages) Thousands of % Change --------------------------------------------------------------------- U.S. Dollars ------------ 2006 2007 2008 2008/(2)/ 2007 2008 --------------------- --------------------- --------------------- ------------ ------ ---- OFFICE SOLUTIONS Imaging Solutions 1,446,635 75.8% 1,580,155 76.4% 1,709,491 77.0% $17,094,910 9.2 8.2 Network System Solutions 190,593 10.0 194,312 9.4 200,082 9.0 2,000,820 2.0 3.0 INDUSTRIAL PRODUCTS 120,636 6.3 133,387 6.4 144,340 6.5 1,443,400 10.6 8.2 OTHER 151,374 7.9 161,071 7.8 166,076 7.5 1,660,760 6.4 3.1 Total 1,909,238 100.0% 2,068,925 100.0% 2,219,989 100.0% $22,199,890 8.4 7.3
Notes: (1) During fiscal year 2007, a subsidiary of the Company sold its content distribution business. As a result of such sale, the operating results of such business were reclassified as a discontinued operation. Accordingly, sales derived from such business were excluded from the above consolidated financial data for all periods in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (2) The above consolidated financial data set forth under the heading "Thousands of U.S. Dollars 2008," which have been translated from Japanese Yen to U.S. Dollar for the year ended March 31, 2008, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of Yen 100 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Bank of New York on March 31, 2008. (3) The above consolidated financial data set forth net sales to external customers by product. FISCAL YEAR 2008 COMPARED TO FISCAL YEAR 2007 NET SALES. Consolidated net sales of Ricoh for fiscal year 2008 increased by 7.3% (or Yen 151.0 billion) to Yen 2,219.9 billion from Yen 2,068.9 billion for fiscal year 2007. The increase in net sales in the Office Solutions segment and the Industrial Products segment primarily contributed to this increase in net sales. Net sales from the Office Solutions segment accounted for 86.0% of Ricoh's total consolidated net sales for fiscal year 2008. Net sales of PPCs/MFPs, laser printers and GELJET printers, particularly those with color capabilities, continued to increase during fiscal year 2008. In addition, net sales generated by InfoPrint Solutions Company (whose net sales were reflected for part of the fiscal year) and the European sales and service companies (formerly known as Danka Business Systems PLC) acquired in fiscal year 2007 (whose net sales were reflected for the full fiscal year for the first time) contributed to the increase in net sales for the Office Solutions segment for fiscal year 2008. More specifically, a significant portion of the net sales from the Office Solutions segment was derived from the Imaging Solutions category, which accounted for 77.0% of Ricoh's total consolidated net sales, up 0.6 percentage points from fiscal year 2007. The increase in net sales from the Imaging Solutions category was due primarily to the increase in net sales of color PPCs/MFPs, color and monochrome laser printers and GELJET printers. Net sales derived from InfoPrint Solutions Company's production printing products as well as Ricoh's ability to respond to its customers' demands by offering solutions aimed at increasing management and workflow efficiencies and tailored to meet their printing needs ranging from office network printers and mission-critical business printers to high-speed, on-demand printing environments also contributed to the increase in net sales in the Imaging Solutions category for fiscal year 2008. -40- Sales of color PPCs/MFPs continued to grow in double-digit percentage figures in both Japan and the overseas markets due in part to the introduction of new value-added products that featured higher printing quality and enhanced security functions. Compared to fiscal year 2007, net sales of color PPCs/MFPs increased by 11.3% in Japan and 35.8% in the overseas markets as customer demand in both Japan and the overseas markets continued to shift from monochrome to color products. Similar to fiscal year 2007, sales of color and monochrome laser printers and GELJET printers continued to grow in double-digit percentage figures in fiscal year 2008 in Japan and the overseas markets. Compared to fiscal year 2007, net sales of laser printers and GELJET printers increased by 8.9% in Japan and 88.8% in the overseas markets. These increases in laser printers and GELJET printers were due primarily to the continuous release of new value added products that adequately addressed customer needs in terms of printing quality and speed in both Japan and the overseas markets. For example, in fiscal year 2008, Ricoh introduced a new product lineup of low-end GELJET printers, such as the IPSiO GX3000SF/GX3000S Series (also known as Aficio GX3000SF/GX3000S/3050sfn when sold overseas), which were favorably received in Japan and the overseas markets. In addition to the increase in net sales in the Imaging Solutions category, the increase in net sales in the Network System Solutions category, which accounted for 9.0% of Ricoh's total consolidated net sales for fiscal year 2008, also contributed to the increase in net sales in the Office Solutions segment. Sales of information technology support services and software, which are focused on enhancing customers' office printing environment, increased in line with the increase in sales of Ricoh's solutions business (comprised not only of sales of hardware but also sales of software and services). In Japan, Ricoh focused on providing greater support services that assisted customers in developing networked environments to optimize their printing costs and that lead to increased sales of both hardware and software particularly following the launch of its new solutions brand "Operius." As a result of these factors, net sales in the Network System Solutions category increased by 3.0% in fiscal year 2008 as compared to fiscal year 2007. In the Industrial Products segment, net sales increased by 8.2% in fiscal year 2008 as compared to fiscal year 2007. This increase was due primarily to the increase in sales of semiconductors and thermal media resulting from stable market demand for such products. In particular, sales of semiconductors increased due primarily to an increase in demand for Ricoh's integrated circuits by manufacturers of electronic devices such as cellular phones and PC card. The increase in sales in these products, however, was partially offset by the decrease in sales of optical equipment due to lower demand for rear projection products. In the Other segment, net sales increased by 3.1% mainly due to the continuous increase in sales of digital cameras and financing services. The net effect of the depreciation of the U.S. Dollar and the appreciation of the Euro in relation to the Japanese Yen also contributed to the increase in consolidated net sales in fiscal year 2008 as compared to fiscal year 2007 in Japanese Yen. Had the -41- foreign currency exchange rates remained the same as in fiscal year 2007, Ricoh's consolidated net sales would have increased by 5.4%. Products. The increase in net sales derived from products was due primarily to the increase in net sales of color PPCs/MFPs, color and monochrome laser printers and GELJET printers resulting from Ricoh's introduction of new high- to low-end product models with advanced features, which were favorably received by customers who wished to expand their office digital color networking capacity. The increase in net sales of color PPCs/MFPs, color and monochrome laser printers and GELJET printers completely offset the decrease in net sales of optical equipment. In addition, net sales generated by products sold by InfoPrint Solutions Company and the European sales and service companies acquired in fiscal year 2007 contributed to the growth in net sales derived from products. Post sales and rentals. Net sales derived from post sales services and rentals of equipment increased mainly due to an increase in revenue from post sale services such as maintenance services as well as increased sales of supplies for PPCs/MFPs, laser printers and GELJET printers. Ricoh continued to direct its marketing and promotional efforts of its equipment rental services towards major corporate clients in Japan and overseas. Other revenue. Net sales derived from other sources increased mainly due to an increase in revenue from financing services. COST OF SALES. Consolidated cost of sales for fiscal year 2008 increased by 7.1% (or Yen 85.7 billion) to Yen 1,292.2 billion from Yen 1,206.5 billion for fiscal year 2007. This increase was due primarily to the increase in net sales of color PPCs/MFPs, color and monochrome laser printers and GELJET printers. The increase in cost of sales was also attributable to the fact that fiscal year 2008 was the first year in which (1) cost of sales incurred by InfoPrint Solutions Company, which commenced its operation in June 2007 and (2) cost of sales for the full fiscal year incurred by the European sales and service companies (formerly known as Danka Business Systems PLC) acquired in fiscal year 2007, were reflected in Ricoh's financial statements. While overall cost of sales increased due to the above factors, Ricoh was able to achieve certain production efficiencies as a result of the increase in net sales of the above products. GROSS PROFIT. Consolidated gross profit for fiscal year 2008 increased by 7.6% (or Yen 65.3 billion) to Yen 927.7 billion from Yen 862.4 billion for fiscal year 2007. This increase in gross profit primarily reflects the increase in net sales derived from new value-added products, such as color PPCs/MFPs, color and monochrome laser printers and GELJET printers, as well as production efficiencies achieved by Ricoh as a result of increased sale of some of its products. Gross profit recorded by InfoPrint Solutions Company (for part of the fiscal year) and the European sales and service companies (formerly known as Danka Business Systems PLC) acquired in fiscal year 2007 (for the full fiscal year) in Europe also contributed to the increase in consolidated gross profit for fiscal year 2008. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling, general and administrative expenses for fiscal year 2008, increased by 8.5% (or Yen 58.1 billion) to -42- Yen 746.2 billion from Yen 688.0 billion for fiscal year 2007. Ricoh invested Yen 126.0 billion in R&D activity during fiscal year 2008 for purposes of developing more advanced PPCs/MFPs, laser printers and GELJET printers with new capabilities to maintain Ricoh's large market share position in these products in the current competitive marketplace. In addition Ricoh incurred certain expenses relating to (1) investments in information technologies in connection with the development of its core operating systems in its offices in Japan and overseas and (2) the commencement of operations of InfoPrint Solutions Company. Fiscal year 2008 was also the first year in which selling, general and administrative expenses of InfoPrint Solutions Company (for part of the fiscal year) and the European sales and service companies (formerly known as Danka Business Systems PLC) acquired in fiscal year 2007(for the full fiscal year) were reflected in Ricoh's consolidated financial statements. Expenses relating to the consolidation of certain other sales and service companies in Japan and overseas to improve operational efficiency, such as the consolidation of sales and services companies in Europe, also contributed to the increase in consolidated selling, general and administrative expenses for fiscal year 2008. Furthermore, the net effect of the appreciation of the Euro and the depreciation of the U.S. Dollar in relation to the Japanese Yen resulted in an increase in selling, general and administrative expenses of approximately Yen 10.9 billion. OPERATING INCOME. Consolidated operating income for fiscal year 2008 increased by 4.1% (or Yen 7.1 billion) to Yen 181.5 billion from Yen 174.3 billion for fiscal year 2007. Operating income as a percentage of net sales decreased by 0.2 percentage points from 8.4% for fiscal year 2007 to 8.2% for fiscal year 2008. Despite the increase in sales of value-added products such as color PPCs/MFPs, color and monochrome laser printers and GELJET printers, the percentage of increase in gross profit was lower than the percentage of increase in selling, general and administrative expenses due to certain expenses that Ricoh incurred during fiscal year 2008 to expand its business and to improve its operational efficiency as discussed above. INTEREST AND DIVIDEND INCOME. Consolidated interest and dividend income for fiscal year 2008 increased by Yen 0.8 billion to Yen 6.3 billion from Yen 5.5 billion for fiscal year 2007. This increase was attributable to the increase in dividend income derived from equity investments in Japanese companies reflecting the favorable financial market conditions and the positive change in economic conditions in Japan. INTEREST EXPENSE. Consolidated interest expense for fiscal year 2008 decreased by Yen 2.5 billion to Yen 4.8 billion from Yen 7.3 billion for fiscal year 2007. This decrease in interest expense was attributable to the decrease in the amount of outstanding interest-bearing debt owed to third parties, which reflects Ricoh's continuing efforts to utilize funds available within Ricoh rather than borrowing from third parties. FOREIGN CURRENCY EXCHANGE (GAIN) LOSS, NET. Consolidated foreign currency exchange loss, net included in other (income) expenses for fiscal year 2008 increased by Yen 9.7 billion to Yen 10.9 billion from Yen 1.1 billion for fiscal year 2007. For additional information on Ricoh's foreign exchange hedging activities, see Item 11. Quantitative and Qualitative Disclosures About Market Risk. -43- OTHER, NET. Consolidated other, net included in other (income) expenses decreased by Yen 0.6 billion to an income of Yen 2.5 billion for fiscal year 2008 from an income of Yen 3.1 billion for fiscal year 2007. This decrease in income of other, net in fiscal year 2008 was due to the decrease in income derived from the sale of marketable securities as compared to fiscal year 2007. PROVISION FOR INCOME TAXES. Total consolidated provision for income taxes for fiscal year 2008 decreased by 1.4% (or Yen 0.9 billion) to Yen 63.3 billion from Yen 64.3 billion for fiscal year 2007. The effective tax rate was 36.3% for fiscal year 2008 compared to 36.9% for fiscal year 2007. The effective tax rate was lower than the Japanese statutory tax rate of approximately 40%. See Note 9 to the Consolidated Financial Statements for additional information. MINORITY INTERESTS. Consolidated minority interests for fiscal year 2008 increased by Yen 0.5 billion to Yen 6.0 billion from Yen 5.5 billion for fiscal year 2007. This increase was due primarily to improved performance of Ricoh Elemex Corporation for fiscal year 2008. EQUITY IN EARNINGS OF AFFILIATES. Consolidated equity in earnings of affiliates for fiscal year 2008 decreased by Yen 0.2 billion to Yen 1.2 billion from Yen 1.5 billion for fiscal year 2007. This decrease was due primarily to the fact that Ricoh no longer recorded earnings for a company that ceased to be an affiliate as of October 2007 due to certain restructuring initiatives undertaken by such company. See Note 7 to the Consolidated Financial Statements for additional information. -44- OPERATING SEGMENTS
Millions of Yen (except for percentages) Thousands of --------------------------------------------- U.S. Dollars 2007 2008 2008/(2)/ % Change - --------------------------------------------------------------------------------------------------- OFFICE SOLUTIONS Net sales 1,774,467 100.0% 1,909,573 100.0% $19,095,730 7.6 Operating expenses 1,549,156 87.3 1,674,940 87.7 16,749,400 8.1 Operating income 225,311 12.7% 234,633 12.3% $ 2,346,330 4.1 - --------------------------------------------------------------------------------------------------- INDUSTRIAL PRODUCTS Net sales 138,112 100.0% 148,883 100.0% $ 1,488,830 7.8 Operating expenses 135,164 97.9 144,708 97.2 1,447,080 7.1 Operating income 2,948 2.1% 4,175 2.8% $ 41,750 41.6 - --------------------------------------------------------------------------------------------------- OTHER Net sales 161,071 100.0% 166,076 100.0% $ 1,660,760 3.1 Operating expenses 158,868 98.6 163,529 98.5 1,635,290 2.9 Operating income 2,203 1.4% 2,547 1.5% $ 25,470 15.6 - --------------------------------------------------------------------------------------------------- CORPORATE AND ELIMINATION Net sales (4,725) (4,543) $ (45,430) Operating expenses 51,357 55,306 553,060 Operating income (loss) (56,082) (59,849) $ (598,490) - --------------------------------------------------------------------------------------------------- CONSOLIDATED Net sales 2,068,925 100.0% 2,219,989 100.0% $22,199,890 7.3 Operating expenses 1,894,545 91.6 2,038,483 91.8 20,384,830 7.6 Operating income 174,380 8.4% 181,506 8.2% $ 1,815,060 4.1 - ---------------------------------------------------------------------------------------------------
Notes: (1) During fiscal year 2007, a subsidiary of the Company sold its content distribution business. As a result of such sale, the operating results of such business were reclassified as a discontinued operation. Accordingly, sales derived from such business were excluded from the above segment data for all periods in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (2) The above consolidated financial data set forth under the heading "Thousands of U.S. Dollars 2008," which have been translated from Japanese Yen to U.S. Dollar for the year ended March 31, 2008, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of Yen 100 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Bank of New York on March 31, 2008. (3) The above consolidated financial data, which set forth net sales, operating expenses and operating income (loss) for each operating segment, include both transactions with external customers as well as intersegment transactions. Office Solutions Net sales in the Office Solutions segment for fiscal year 2008 increased by 7.6% (or Yen 135.1 billion) to Yen 1,909.5 billion from Yen 1,774.4 billion for fiscal year 2007. This increase was due primarily to the growth recorded in the Imaging Solutions category. More specifically, sales in the Imaging Solutions category for fiscal year 2008 increased by 8.2% (or Yen 129.3 billion) to Yen 1,709.4 billion from Yen 1,580.1 billion for fiscal year 2007. This increase was due primarily to the increase in net sales of value-added color PPCs/ MFPs, color and monochrome laser printers and GELJET printers in both Japan and the overseas markets. Color PPCs/MFPs remained popular among customers as these products are equipped with advanced digital and networking technologies, which address customers' needs for conducting business operations effectively and efficiently by digitalizing and colorizing documents and enabling the handling of large volumes of information. The increase in sales of color and monochrome laser printers in fiscal year 2008 was due primarily to the fact that the net sales of InfoPrint Solutions Company, which primarily sells production printing products, were reflected in Ricoh's financial statements. Production printing products are high-end laser printers that are primarily -45- used in environments that require high-volume printing, such as offices and data centers. The increase in sales derived from production printing products contributed to the increase in sales in this segment. In addition, Ricoh continued to release products with enhanced security features and products that are friendly to the environment. Furthermore, Ricoh continued to offer solutions to optimize the total printing costs of its customers in fiscal year 2008 to assist customers manage their TDV more effectively and efficiently. On the other hand, sales of monochrome PPCs/MFPs decreased in fiscal year 2008 due primarily to the shift in customer demand from monochrome products to products with color capabilities. Sales in the Network System Solutions category for fiscal year 2008 increased by 3.0% (or Yen 5.7 billion) to Yen 200.0 billion from Yen 194.3 billion for fiscal year 2007. Sales in the solutions business, such as support services that assist customers establish networked environments in connection with Ricoh's imaging solutions products and solutions with software to optimize total printing costs, continued to increase in both Japan and the overseas markets in fiscal year 2008. Sales in the printing solutions business increased because customers sought products that streamlined the process of document scanning, indexing and distribution by integrating hardware and software. Excluding the net effect of the foreign currency exchange rate fluctuations, sales in the Office Solutions segment would have increased by 5.5% (or Yen 98.1 billion) for fiscal year 2008 as compared to fiscal year 2007. For fiscal year 2008, cost of sales of the Office Solutions segment increased due primarily to the increase in net sales. Fiscal year 2008 was also the first fiscal year in which the cost of sales and selling, general and administrative expenses of InfoPrint Solutions Company (for part of the fiscal year) and the European sales and service companies (formerly known as Danka Business Systems PLC) acquired in fiscal year 2007 (for the full fiscal year) were reflected in Ricoh's consolidated financial statements. In addition, Ricoh incurred expenses relating to the increase of research and development investments in its core products, such as PPCs/MFPs in the Imaging Solutions category. Furthermore, Ricoh incurred certain selling, general and administrative expenses in fiscal year 2008 in connection with the consolidation of a number of sales and service companies in Europe. As a result, operating expenses in the Office Solutions segment for fiscal year 2008 increased by 8.1% (or Yen 125.7 billion) to Yen 1,674.9 billion from Yen 1,549.1 billion for fiscal year 2007. Operating income for the Office Solutions segment for fiscal year 2008 increased by 4.1% (or Yen 9.3 billion) to Yen 234.6 billion from Yen 225.3 billion for fiscal year 2007. Operating income as a percentage of net sales for fiscal year 2008 decreased by 0.4 percentage points to 12.3% from 12.7% as compared to fiscal year 2007 primarily because the percentage increase in operating expenses was greater than the percentage increase in net sales for the same period. -46- Industrial Products Net sales in the Industrial Products segment for fiscal year 2008 increased by 7.8% (or Yen 10.7 billion) to Yen 148.8 billion from Yen 138.1 billion for fiscal year 2007. Sales of semiconductors and thermal media increased due to stable market demand. In particular, sales of semiconductors increased due primarily to an increase in demand for Ricoh's integrated circuits by manufacturers of electronic devices such as cellular phones and PC card. While sales in the optical equipment business decreased from the previous fiscal year due primarily to the decrease in demand for rear projection products, such decrease in sales was fully offset by the increase in sales of the semiconductor and thermal media businesses. Operating expenses in this segment for fiscal year 2008, increased by 7.1% (or Yen 9.5 billion) to Yen 144.7 billion from Yen 135.1 billion for fiscal year 2007. This increase was due primarily to the increase in sales of products in this segment. As a result, operating income for the Industrial Products segment for fiscal year 2008 increased by 41.6% (or Yen 1.2 billion) to Yen 4.1 billion from Yen 2.9 billion for fiscal year 2007. Operating income as a percentage of net sales for fiscal year 2008 increased by 0.7 percentage points to 2.8% from 2.1% as compared to fiscal year 2007. Other Net sales in the Other segment for fiscal year 2008 increased by 3.1% (or Yen 5.0 billion) to Yen 166.0 billion from Yen 161.0 billion for fiscal year 2007. During fiscal year 2008, sales of digital cameras increased due primarily to the favorable response by customers to new digital camera products that Ricoh introduced. The steady performance of the financing business by Ricoh Leasing Co., Ltd. also contributed to the increase in net sales in this segment. Operating expenses in this segment for fiscal year 2008, increased by 2.9% (or Yen 4.6 billion) to Yen 163.5 billion from Yen 158.8 billion for fiscal year 2007. As a result, operating income for the Other segment for fiscal year 2008 increased by Yen 0.3 billion to Yen 2.5 billion as compared to Yen 2.2 billion for fiscal year 2007. Operating income as a percentage of net sales for fiscal year 2008 increased by 0.1 percentage points to 1.5% from 1.4 % as compared to fiscal year 2007. -47- GEOGRAPHIC SEGMENTS BY GEOGRAPHIC ORIGIN
Millions of Yen (except for percentages) Thousands of --------------------------------------------- U.S. Dollars 2007 2008 2008/(2)/ % Change - --------------------------------------------------------------------------------------------------- JAPAN Net sales 1,521,967 100.0% 1,535,513 100.0% $15,355,130 0.9 Operating expenses 1,411,653 92.8 1,427,575 93.0 14,275,750 1.1 Operating income 110,314 7.2% 107,938 7.0% $ 1,079,380 (2.2) - --------------------------------------------------------------------------------------------------- THE AMERICAS Net sales 429,262 100.0% 435,783 100.0% $ 4,357,830 1.5 Operating expenses 408,150 95.1 433,429 99.5 4,334,290 6.2 Operating income 21,112 4.9% 2,354 0.5% $ 23,540 (88.8) - --------------------------------------------------------------------------------------------------- EUROPE Net sales 511,795 100.0% 604,809 100.0% $ 6,048,090 18.2 Operating expenses 478,380 93.5 565,736 93.5 5,657,360 18.3 Operating income 33,415 6.5% 39,073 6.5% $ 390,730 16.9 - --------------------------------------------------------------------------------------------------- OTHER Net sales 269,043 100.0% 317,598 100.0% $ 3,175,980 18.0 Operating expenses 251,486 93.5 291,141 91.7 2,911,410 15.8 Operating income 17,557 6.5% 26,457 8.3% $ 264,570 50.7 - --------------------------------------------------------------------------------------------------- CORPORATE AND ELIMINATION Net sales (663,142) (673,714) $(6,737,140) Operating expenses (655,124) (679,398) (6,793,980) Operating income (loss) (8,018) 5,684 $ 56,840 - --------------------------------------------------------------------------------------------------- CONSOLIDATED Net sales 2,068,925 100.0% 2,219,989 100.0% $22,199,890 7.3 Operating expenses 1,894,545 91.6 2,038,483 91.8 20,384,830 7.6 Operating income 174,380 8.4% 181,506 8.2% $ 1,815,060 4.1 - ---------------------------------------------------------------------------------------------------
Notes: (1) During fiscal year 2007, a subsidiary of the Company sold its content distribution business. As a result of such sale, the operating results of such business were reclassified as a discontinued operation. Accordingly, sales derived from such business were excluded from the above segment data for all periods in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (2) The above consolidated financial data set forth under the heading "Thousands of U.S. Dollars 2008," which have been translated from Japanese Yen to U.S. Dollar for the year ended March 31, 2008, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of Yen 100 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Bank of New York on March 31, 2008. (3) The above consolidated financial data, which set forth net sales, operating expenses and operating income (loss) for each geographic segment by geographic origin, include both transactions with external customers as well as intersegment transactions. Japan Sales in Japan for fiscal year 2008 increased by 0.9% (or Yen 13.5 billion) to Yen 1,535.5 billion from Yen 1,521.9 billion for fiscal year 2007. Ricoh recorded an increase in sales of color PPCs/MFPs, color and monochrome laser printers and GELJET printers in Japan. This increase reflects the results of Ricoh's strategic sales promotion activities and marketing strategy in the Office Solutions segment that capitalized on the shift in customer demand from stand-alone monochrome products to color high-speed products that function in the network environment. Sales of solutions products such as support services, document management applications and other software increased in Japan as well. The increase in sales of solutions products was attributable to Ricoh's successful promotion of solutions associated with software and information technology support services that optimized customers' total printing costs. In addition, increased sales of thermal media also contributed to the overall increase in sales in Japan. -48- Operating expenses in Japan for fiscal year 2008 increased by 1.1% (or Yen 15.9 billion) to Yen 1,427.5 billion from Yen 1,411.6 billion for fiscal year 2007. The increase in operating expenses was due primarily to the increase in sales as well as the increase in R&D expenses. As a result, operating income for fiscal year 2008 decreased by 2.2% (or Yen 2.3 billion) to Yen 107.9 billion from Yen 110.3 billion for fiscal year 2007. The Americas Net sales in the Americas for fiscal year 2008 increased by 1.5% (or Yen 6.5 billion) to Yen 435.7 billion from Yen 429.2 billion for fiscal year 2007. Despite sluggish economic conditions in the Americas due to the slowdown in growth in the United States, Ricoh recorded increased sales of value-added color PPCs/MFPs in the Americas for fiscal year 2008. The increase in sales of such PPCs/MFPs reflects Ricoh's introduction of new models that responded to the diverse range of customer needs for color, networking and high-speed products in this geographic segment. Furthermore, sales of production printing products from the newly consolidated subsidiary InfoPrint Solutions Company and its subsidiaries contributed favorably to the overall sales in the Americas. Operating expenses in this geographic segment for fiscal year 2008 increased by 6.2% (or Yen 25.2 billion) to Yen 433.4 billion from Yen 408.1 billion for fiscal year 2007. Despite the increase in sales of value-added color PPCs/MFPs, operating expenses increased at a higher percentage of increase than the increase in net sales as the increasingly competitive business environment in the Americas required Ricoh to increase its strategic sales promotions and incur greater marketing related expenses. As a result, operating income for fiscal year 2008 decreased by 88.8% (or Yen 18.7 billion) to Yen 2.3 billion from Yen 21.1 billion for fiscal year 2007. Europe Sales in Europe for fiscal year 2008 increased by 18.2% (or Yen 93.0 billion) to Yen 604.8 billion from Yen 511.7 billion for fiscal year 2007, due primarily to an increase in sales of value-added color PPCs/MFPs reflecting Ricoh's continuing efforts to replace monochrome products at customer sites with color products, and color laser printers and GELJET printers reflecting Ricoh's sales promotional efforts to improve TCO. Operating expenses in this geographic segment for fiscal year 2008 increased by 18.3% (or Yen 87.3 billion) to Yen 565.7 billion from Yen 478.3 billion for fiscal year 2007 due primarily to the increase in sales in this geographic segment. As a result, operating income for fiscal year 2008 increased by 16.9% (or Yen 5.6 billion) to Yen 39.0 billion from Yen 33.4 billion for fiscal year 2007 due primarily to increased sales of value-added products such as color PPCs/MFPs, color and monochrome laser printers and GELJET printers. -49- Other Net sales in the Other geographic segment, including China, South East Asia and Oceania, increased for fiscal year 2008 by 18.0% (or Yen 48.5 billion) to Yen 317.5 billion from Yen 269.0 billion for fiscal year 2007. This increase was due primarily to the increase in sales of color PPCs/MFPs, color laser printers and GELJET printers. Sales of these products increased in this geographic segment as customer demand shifted from monochrome products toward color products. In addition, products manufactured in this geographic segment were exported to other geographic segments, reflecting increased demand of Ricoh's office solution products worldwide, which in turn contributed to the increase in sales in this geographic segment. Operating expenses in this geographic segment for fiscal year 2008 increased by 15.8% (or Yen 39.6 billion) to Yen 291.1 billion from Yen 251.4 billion for fiscal year 2007 due primarily to the increase in net sales in this geographic segment. As a result, operating income for fiscal year 2008 increased by 50.7% (or Yen 8.9 billion) to Yen 26.4 billion from Yen 17.5 billion for fiscal year 2007 due primarily to the increase in net sales in this geographic segment. FISCAL YEAR 2007 COMPARED TO FISCAL YEAR 2006 NET SALES. Consolidated net sales of Ricoh for fiscal year 2007 increased by 8.4% (or Yen 159.6 billion) to Yen 2,068.9 billion from Yen 1,909.2 billion for fiscal year 2007. Fiscal year 2007 was a milestone in that it was the first fiscal year in which net sales exceed Yen 2,000.0 billion. This increase in net sales was due primarily to the increase in net sales in the Office Solutions segment. Net sales from the Office Solutions segment accounted for 85.8% of the consolidated net sales for fiscal year 2007. A significant portion of such net sales was derived from the Imaging Solutions category, which accounted for 76.4% of consolidated total net sales, up 0.6 percentage points from fiscal year 2006. The increase in net sales from the Imaging Solutions category was due primarily to the increase in net sales of PPCs/MFPs, laser printers and GELJET printers as a result of Ricoh's introduction of new products in response to the continuing shift in customer preference from stand-alone equipment to multi-functional equipment, which can improve the customer's operations by expanding the digital color networking capacity of their office environment. In particular, sales of color PPCs/MFPs continued to grow in double-digit percentage figures in both Japan and the overseas markets. Compared to fiscal year 2006, net sales of color PPCs/MFPs increased by 18.6% in Japan and 29.3% in the overseas markets as customer demand in both Japan and the overseas markets continued to shift from monochrome to color products. Similar to fiscal year 2006, sales of laser printers and GELJET printers continued to grow in double-digit percentage figures in fiscal year 2007 in Japan and the overseas markets. Compared to fiscal year 2006, net sales of laser printers and GELJET printers increased by 14.4% in Japan and 28.4% in the overseas markets. Such increases were due primarily to the continuous release of new products -50- that adequately addressed customer needs in terms of printing quality and speed in both Japan and the overseas markets. In response to our customer demands, we continued to offer management and workflow efficiency solutions that are customized to our customers' printing needs from the operational administration of office network printers and mission-critical business printers to the creation of a high-speed, on-demand printing environment. We also offered professional services such as environment analysis, solutions and custom software design, in order to assist our customers improve their printing processes. In addition, during fiscal year 2007, Ricoh strengthened its sales of support services, document management applications and related software that assist its customers in optimizing their printing costs. As a result of its efforts, net sales in the Network System Solutions category increased by 2.0% in fiscal year 2007 as compared to fiscal year 2006 and contributed to the increase in net sales in the Office Solutions segment. In the Industrial Products segment, net sales increased by 10.6% in fiscal year 2007 as compared to fiscal year 2006. Sales of thermal media and electronic components increased due to stable market demand. Sales of semiconductor devices increased due primarily to an increase in demand for Ricoh's integrated circuits by manufacturers of electronic devices such as mobile and cellular phones. Sales of measuring equipment also increased due primarily to the recovery in demand for such product. The increase in sales in these products, however, was partially offset by the decrease in sales of optical equipment due to sluggish demand. In the Other segment, net sales increased by 6.4% mainly due to the continuous increase in sales of digital cameras and financing services. The appreciation of both the U.S. Dollar and the Euro in relation to the Japanese Yen also contributed to the increase in consolidated net sales in fiscal year 2007 as compared to fiscal year 2006 in Japanese Yen. Had the foreign currency exchange rates remained the same as in fiscal year 2006, Ricoh's consolidated net sales would have increased by 5.2%. Products. An increase in net sales derived from products was mainly due to the increase in net sales of PPCs/MFPs, laser printers and GELJET printers as a result of Ricoh's introduction of new products in response to the continuing shift in customers' preference from stand-alone equipment to multi-functional equipment, which can improve customers' operations by expanding the digital color networking capacity of their office environment. The increase in net sales of PPCs/MFPs, laser printers and GELJET printers completely offset the decrease in net sales of personal computers and servers in Japan, optical equipment and optical discs. In addition, Ricoh's new subsidiary, Ricoh Printing Systems, Ltd., contributed to the growth in the sales of this category. Cost of sales for products increased mainly due to the increase in net sales of PPCs/MFPs, laser printers and GELJET printers. -51- Post sales and rentals. Net sales derived from post sales services and rentals of equipment increased mainly due to an increase in revenue from post sale services such as maintenance services as well as increased sales of supplies for PPCs/MFPs, laser printers and GELJET printers. Ricoh continued to direct its marketing and promotional efforts of its equipment rental services towards major corporate clients in Japan and overseas. Other revenue. Net sales derived from other sources increased mainly due to an increase in revenue from financing services. COST OF SALES. Consolidated cost of sales for fiscal year 2007 increased by 8.3% (or Yen 92.2 billion) to Yen 1,206.5 billion from Yen 1,114.2 billion for fiscal year 2006. This increase was due primarily to the increase in net sales of PPCs/MFPs, laser printers and GELJET printers. GROSS PROFIT. Consolidated gross profit for fiscal year 2007 increased by 8.5% (or Yen 67.4 billion) to Yen 862.4 billion from Yen 795.0 billion for fiscal year 2006. This increase in gross profit primarily reflects the increase in sales derived from the introduction of new products in the Office Solutions segment and value-added higher-margin products, such as MFPs, laser printers and GELJET printers. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling, general and administrative expenses for fiscal year 2007 increased by 6.4% (or Yen 41.6 billion) to Yen 688.0 billion from Yen 646.4 billion for fiscal year 2006. Ricoh invested Yen 114.9 billion in R&D activity during fiscal year 2007 for purposes of developing more advanced MFPs, laser printers and GELJET printers with new capabilities to maintain Ricoh's large market share position in these products in the current competitive marketplace. Furthermore Ricoh incurred certain expenses relating to (1) investments in information technologies in connection with the development of its core operating systems in its offices in Japan and overseas and (2) the expansion of its business such as the acquisition by Ricoh Europe B.V. of sales and services companies in Europe. In addition, the appreciation of both the U.S. Dollar and the Euro in relation to the Japanese Yen resulted in an increase in selling, general and administrative expenses of approximately Yen 16.9 billion. OPERATING INCOME. Consolidated operating income for fiscal year 2007 increased by 17.4% (or Yen 25.7 billion) to Yen 174.3 billion from Yen 148.5 billion for fiscal year 2006. Operating Income as a percentage of net sales increased by 0.6 percentage points from 7.8% for fiscal year 2006 to 8.4% for fiscal year 2007. This increase was due primarily to increased sales in profitable product lines as well as decreased selling, general and administrative expenses as a percentage of net sales resulting from structural reform initiatives that Ricoh implemented during fiscal year 2007, including steps taken by Ricoh to streamline its core operating systems and thereby enhance overall operational efficiency. INTEREST AND DIVIDEND INCOME. Consolidated interest and dividend income for fiscal year 2007 increased by Yen 2.6 billion to Yen 5.5 billion from Yen 2.8 billion for fiscal year 2006. The increase in interest and dividend income reflected the favorable financial -52- market conditions and the positive change in economic conditions in Japan as dividend income from Japanese companies increased. INTEREST EXPENSE. Consolidated interest expense for fiscal year 2007 increased by Yen 2.1 billion to Yen 7.3 billion from Yen 5.2 billion for fiscal year 2006. The increase in interest expense was due primarily to an increase in market interest rates as compared to fiscal year 2006. FOREIGN CURRENCY EXCHANGE (GAIN) LOSS, NET. Consolidated foreign currency exchange (gain) loss, net included in other (income) expenses for fiscal year 2007 recorded a loss of Yen 1.1 billion from a gain of Yen 3.7 billion for fiscal year 2006. For additional information on Ricoh's foreign exchange hedging activities, see Item 11. Quantitative and Qualitative Disclosures About Market Risk. OTHER, NET. Consolidated other, net included in other (income) expenses increased by Yen 0.4 billion to an income of Yen 3.1 billion for fiscal year 2007 from an income of Yen 2.7 billion for fiscal year 2006. This increase in income of other, net in fiscal year 2007 was due to an increase in income derived from the sale of marketable securities as compared to fiscal year 2006. PROVISION FOR INCOME TAXES. Total consolidated provision for income taxes for fiscal year 2007 increased by 14.5% (or Yen 8.1 billion) to Yen 64.3 billion from Yen 56.1 billion for fiscal year 2006. The effective tax rate was 36.9% for fiscal year 2007 from 36.8% for the previous fiscal year. The effective tax rate was lower than the Japanese statutory tax rate. See Note 9 to the Consolidated Financial Statements for additional information. MINORITY INTERESTS. Consolidated minority interests for fiscal year 2007 increased by Yen 1.3 billion to Yen 5.5 billion from Yen 4.1 billion for fiscal year 2006. This increase was due primarily to improved performance of Ricoh Elemex Corporation for fiscal year 2007. EQUITY IN EARNINGS OF AFFILIATES. Consolidated equity in earnings of affiliates for fiscal year 2007 decreased by Yen 1.0 billion to Yen 1.5 billion from Yen 2.6 billion for fiscal year 2006. This decrease was due primarily to the fact that Ricoh no longer recorded earnings for a company that it recognized as an affiliate in prior fiscal years as Ricoh's interests in such company decreased as a result of certain restructuring initiatives undertaken by such company during fiscal year 2007. See Note 7 to the Consolidated Financial Statements for additional information. INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX. Consolidated income from discontinued operations, net of tax for fiscal year 2007 increased by Yen 3.4 billion to Yen 5.5 billion from Yen 2.0 billion for fiscal year 2006. This increase was due primarily to the gain from the sale of the content delivery business of San-Ai Co., Ltd., a wholly-owned subsidiary of the Company, during fiscal year 2007. See Note 4 to the Consolidated Financial Statements for additional information. -53- OPERATING SEGMENTS
Thousands Millions of Yen (except for percentages) of U.S. --------------------------------------------- Dollars 2006 2007 2007/(2)/ % Change - --------------------------------------------------------------------------------------------------- OFFICE SOLUTIONS Net sales 1,637,228 100.0% 1,774,467 100.0% $15,037,856 8.4 Operating expenses 1,434,279 87.6 1,549,156 87.3 13,128,441 8.0 Operating income 202,949 12.4% 225,311 12.7% $ 1,909,415 11.0 - --------------------------------------------------------------------------------------------------- INDUSTRIAL PRODUCTS Net sales 123,200 100.0% 138,112 100.0% $ 1,170,441 12.1 Operating expenses 124,108 100.7 135,164 97.9 1,145,458 8.9 Operating income (loss) (908) (0.7)% 2,948 2.1% $ 24,983 -- - --------------------------------------------------------------------------------------------------- OTHER Net sales 151,374 100.0% 161,071 100.0% $ 1,365,009 6.4 Operating expenses 148,692 98.2 158,868 98.6 1,346,339 6.8 Operating income 2,682 1.8% 2,203 1.4% $ 18,670 (17.9) - --------------------------------------------------------------------------------------------------- CORPORATE AND ELIMINATION Net sales (2,564) (4,725) $ (40,043) Operating expenses 53,575 51,357 435,228 Operating income (loss) (56,139) (56,082) $ (475,271) - --------------------------------------------------------------------------------------------------- CONSOLIDATED Net sales 1,909,238 100.0% 2,068,925 100.0% $17,533,263 8.4 Operating expenses 1,760,654 92.2 1,894,545 91.6 16,055,466 7.6 Operating income 148,584 7.8% 174,380 8.4% $ 1,477,797 17.4 - ---------------------------------------------------------------------------------------------------
Notes: (1) During fiscal year 2007, a subsidiary of the Company sold its content distribution business. As a result of such sale, the operating results of such business were reclassified as a discontinued operation. Accordingly, sales derived from such business were excluded from the above segment data for all periods in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (2) The above consolidated financial data set forth under the heading "Thousands of U.S. Dollars 2007," which have been translated from Japanese Yen to U.S. Dollar for the year ended March 31, 2007, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of Yen 118 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Bank of New York on March 31, 2007. (3) The above consolidated financial data, which set forth net sales, operating expenses and operating income (loss) for each operating segment, include both transactions with external customers as well as intersegment transactions. Office Solutions Net sales in the Office Solutions segment for fiscal year 2007 increased by 8.4% (or Yen 137.2 billion) to Yen 1,774.4 billion from Yen 1,637.2 billion for fiscal year 2006. This increase was due primarily to the favorable growth in the Imaging Solutions category. More specifically, sales in the Imaging Solutions category for fiscal year 2007 increased by 9.2% (or Yen 133.5 billion) to Yen 1,580.1 billion from Yen 1,446.6 billion for fiscal year 2006. This increase was due primarily to the increase in net sales of higher-margin, value-added color PPCs/MFPs, color laser printers and GELJET printers in both Japan and the overseas markets. Such products are equipped with advanced digital and networking technologies, and continue to be well-received by customers as such products addressed customers' needs for conducting business operations effectively and efficiently by digitalizing and colorizing documents and being capable of handling large volumes of information. With respect to monochrome products, overseas sales of monochrome PPCs/MFPs increased in fiscal year 2007, while sales of monochrome PPCs/MFPs in Japan continued to decrease due primarily to a shift in customer demand from monochrome products to products with color capabilities. Sales of monochrome and -54- color laser printers and GELJET printers increased in both Japan and the overseas markets due primarily to the continuous release of new products that adequately addressed customers' needs in terms of printing quality and speed Furthermore, an increase in sales volume of high-end products and customized products contributed to the increase in sales in this segment. Ricoh continued to release products with enhanced security features and products that are friendly to the environment. Furthermore, Ricoh continued to offer solutions to optimize the total printing costs of its customers during fiscal year 2007 to assist customers manage their TDV more effectively and efficiently. Sales in the Network System Solutions category for fiscal year 2007 increased by 2.0% (or Yen 3.7 billion) to Yen 194.3 billion from Yen 190.5 billion for fiscal year 2006. Sales in the solutions business, such as support and services relating to Ricoh's imaging solutions products, continued to increase both in Japan and the overseas markets during fiscal year 2007 due to successful promotional efforts to assist customers in optimizing their total printing costs. Sales of software and related services also increased due to such promotional efforts. Excluding the foreign currency exchange rate fluctuations, sales in the Office Solutions segment would have increased by 4.9% (or Yen 79.7 billion) for fiscal year 2007 as compared to fiscal year 2006. For fiscal year 2007, cost of sales of the Office Solutions segment increased due primarily to the increase in sales derived from the introduction of new products. Furthermore, Ricoh incurred certain expenses relating to (1) investments in information technologies in connection with the development of its core operating systems in its offices in Japan and overseas and (2) the expansion of its business such as the acquisition by Ricoh Europe B.V. of sales and services companies in Europe. As a result, operating expenses in the Office Solutions segment for fiscal year 2007 increased by 8.0% (or Yen 114.8 billion) to Yen 1,549.1 billion from Yen 1,434.2 billion for fiscal year 2006. Operating income for the Office Solutions segment for fiscal year 2007 increased by 11.0% (or Yen 22.3 billion) to Yen 225.3 billion from Yen 202.9 billion for fiscal year 2006. Operating income as a percentage of net sales for fiscal year 2007 increased by 0.3 percentage points to 12.7% from 12.4% as compared to fiscal year 2006. Increased sales in highly profitable product lines, such as MFPs with color capabilities, coupled with lower selling, general and administrative expenses as a percentage of net sales due to structural reform initiatives undertaken by Ricoh to streamline its business structure contributed to the increase in operating income of the Office Solutions segment for fiscal year 2007. Industrial Products Net sales in the Industrial Products segment for fiscal year 2007 increased by 12.1% (or Yen 14.9 billion) to Yen 138.1 billion from Yen 123.2 billion for fiscal year 2006. Sales -55- of thermal media and electronic components increased due to stable market demand and sales of semiconductor devices increased reflecting a demand for Ricoh's integrated circuits by manufacturers of such electronic devices as mobile and cellular phones. Sales of measuring equipment increased due primarily to the recovery in demand for such products. While sales in the optical equipment business decreased from the previous fiscal year due primarily to sluggish demand, such decrease in sales of the optical equipment business was sufficiently offset by the increase in sales from the thermal media, electronic components, semiconductor and measuring equipment businesses as discussed above. Operating expenses in this segment for fiscal year 2007, increased by 8.9% (or Yen 11.0 billion) to Yen 135.1 billion from Yen 124.1 billion for fiscal year 2006. This increase was due primarily to the increase in sales in this segment. As a result, operating income for the Industrial Products segment for fiscal year 2007 increased by Yen 3.8 billion to Yen 2.9 billion as compared to the operating loss of Yen 0.9 billion for fiscal year 2006. Operating income as a percentage of net sales for fiscal year 2007 increased by 2.8 percentage points to 2.1% from (0.7)% as compared to fiscal year 2006. Other Net sales in the Other segment for fiscal year 2007 increased by 6.4% (or Yen 9.6 billion) to Yen 161.0 billion from Yen 151.3 billion for fiscal year 2006. During fiscal year 2007, sales of digital cameras increased due primarily to the favorable response by customers of new digital camera products that Ricoh introduced. The steady performance of the financing business also contributed to the increase in this segment. Operating expenses in this segment for fiscal year 2007, increased by 6.8% (or Yen 10.1 billion) to Yen 158.8 billion from Yen 148.6 billion for fiscal year 2006. As a result, operating income for the Other segment for fiscal year 2007 decreased by Yen 0.4 billion to Yen 2.2 billion as compared to Yen 2.6 billion for fiscal year 2006. Operating income as a percentage of net sales for fiscal year 2007 decreased by 0.4 percentage points to 1.4% from 1.8 % as compared to fiscal year 2006. -56- GEOGRAPHIC SEGMENTS BY GEOGRAPHIC ORIGIN
Thousands Millions of Yen (except for percentages) of U.S. --------------------------------------------- Dollars 2006 2007 2007/(2)/ % Change - --------------------------------------------------------------------------------------------------- JAPAN Net sales 1,406,032 100.0% 1,521,967 100.0% $12,898,025 8.2 Operating expenses 1,310,233 93.2 1,411,653 92.8 11,963,161 7.7 Operating income 95,799 6.8% 110,314 7.2% $ 934,864 15.2 - --------------------------------------------------------------------------------------------------- THE AMERICAS Net sales 393,376 100.0% 429,262 100.0% $ 3,637,814 9.1 Operating expenses 378,108 96.1 408,150 95.1 3,458,899 7.9 Operating income 15,268 3.9% 21,112 4.9% $ 178,915 38.3 - --------------------------------------------------------------------------------------------------- EUROPE Net sales 438,753 100.0% 511,795 100.0% $ 4,337,246 16.6 Operating expenses 417,341 95.1 478,380 93.5 4,054,068 14.6 Operating income 21,412 4.9% 33,415 6.5% $ 283,178 56.1 - --------------------------------------------------------------------------------------------------- OTHER Net sales 200,288 100.0% 269,043 100.0% $ 2,280,025 34.3 Operating expenses 185,283 92.5 251,486 93.5 2,131,237 35.7 Operating income 15,005 7.5% 17,557 6.5% $ 148,788 17.0 - --------------------------------------------------------------------------------------------------- CORPORATE AND ELIMINATION Net sales (529,211) (663,142) $(5,619,847) Operating expenses (530,311) (655,124) (5,551,899) Operating income (loss) 1,100 (8,018) $ (67,948) - --------------------------------------------------------------------------------------------------- CONSOLIDATED Net sales 1,909,238 100.0% 2,068,925 100.0% $17,533,263 8.4 Operating expenses 1,760,654 92.2 1,894,545 91.6 16,055,466 7.6 Operating income 148,584 7.8% 174,380 8.4% $ 1,477,797 17.4 - ---------------------------------------------------------------------------------------------------
Notes: (1) During fiscal year 2007, a subsidiary of the Company sold its content distribution business. As a result of such sale, the operating results of such business were reclassified as a discontinued operation. Accordingly, sales derived from such business were excluded from the above segment data for all periods in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (2) The above consolidated financial data set forth under the heading "Thousands of U.S. Dollars 2007," which have been translated from Japanese Yen to U.S. Dollar for the year ended March 31, 2007, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of Yen 118 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Bank of New York on March 31, 2007. (3) The above consolidated financial data, which set forth net sales, operating expenses and operating income (loss) for each geographic segment by geographic origin, include both transactions with external customers as well as intersegment transactions. Japan Sales in Japan for fiscal year 2007 increased by 8.2% (or Yen 115.9 billion) to Yen 1,521.9 billion from Yen 1,406.0 billion for fiscal year 2006. In the Office Solutions segment, Ricoh conducted a series of sales promotions in Japan when it introduced new products and increased customers' demand by introducing new products that combined color printing capabilities and various office solutions that addressed customers' needs. Ricoh's strategic sales promotion activities and marketing strategies were designed to target its customers' changing demand from stand-alone monochrome products to color high-speed products that work in the network environment. Sales of solution products such as support services, document management applications and other software increased in Japan as well. This increase was attributable to Ricoh's successful promotion of solutions associated with software and IT services that optimized the customers' total printing costs. Sales of semiconductors also increased despite the -57- intensified competition in the cellular phone market. In addition, sales of both thermal media and measuring equipment increased, with the measuring equipment business showing an upward trend in demand. Operating expenses in Japan for fiscal year 2007 increased by 7.7% (or Yen 101.4 billion) to Yen 1,411.6 billion from Yen 1,310.2 billion for fiscal year 2006. The increase in operating expenses was due primarily to the increase in sales as well as the increase in R&D expenses and depreciation expenses. As a result, operating income for fiscal year 2007 increased by 15.2% (or Yen 14.5 billion) to Yen 110.3 billion from Yen 95.7 billion for fiscal year 2006. The Americas Net sales in the Americas for fiscal year 2007 increased by 9.1% (or Yen 35.8 billion) to Yen 429.2 billion from Yen 393.3 billion for fiscal year 2006. Ricoh recorded increased sales of color and high-speed MFPs, laser printers and GELJET printers for corporate clients in the Americas for fiscal year 2007. Furthermore, Ricoh continued to enhance its sales structure to form close relationships with its customers and expand its product line-up in the Americas during fiscal year 2007. Ricoh also worked closely with its customer to develop tailored integrated networking solutions to meet individual requirements of each customer. Operating expenses in this geographic segment for fiscal year 2007 increased by 7.9% (or Yen 30.0 billion) to Yen 408.1 billion from Yen 378.1 billion for fiscal year 2006. The increase in operating expenses was due primarily to the increase in sales. The operating expenses as a percentage of net sales decreased by 1.0 percentage point for fiscal year 2007 as compared to the previous fiscal year in the Americas due primarily to the system integration initiatives that were implemented during the previous fiscal year to achieve operational efficiencies. As a result, operating income for fiscal year 2007 increased by 38.3% (or Yen 5.8 billion) to Yen 21.1 billion from Yen 15.2 billion for fiscal year 2006 due primarily to the increase in sales of higher-margin products such as color MFPs. Europe Sales in Europe for fiscal year 2007 increased by 16.6% (or Yen 73.0 billion) to Yen 511.7 billion from Yen 438.7 billion for fiscal year 2006, due primarily to an increase in sales in the Imaging Solutions category such as MFPs, laser printers and GELJET printers, reflecting Ricoh's continuing efforts to strengthen its sales networks and to reinforce the strength of its brand in this geographic segment. Operating expenses in this geographic segment for fiscal year 2007 increased by 14.6% (or Yen 61.0 billion) to Yen 478.3 billion from Yen 417.3 billion for fiscal year 2006 due primarily to the increase in sales and the acquisition of Danka's European companies. -58- As a result, operating income for fiscal year 2007 increased by 56.1% (or Yen 12.0 billion) to Yen 33.4 billion from Yen 21.4 billion for fiscal year 2006 due primarily to the increase in sales of higher-margin products such as color MFPs. Other Net sales in the Other geographic segment increased for fiscal year 2007 by 34.3% (or Yen 68.7 billion) to Yen 269.0 billion from Yen 200.2 billion for fiscal year 2006. This increase was due primarily to the increase in sales of color MFPs. Sales of Office Solutions products, such as color MFPs, laser printers and GELJET printers, increased in this geographic segment as customer demand shifted toward such products and Ricoh's group companies in this geographic region manufactured and exported such products to various other Ricoh group companies worldwide. Operating expenses in this geographic segment for fiscal year 2007 increased by 35.7% (or Yen 66.2 billion) to Yen 251.4 billion from Yen 185.2 billion for fiscal year 2006 due primarily to increased sales activities in this geographic segment. As a result, operating income for fiscal year 2007 increased by 17.0% (or Yen 2.5 billion) to Yen 17.5 billion from Yen 15.0 billion for fiscal year 2006 due primarily to the increased sales activities in this geographic segment. -59- B. Liquidity and Capital Resources Cashflows - --------- The following table summarizes our cashflows for each of the three fiscal years ended March 31, 2006, 2007 and 2008, as reported in our Consolidated Statements of Cashflows in the accompanying Consolidated Financial Statements. (Billions of Yen) For the year ended March 31, ---------------------------- 2006 2007 2008 ------ ------ ------ Net cash provided by operating activities 173.4 167.2 194.3 Net cash used in investing activities (120.0) (115.4) (198.3) Net cash provided by (used in) financing activities (59.9) 9.2 (72.1) Net increase in cash and cash equivalents from discontinued operations 3.3 0.8 -- Increase (decrease) in cash and cash equivalents 0.1 68.6 (85.1) Cash and cash equivalents at beginning of year 186.8 187.0 255.7 Cash and cash equivalents at end of year 187.0 255.7 170.6 Operating Cashflows For fiscal year 2008, net cash provided by operating activities consisted primarily of net income from continuing operations of Yen 106.4 billion, depreciation and amortization of Yen 95.7 billion, an increase in accrued income taxes and accrued expenses and other of Yen 5.2 billion and deferred income taxes of Yen 4.9 billion, which were partially offset by an increase in finance receivables of Yen 17.1 billion and an increase in trade receivables of Yen 16.5 billion. As compared to fiscal year 2007, net cash provided by operating activities in fiscal year 2008 increased mainly because (1) depreciation and amortization increased for fiscal year 2008 reflecting the financial effect of new companies becoming subsidiaries of the Company in fiscal year 2008 (such as InfoPrint Solutions Company) and (2) the depreciation of the U.S. Dollar in relation to the Japanese Yen in fiscal year 2008 resulted in an increase in Other, net. For fiscal year 2007, net cash provided by operating activities consisted primarily of net income from continuing operations of Yen 106.2 billion, depreciation and amortization of Yen 89.6 billion, and an increase in accrued income taxes and accrued expenses and other of Yen 11.1 billion, which were partially offset by an increase in finance receivables of Yen 28.0 billion and an increase in trade receivables of Yen 15.9 billion. As compared to fiscal year 2006, net cash provided by operating activities in fiscal year 2007 decreased mainly because the increase in net sales, especially in Japan, during the fourth -60- quarter as compared to such period during fiscal year 2006 resulted in an increase in Ricoh's finance receivables and trade receivables for fiscal year 2007. For fiscal year 2006, net cash provided by operating activities consisted primarily of net income from continuing operations of Yen 95.0 billion, depreciation and amortization of Yen 84.0 billion, a decrease in trade receivables of Yen 13.4 billion and other, net of Yen 11.0 billion, which were partially offset by an increase in finance receivables of Yen 30.0 billion, deferred income taxes of Yen 4.6 billion and a decrease in trade payables of Yen 4.4 billion. As compared to fiscal year 2005, net cash provided by operating activities in fiscal year 2006 increased mainly because (1) the decrease in net sales in Japan during the fourth quarter as compared to such period in fiscal year 2005 resulted in a decrease in Ricoh's trade receivables for fiscal year 2006 and (2) the increase in capital expenditures also resulted in an increase in depreciation expenses as compared to fiscal year 2005. Investing Cashflows For fiscal year 2008, net cash used in investing activities consisted mainly of, Yen 97.9 billion in payments for purchases of available-for-sale securities, Yen 96.7 billion for acquisitions of new subsidiaries, net of cash acquired, Yen 85.2 billion of expenditures for property, plant and equipment and Yen 19.3 billion of other, net. Ricoh realized Yen 100.0 billion from the sale of available-for-sale securities that were held by the Company and certain subsidiaries. Net cash used in investing activities increased in fiscal year 2008 mainly because Ricoh used cash in connection with the establishment and commencement of operations of InfoPrint Solutions Company. For fiscal year 2007, net cash used in investing activities consisted mainly of, Yen 97.1 billion in payments for purchases of available-for-sale securities, Yen 85.7 billion of expenditures for property, plant and equipment, Yen 23.2 billion for acquisitions of new subsidiaries, net of cash acquired, and Yen 17.9 billion of other, net. Ricoh realized Yen 96.0 billion from the sale of available-for-sale securities that were held by the Company and certain subsidiaries and Yen 12.0 billion from sales of discontinued operations. As compared to fiscal year 2006, net cash used in investing activities decreased in fiscal year 2007 mainly because Ricoh did not incur the capital expenditures that incurred in fiscal year 2006. For fiscal year 2006, net cash used in investing activities consisted mainly of Yen 138.6 billion in payments for purchases of available-for-sale securities, Yen 101.7 billion of expenditures for property, plant and equipment and Yen 24.2 billion of other, net. Ricoh realized Yen 141.6 billion from the sale of available-for-sale securities that were held by the Company and certain subsidiaries. As compared to fiscal year 2005, net cash used in investing activities increased in fiscal year 2006 mainly because Ricoh incurred capital expenditures for the consolidation of some of its operations at its headquarter in Tokyo, the consolidation of its domestic R&D facilities and offices, and the establishment of a new color toner factory in Japan. Financing Cashflows -61- For fiscal year 2008, net cash used in financing activities consisted primarily of Yen 75.7 billion to repay long-term indebtedness and Yen 22.6 billion to pay dividends, which were partially offset by Yen 67.1 billion of proceeds received from long-term indebtedness. As compared to fiscal year 2007, net cash used in financing activities increased in fiscal year 2008 as Ricoh reduced its interest-bearing indebtedness provided by external parties by Yen 32.3 billion and acquired Yen 15.7 billion of treasury stock. For fiscal year 2007, net cash provided by financing activities consisted primarily of Yen 65.2 billion of proceeds from the issuance of long-term debt securities, of which Yen 55.2 billion of consisted of cash proceeds from the issuance of Euro Yen zero coupon convertible bonds due 2011, and Yen 60.1 billion of proceeds from long-term indebtedness. Ricoh repaid Yen 55.0 billion of long-term debt securities, Yen 49.1 billion of long-term indebtedness and paid Yen 18.2 billion of dividends. As compared to fiscal year 2006, net cash from financing activities increased in fiscal year 2007 as Ricoh received proceeds from the issuance of Yen 55.2 billion aggregate principal amount of the Euro Yen zero coupon convertible bonds and reduced the amount of its outstanding long-term indebtedness. For fiscal year 2006, net cash used in financing activities consisted primarily of Yen 93.7 billion used to repay long-term indebtedness, Yen 52.0 billion used to repay long-term debt securities, Yen 16.1 billion used for dividend payments and Yen 10.6 billion used for the purchase of treasury stock. Ricoh received Yen 63.7 billion of proceeds from long-term indebtedness and Yen 39.6 billion from the increase in short-term borrowings. In total, Ricoh reduced its interest-bearing indebtedness provided by external parties by Yen 32.3 billion as it continued to use its group cash management system for its efficient cash management. As compared to fiscal year 2005, net cash used in financing activities increased in fiscal year 2006 as Ricoh continued to reduce its external borrowings. Cash and Asset-Liability Management Ricoh has in recent years tried to achieve greater efficiencies in the utilization of cash balances held by its subsidiaries pursuant to its policy of ensuring adequate financing and liquidity for its operations and growth, and maintaining the strength of its balance sheet. One of the methods that Ricoh has implemented to achieve greater efficiency is building up its cash management system in Japan, the United States and Europe. This cash management system functions as an arrangement whereby Ricoh's funds are pooled together and cash resources are lent and borrowed from one group company to another company, with finance companies located in Japan, the United States and the Netherlands coordinating this arrangement. This pooling-of-funds arrangement has reduced the occurrence of excess accumulation of cash in one group company while another group company engages in unnecessary borrowing from third party institutions to meet its cash requirements. As such, the pooling-of-funds arrangement has reduced interest expense and related costs which were previously paid to third parties. Ricoh also enters into various derivative financial instrument contracts in the normal course of its business and in connection with the management of its assets and liabilities. In order to hedge against the potentially adverse impacts of foreign currency -62- fluctuations on its assets and liabilities denominated in foreign currencies, Ricoh enters into foreign exchange contracts and foreign currency options. Another form of derivative financial contracts that Ricoh enters into is interest rate swap agreements to hedge against the potentially adverse impacts of fair value or cashflow fluctuations on its outstanding debt interests. Ricoh uses derivative instruments to reduce its risk and to protect the market value of its assets and liabilities in conformity with Ricoh's policy. Ricoh does not use derivative financial instruments for trading or speculative purposes, nor is it a party to leveraged derivatives. Detailed discussion of these derivative contracts is provided in Item 11. Quantitative and Qualitative Disclosures About Market Risk. Ricoh also engages in securitization activities through its domestic leasing affiliate, Ricoh Leasing Co., Ltd. For a discussion of such activities, see Item 5.E. Off-Balance Sheet Arrangements. Sources of Funding Ricoh's principal sources of funding are a combination of cash and cash equivalents on hand, various lines of credit and the issuance of commercial paper and medium-term notes. In assessing its liquidity and capital resources needs, Ricoh places importance on the net income figure in the income statement, balances of cash and cash equivalents in the balance sheet and operating cashflows in the cashflow statements. As of March 31, 2008, lines of credit and short-term and medium-term borrowings were as follows: (Billions of Yen) - -------------------------------------------------------------------------------- Average Interest Rate (%) Amount Available ------------------------------------ Bank loans 1.3 341.9 Commercial paper 2.3 232.0 Medium-term notes 3.5 101.9 - -------------------------------------------------------------------------------- Total -- 675.9 - -------------------------------------------------------------------------------- As of March 31, 2008, Ricoh had Yen 170.6 billion in cash and cash equivalents and Yen 784.6 billion in aggregate borrowing facilities. Of the Yen 784.6 billion in aggregate borrowing facilities, Yen 675.9 billion was available to be borrowed by Ricoh as of March 31, 2008. Ricoh Leasing Co., Ltd. has a Yen 57.0 billion committed credit line with several banks having credit ratings satisfactory to Ricoh. This Yen 57.0 billion committed credit line amount is included in the Yen 784.6 billion figure for aggregate borrowing facilities. Almost all such borrowings from financial institutions and outstanding securities are unsecured. Ricoh believes that its working capital used to repay indebtedness and execute new transactions is sufficient, due to its diverse funding sources and the inflow of cash generated from its operating activities. Even if Ricoh is unable to access these markets on acceptable terms, Ricoh has access to other sources of liquidity, including bank borrowings, cash flows from operations and sales of assets. In addition, its subsidiaries -63- may be restricted from paying dividends for various reasons, such as capital adequacy requirements. However, Ricoh does not expect such restrictions to have a significant impact on its ability to meet its cash obligations. The Company, Ricoh Leasing Co., Ltd. and certain overseas subsidiaries raise capital by issuing commercial paper and medium-term notes. Ricoh Leasing Co., Ltd. and certain overseas subsidiaries of the Company issue commercial paper to meet their short-term funding requirements. Utilization of such capacity depends on Ricoh's financing needs, investor demand and market conditions, as well as the ratings outlook for Ricoh's securities, as discussed below. Interest rates for commercial paper issued by the Company and its subsidiaries ranged from 0.65% to 4.64% and the interest rate for the medium-term notes issued by the Company and its subsidiaries was 3.51% during fiscal year 2008. As discussed in "Cash and Asset-Liability Management," Ricoh has decreased its outstanding interest-bearing debt in recent years by using its cash management system in Japan, the United States and Europe. The Company obtains ratings from the following major rating agencies: Standard & Poor's Rating Services, a division of McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors Services ("Moody's"), and another local rating agency in Japan. As of March 31, 2008, S&P assigned long-term and short-term credit ratings for the Company of A+ and A-1, respectively, and Moody's assigned a long-term credit rating for the Company of A1. As is customary in Japan, substantially all of the bank loans are subject to general agreements with each lending bank which provide, among other things, that the bank may request additional security for loans if there is reasonable and probable cause for the necessity of such additional security and the bank may treat any security furnished, as well as any cash deposited in such bank, as security for all present and future indebtedness. The Company has never been requested to furnish such additional security. In some cases, the Company's long-term debt securities contain customary covenants, including a "limitation on liens" covenant. The Company was in compliance with the covenants in its bank agreements and securities as of March 31, 2008. The Company is not subject to any covenants limiting its ability to incur additional indebtedness. For additional detail regarding these securities, see Note 11 to the Consolidated Financial Statements. Cash Requirements and Commitments Ricoh believes that its cash and cash equivalents and funds expected to be generated from its operations are sufficient to meet its cash requirements at least through fiscal year 2009. Even if there were a decrease in cashflows from operations as a result of fluctuations in customer demands from one year to another, Ricoh believes that current funds on hand along with funds available under existing borrowing facilities would be sufficient to finance its anticipated operations. In addition, Ricoh believes that it is able to secure adequate resources to fund ongoing operating requirements and investments related to the expansion of existing businesses and the development of new projects through its access to the financial and capital markets. Interest rates may fluctuate as it -64- may be affected by the financial market turbulence resulting in part from the subprime mortgage crisis in the United States and the rise in oil prices. However, Ricoh believes that the effect of such fluctuations will not significantly affect Ricoh's liquidity, mainly due to the fact that Ricoh has sufficient amounts of cash and cash equivalents on hand, a continuous cashflow generated from its operating activities and a group-wide cash management system. Ricoh expects that its capital expenditures for fiscal year 2009 will amount to approximately Yen 90.0 billion, principally for investments in manufacturing facilities of digital and networking equipment with new engines, toners, semiconductor and thermal media. More specifically, Ricoh plans to purchase land to build a production plant in Thailand in fiscal year 2009. This plant is expected to commence its operations in fiscal year 2010 and manufacture MFPs and laser printers. Ricoh anticipates that this plant in Thailand will strengthen its manufacturing network in Asia. In addition, Ricoh plans to establish production plants in Japan during fiscal year 2009 and 2010 for PxP toners, which produce higher quality images. In addition, Ricoh is obligated to repay long-term indebtedness in the aggregate principal amount of Yen 82.6 billion during fiscal year 2009, and in the aggregate principal amount of Yen 224.2 billion during fiscal years 2010 through 2012. The Company and certain of its subsidiaries have various employee pension plans covering all of their employees. As described in Note 12 to the Consolidated Financial Statements, the unfunded portion of these employee pension plans amounted to Yen 96.9 billion, as of March 31, 2008. The unfunded amount was recorded as an asset of Yen 9.0 and a liability of Yen 106.0 billion on the consolidated balance sheet of Ricoh as of March 31, 2008. The amounts contributed to pension plans for fiscal years 2006, 2007 and 2008 were Yen 13.8 billion, Yen 14.7 billion and Yen 14.5 billion, respectively. Ricoh believes that its cashflow from operating and investing activities together with existing lines of credit and borrowing facilities provide sufficient means to satisfy its liquidity needs and future obligations as described above. C. Research and Development, Patents and Licenses Research and Development - ------------------------ Since its formation, Ricoh's basic management philosophy has been to contribute to society by developing and providing innovative and useful products with an emphasis on the relationship between people and information. Based on this management philosophy, Ricoh undertakes a variety of R&D activities to develop new technologies, products and systems to facilitate better communication. The Research and Development Group and the Software R&D Group (collectively, the "R&D Groups") function as the headquarters of Ricoh's R&D activities, which are conducted at its R&D facilities throughout Japan and certain satellite R&D facilities overseas. Ricoh conducts a wide range of R&D activities, including technological research, research in elemental technologies, product applications and manufacturing technologies, including environmental technologies. -65- The R&D facilities conduct basic and advanced research in connection with optical technologies, new materials, devices, information electronics, environmental technologies and software technologies as well as elemental development for new products. In addition to the R&D facilities in Japan, Ricoh has established satellite R&D facilities in the United States and China. Ricoh seeks to realize "image communications" through the development of Imaging Solutions products that can adapt to changes in the broadband working environment and the development of new technologies for multimedia. Ricoh also engages in R&D activities to protect the environment in a variety of fields. For fiscal years 2006, 2007 and 2008, Ricoh's consolidated R&D expenditures totaled Yen 110.3 billion, Yen 114.9 billion and Yen 126.0 billion, respectively. Out of total consolidated R&D expenditures of Yen 126.0 billion for fiscal year 2008, Yen 97.2 billion were for R&D activities related to the Office Solutions segment. Ricoh conducted development activities in the Office Solutions segment for (1) optical design for copiers and printers, (2) imaging data processing technology, (3) electrophotographic supply technology, (4) elemental technology for the next-generation of image producing engines, (5) cutting edge software technology and (6) applications for the advancement of system solutions. Out of total consolidated R&D expenditures of Yen 126.0 billion for fiscal year 2008, Yen 10.9 billion were for R&D activities related to the Industrial Products segment. In the Industrial Products segment, Ricoh's R&D activities continued to include (1) designing ASICs and ASSPs for imaging, audio and communication use, (2) developing methods to utilize electronic design automation, (3) developing optical element technologies and new recording methods and (4) R&D for supply parts such as thermal media. More specifically, in the electronic devices business, Ricoh continued to develop devices that are compatible with next-generation interfaces that have improved data transmission rates and reduced pin numbers. In addition, Ricoh continued to develop voltage regulator ICs that contribute to lower-power consumption current, improved operational stability and further miniaturization of various information equipment. Out of total consolidated R&D expenditures of Yen 126.0 billion for fiscal year 2008, Yen 1.9 billion were for R&D activities related to the Other segment. In this segment, Ricoh continued to develop its image capturing device technology for digital cameras and its related applications technology. In addition, Ricoh continues to engage in the development of its fundamental research fields, which focus on R&D activities that can be applied to various products and that are difficult to categorize into a specific operating segment. Out of total consolidated R&D expenditures of Yen 126.0 billion for fiscal year 2008, Yen 15.9 billion were for R&D activities relating to fundamental research fields. Such R&D activities include R&D in nanotechnology, micro-machining, general technologies in measuring, analysis and simulation, new materials and devices, non-electrophotographic recording technologies, production techniques, system software modules, photonics technology for high speed and high quality image processing, the next-generation of office systems and office solutions, and environmental technologies. -66- For a summary of Ricoh's R&D expenditures during for fiscal years 2006, 2007 and 2008, see Note 19 to the Consolidated Financial Statements. Patents and Licenses - -------------------- Ricoh owns approximately 27,500 patents as of March 31, 2008, on a worldwide basis, and has a large number of licenses under various agreements with Japanese and foreign companies. Although patents and licenses are important to Ricoh, it does not believe that the expiration of any single patent or group of related patents or of any license agreements will materially affect its business. The following table lists some of the important patent and licensing agreements which the Company is currently a party to:
Counterparty Country Summary of the Contract Contract Term - --------------------------------------------------------------------------------------------------------- International USA Comprehensive cross license patent March 28, 2007 to expiration date Business Machines agreement relating to the of the patent subject to the Corporation information processing technology agreement area (reciprocal agreement) ADOBE Systems USA Patent licensing agreements January 1, 1999 to January 1, 2009 Incorporated relating to development on printer software and sales (the counterparty as the licensee) Lemelson Medical, USA Patent licensing agreement relating March 31, 1993 to expiration date Education & Research to computer image analysis and of the patent subject to the Foundation Limited other products (the counterparty as agreement Partnership the licensee) Canon Inc. Japan Patent licensing agreement relating October 1, 1998 to expiration date to office equipment (reciprocal of the patent subject to the agreement) agreement Brother Industries, Japan Patent licensing agreement relating October 1, 2004 to September 30, Ltd. to digital photography (the Company 2009 as the licensor) Kyocera Mita Japan Patent licensing agreement relating January 1, 2007 to December 31, Corporation to method of controlling multi 2011 function peripheral (the Company as the licensor)
D. Trend Information See "OVERVIEW" above and "Cautionary Statement with Respect to Forward-Looking Statements" elsewhere in this Annual Report. E. Off-Balance Sheet Arrangements As disclosed in Note 5 to the Consolidated Financial Statements, Ricoh, through its domestic leasing affiliate, has certain procedures in place to sell some of its lease receivables through securitization programs; however, no lease receivables have been -67- securitized during the last three fiscal years. Securitization involves the creation of special purpose entities ("SPEs") for purposes of holding pooled assets. The SPEs are designed to place the pooled assets beyond the reach of Ricoh and its creditors in the event of bankruptcy and when structured in this manner (and subject to certain other conditions), the pooled assets are removed from Ricoh's consolidated balance sheets. The SPEs are also designed so that investors have no recourse to Ricoh in the event of any failure of payment on the pooled assets. Therefore, when securitizing assets in this manner, Ricoh does not have any exposed assets or contingent liabilities other than those recognized as subordinated residual interests on Ricoh's consolidated balance sheets. As of March 31, 2008, Ricoh had one SPE, which held assets that Ricoh sold in a securitization totaling Yen 40.4 billion. Ricoh does not dispose of troubled leases, loans or other problem assets by means of nonconsolidated SPEs. None of our officers, directors or employees holds any equity interests in the SPE noted above or receives any direct or indirect compensation from the SPE. The SPE does not own shares or equity interests in Ricoh or any of Ricoh's affiliates, and there are no agreements in place to do so. In addition to the above, Ricoh acts as a guarantor for some of its employees' housing loans. As of March 31, 2008, the total amount of such guarantees was Yen 87 million. F. Tabular Disclosure of Contractual Obligations The following table sets forth Ricoh's contractual obligations as of March 31, 2008.
Millions of Yen Payments due by period ------------------------------------------------------------------ Less than 1 More than 5 CONTRACTUAL OBLIGATIONS Total year 1-3 years 3-5 years years - -------------------------------------------------------------------------------------------------------- Long-term Debt Obligations 307,019 82,377 143,761 80,878 3 Interest Expense Associated with Long-term Debt Obligations 6,406 3,326 2,840 240 -- Capital (Finance) Lease Obligations 1,177 281 449 298 149 Operating Lease Obligations 77,499 20,770 30,106 15,634 10,989 Purchase Obligations 7,071 7,071 -- -- -- - -------------------------------------------------------------------------------------------------------- TOTAL 399,172 113,825 177,156 97,050 11,141 - --------------------------------------------------------------------------------------------------------
Ricoh expects to contribute Yen 13.1 billion to its pension plan during fiscal year 2009 and is currently unable to predict funding requirements for periods beyond fiscal year 2008 due to uncertainties related to changes in actuarial assumptions, return on plan assets, and changes to plan membership. Ricoh had operating lease commitments with rental payments totaling Yen 45.3 billion for fiscal year 2008. -68- G. Safe Harbor See "Cautionary Statement With Respect to Forward-Looking Statements." -69- Item 6. Directors, Senior Management and Employees ------------------------------------------ A. Directors and Senior Management Directors and Corporate Auditors of the Company as of June 26, 2008 were as follows:
Name Current Position (Date of Birth) (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Masamitsu Sakurai Chairman of the Board and Apr. 1966 Joined the Company (January 8, 1942) Representative Director May 1984 President of Ricoh UK Products Ltd. Apr. 1990 General Manager of Purchasing Division June 1992 Director Apr. 1993 President of Ricoh Europe B.V. June 1994 Managing Director Apr. 1996 President and Representative Director June 2005 Representative Director (Current) June 2005 President June 2005 Chairman of the Board (Current) Apr. 2007 Chairman (Current) Principal business activities and other principal directorships performed outside of Ricoh: Chairman of Japan Association of Corporate Executives Vice President of Japan Business Machine and Information System Industries Association Representative of Asahi Insurance Company Corporate Auditor of San-Ai Oil Co., Ltd. Director of Millea Holdings, Inc. Director of Coca-Cola West Holdings Co., Ltd. - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Shiro Kondo Representative Director Apr. 1973 Joined the Company (October 7, 1949) July 1999 Deputy General Manager of Imaging System Business Group June 2000 Senior Vice President Oct. 2000 General Manager of Imaging System Business Group June 2002 Executive Vice President June 2003 Managing Director Oct. 2004 In charge of Imaging Engine Solution Development Oct. 2004 General Manager of MFP Business Group June 2005 Director June 2005 Corporate Executive Vice President Apr. 2007 Representative Director (Current) Apr. 2007 President (Current) Apr. 2007 CEO (Chief Executive Officer) (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Koichi Endo Director Apr. 1966 Joined the Company (February 16, 1944) Apr. 1987 President of Ricoh Electronics, Inc. Oct. 1990 General Manager of Components Division June 1992 Director
-70-
Name Current Position (Date of Birth) (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- June 1997 Managing Director Apr. 1998 General Manager of Production Business Group June 2000 Executive Managing Director June 2000 Executive Vice President Apr. 2004 General Manager of Fact Base Management Innovation Office June 2005 Director (Current) June 2005 Corporate Executive Vice President Apr. 2006 CSO (Chief Strategy Officer) (Current) Apr. 2008 Deputy President (Current) Principal business activities and other principal directorships performed outside of Ricoh: Director of San-Ai Plant Construction Co., Ltd. - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Katsumi Yoshida Director Apr. 1967 Joined the Company (August 20, 1944) Feb. 1996 Chairman of Ricoh Electronics, Inc. Apr. 2000 President of Ricoh Corporation Apr. 2001 Executive Vice President June 2002 Managing Director Oct. 2003 General Manager of International Marketing Group Oct. 2003 Chairman of Ricoh China Co., Ltd. June 2004 Executive Managing Director June 2005 Director (Current) June 2005 Corporate Executive Vice President June 2005 CMO (Chief Marketing Officer) (Overseas) (Current) Jan. 2008 Chairman and CEO (Chief Executive Officer) of Ricoh Americas Corporation (Current) Apr. 2008 Deputy President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Masayuki Matsumoto Director Apr. 1970 Joined the Company (December 10, 1944) July 1993 Manager of Tokyo Branch of Imaging Equipment Marketing Division of Marketing Group June 1994 Director Oct. 1998 Managing Director Oct. 1998 General Manager of Marketing Group June 2000 Executive Vice President June 2002 Executive Managing Director Apr. 2005 General Manager of Corporate Social Responsibility Division June 2005 Director (Current) June 2005 Corporate Executive Vice President (Current) June 2005 CMO (Chief Marketing Officer) (Japan) (Current) Apr. 2007 In charge of Corporate Social Responsibility (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Takashi Nakamura Director Apr. 1972 Joined the Company (September 2, 1946) Apr. 1990 President of Ricoh UK Products Ltd.
-71-
Name Current Position (Date of Birth) (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Jan. 1995 President of Ricoh Europe B.V. May 1998 Deputy General Manager of Corporate Planning Division June 1998 Director June 2000 Senior Vice President June 2002 President of Ricoh Elemex Corporation June 2004 Managing Director June 2005 Director (Current) Jan. 2006 Corporate Executive Vice President (Current) Jan. 2006 CHO (Chief Human Resource Officer) (Current) Apr. 2008 General Manager of Personnel Division (Current) Principal business activities and other principal directorships performed outside of Ricoh: Corporate Auditor of TOYO KANETSU K.K. - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kazunori Azuma Director Apr. 1971 Joined the Company (February 11, 1949) Oct. 1994 President of Hokkaido Ricoh Co., Ltd. June 2000 Senior Vice President Oct. 2000 President of Ricoh Technosystems Co., Ltd. June 2003 Managing Director June 2003 Executive Vice President Oct. 2003 Chairman of Ricoh Technosystems Co., Ltd. Nov. 2003 General Manager of Marketing Group (Current) June 2005 Director (Current) June 2005 Corporate Executive Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Zenji Miura Director Apr. 1976 Joined the Company (January 5, 1950) Jan. 1993 President of Ricoh France S.A. Apr. 1998 Deputy General Manager of Finance and Accounting Division Oct. 2000 Senior Vice President Oct. 2000 General Manager of Finance and Accounting Division June 2003 Executive Vice President June 2004 Managing Director June 2005 Director (Current) June 2005 Corporate Executive Vice President (Current) June 2005 CFO (Chief Financial Officer) (Current) June 2005 In charge of IR (Current)
-72-
Name Current Position (Date of Birth) (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Apr. 2006 CIO (Chief Information Officer) (Current) Apr. 2006 In charge of Corporate Communication and Management of Group Companies (Current) Apr. 2006 General Manager of Corporate Planning Division (Current) Feb. 2008 In charge of Internal Management and Control Division (Current) Principal business activities and other principal directorships performed outside of Ricoh: Corporate Auditor of Coca-Cola West Holdings Co., Ltd. - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kiyoshi Sakai Director Apr. 1970 Joined the Company (December 25, 1945) Jan. 1996 General Manager of Corporate Planning Division June 1996 Director Apr. 1999 General Manager of Research and Development Group June 2000 Senior Vice President June 2002 Managing Director June 2002 Executive Vice President Aug. 2002 General Manager of Corporate Technology Planning Division June 2005 Corporate Senior Vice President Apr. 2006 In charge of Corporate Environment (Current) June 2006 Director (Current) June 2006 Corporate Executive Vice President (Current) June 2006 Chief Technology Officer (Current) Apr. 2008 President of Ricoh Innovation, Inc. (Current) Apr. 2008 In charge of Legal Affairs and Intellectual Property (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Takaaki Wakasugi Director June 1985 Professor, Faculty of Economics, the University of Tokyo (March 11, 1943) Sep. 1990 Co-director of Mitsui Life Financial Research Center, University of Michigan Ross School of Business (Current) Apr. 2003 Director and General Manager of Japan Corporate Governance Research Institute, Inc. (Current) Apr. 2004 Professor, Faculty of Business Administration, Tokyo Keizai University (Current) June 2004 Professor Emeritus, the University of Tokyo June 2005 Director (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Takuya Goto Director Apr. 1964 Joined Kao Soap Company (renamed Kao Corporation in 1985) (August 19, 1940)
-73-
Name Current Position (Date of Birth) (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- May 1990 General Manager of Chemical Business Division of Kao Corporation June 1990 Director of Kao Corporation July 1991 Managing Director of Kao Corporation June 1996 Executive Managing Director of Kao Corporation June 1997 President of Kao Corporation June 2002 Representative Director and President of Kao Corporation June 2004 Chairman of Kao Corporation June 2006 Director (Current) Sep. 2007 Chairman of Japan Marketing Association (Current) Principal business activities and other principal directorships performed outside of Ricoh: Chairman of Japan Marketing Association - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kohji Tomizawa Corporate Auditor Apr. 1971 Joined the Company (May 25, 1946) July 1988 President of Ricoh Finance Ltd. May 1991 Head of Administration Office of System Development Division June 1993 General Manager of Marketing Administration Department of International Division June 1997 Managing Director of Ricoh Logistics System Co., Ltd. June 1999 General Manager of DMS Business Division July 2001 Director of Tokyo Ricoh Co., Ltd. June 2004 Corporate Auditor (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Shigekazu Iijima Corporate Auditor Apr. 1972 Joined the Company (July 7, 1948) Oct. 1990 General Manager of Accounting Department of Finance and Accounting Division Apr. 1993 General Manager of Administration Department of Electronic Device Division June 1996 Leader of Management Planning Group of Corporate Planning Division June 1999 Director of Ricoh Elemex Corporation Apr. 2004 General Manager of Business Planning Department of International Business Group July 2005 General Manager of Business Strategy & Planning Center of International Business Group June 2006 Corporate Auditor (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kenji Matsuishi Corporate Auditor Apr. 1965 Graduated from the National Legal Training and Research Institute (July 24, 1937) Apr. 1965 Legal registration as a Japanese attorney Apr. 1965 Joined Takano & Higuchi Legal Services
-74-
Name Current Position (Date of Birth) (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Feb. 1972 General Manager of Matsuishi Legal Services (Current) June 1994 Corporate Auditor (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Takao Yuhara Corporate Auditor Apr. 1969 Joined Nippon Chemical Industrial Co., Ltd. (June 7, 1946) May 1971 Joined Sony Corporation Mar. 1988 Vice President of Sony International (Singapore) Ltd. Apr. 1996 Vice President of Display Company of Sony Corporation June 2002 Corporate Vice President and General Manager of Corporate Planning Division of Sony Corporation June 2003 Corporate Vice President and Group CFO (Chief Financial Officer) of Sony Corporation June 2004 In charge of Corporate Executive Finance and IR of Sony Corporation Dec. 2007 Managing Executive Officer and Senior General Manager, Group Business Management Division of ZENSHO CO., LTD. (Current) Apr. 2008 Officer in charge of Group Finance of ZENSHO CO., LTD. June 2008 Director of ZENSHO CO., LTD. (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kiyohisa Horie Substitute Corporate Auditor Apr. 1970 Joined Horie Morita Audit Office (now: Meiji Audit Corporation) (March 7, 1948) Joined Showa Accounting Office Aug. 1980 Registered as Certified Public Accountant Mar. 1988 Registered as Tax Accountant Apr. 1988 Senior Partner of Meiji Audit Corporation (Current) May 1988 Representative Director of Showa Accounting Office (Current) May 1988 Managing Partner of Meiji Audit Corporation (Current) May 1998 Vice-Chairman & Managing Partner of Meiji Audit Corporation (Current)
Directors and Corporate Auditors are elected at a general meeting of shareholders for two and four years terms, respectively, and may serve any number of consecutive terms. The Board of Directors appoints from among its members a Chairman and one or more Representative Directors in accordance with the Corporation Law of Japan. The Company maintains an executive officer system and under such system there are 44 such officers each with one of the following roles: -75- . Executive officers: Oversee operations under the authority granted from the president and report to the president. . Group executive officers: Assist the president with the management of Ricoh group. Executive Officers of the Company as of June 26, 2008 were as follows:
Name Current Position (Date of Birth) (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Masamitsu Sakurai Chairman and See above for his business experience and other information. (January 8, 1942) Chairman of the Board - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Shiro Kondo President and See above for his business experience and other information. (October 7, 1949) Chief Executive Officer - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Koichi Endo Deputy President See above for his business experience and other information. (February 16, 1944) (Chief Strategy Officer) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Katsumi Yoshida Deputy President See above for his business experience and other information. (August 20, 1944) (Chief Marketing Officer for Overseas) Chairman and CEO (Chief Executive Officer) of Ricoh Americas Corporation - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Masayuki Matsumoto Corporate Executive Vice See above for his business experience and other information (December 10, 1944) President (Chief Marketing Officer for Japan) (Corporate Social Responsibility) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Takashi Nakamura Corporate Executive Vice See above for his business experience and other information. (September 2, 1946) President (Chief Human Resource Officer) General Manager of Personnel Division - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kazunori Azuma Corporate Executive Vice See above for his business experience and other information. (February 11, 1949) President (General Manager of Marketing Group) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Zenji Miura Corporate Executive Vice See above for his business experience and other information. (January 5, 1950) President (Chief Financial Officer) (Chief Information Officer) (Investor Relation) (Corporate Communication) (Management of Group Companies)
-76-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- (General Manager of Corporate Planning Division) (Internal Management and Control Division) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kiyoshi Sakai Corporate Executive Vice See above for his business experience and other information. (December 25, 1945) President (Chief Technology Officer) (Corporate Environment) President of Ricoh Innovation, Inc. (Legal & Intellectual Property) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kazuo Togashi Corporate Senior Vice President Apr. 1972 Joined the Company (November 28, 1949) (General Manager of Apr. 1998 President of Ricoh Europe B.V. International Business Group) June 2000 Senior Vice President (General Manager of Regional Apr. 2002 Chairman of said company Business Support Center of Apr. 2002 Chairman of NRG Group PLC International Business Group) June 2002 Executive Vice President (General Manager of Trade June 2003 Managing Director Affairs & Export/Import June 2005 Corporate Senior Vice President (Current) Administration Center of International Business Group) Chairman of Ricoh China Co., Apr. 2006 General Manager of International Business Group (Current) Ltd. Apr. 2006 General Manager of Regional Business Support Center of International Business Group (Current) Aug. 2006 General Manager of Trade Affairs & Export/Import Administration Center of International Business Group (Current) Jan. 2008 Chairman of Ricoh China Co., Ltd. - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Terumoto Nonaka Corporate Senior Vice President Jan. 1988 Joined the Company (October 28, 1947) (President of Electronic Jan. 1990 Deputy General Manager of Electronic Devices Division Devices Company) (Chairman of Ricoh Electronics June 2000 Senior Vice President Devices Shanghai Co., Ltd.) Oct. 2000 President of Electronic Devices Company (Current) June 2002 Executive Vice President June 2005 Corporate Senior Vice President (Current) July 2006 Chairman of Ricoh Electronics Devices Shanghai Co., Ltd. (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Etsuo Kobayashi Corporate Senior Vice President Apr. 1970 Joined the Company (July 4, 1947) Ebina-Task Force Leader Apr. 1998 General Manager of Personnel Division General Manager of Ebina June 2000 Senior Vice President General Affairs Center June 2003 Executive Vice President
-77-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- June 2005 Corporate Senior Vice President (Current) Apr. 2008 Ebina-Task Force Leader (Current) Apr. 2008 General Manager of Ebina General Affairs Center (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Haruo Nakamura Corporate Senior Vice President Aug. 2000 Joined the Company (April 29, 1952) (General Manager of GJ (GEL Nov. 2000 Leader of "Alpha" Task Force JET) Business Division) Apr. 2004 Executive Vice President Apr. 2004 General Manager of GJ (GELJET) Business Division (Current) June 2005 Corporate Senior Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kenji Hatanaka Corporate Senior Vice President Apr. 1969 Joined the Company (July 1, 1946) (General Manager of Tokyo June 2000 Senior Vice President Branch) June 2003 General Manager of Tokyo Branch (Current) (General Manager of Kanto June 2003 General Manager of Kanto Branch (Current) Branch) June 2004 Executive Vice President (President of Ricoh Sales Co., Jan. 2005 President of Ricoh Sales Co., Ltd. (Current) Ltd.) June 2005 Corporate Senior Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Hiroshi Kobayashi Corporate Senior Vice President Apr. 1974 Joined the Company (July 2, 1948) General Manager of Office Apr. 2002 General Manager of Corporate Planning Division Business Planning Center June 2002 Senior Vice President Apr. 2003 General Manager of Corporate Communication Center June 2004 Executive Vice President Oct. 2004 General Manager of LP Business Group June 2005 Corporate Senior Vice President (Current) Apr. 2007 General Manager of Printer Business Group Apr. 2008 General Manager of Office Business Planning Center (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Susumu Ichioka Corporate Senior Vice President Apr. 1971 Joined the Company (April 23, 1948) Deputy General Manager of Oct. 2003 Senior Vice President Marketing Group Oct. 2003 President of Ricoh Finance Corporation June 2004 Executive Vice President June 2004 Chairman of Ricoh Corporation (now Ricoh Americas Corporation) June 2005 Corporate Senior Vice President (Current) Jan. 2008 Deputy General Manager of Marketing Group (Current)
-78-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Yoshimasa Matsuura Corporate Senior Vice President Apr. 1971 Joined the Company (June 23, 1947) (General Manager of MFP May 1999 General Manager of Supply Chain Management Planning Division Business Group) Apr. 2004 General Manager of Imaging System Business Strategy Center (General Manager of Controller June 2004 Senior Vice President Development Division) Oct. 2004 General Manager of Office Business Planning Center June 2005 Deputy General Manager of MFP Business Group June 2005 General Manager of Business Strategy Center of MFP Business Group June 2005 Corporate Vice President Oct. 2006 General Manager of Products Management & Planning Center of MFP Business Group Apr. 2007 Corporate Senior Vice President (Current) Apr. 2007 General Manager of MFP Business Group (Current) Apr. 2008 General Manager of Controller Development Division (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Norio Tanaka Corporate Senior Vice President Feb. 1978 Joined the Company (March 22, 1948) (General Manager of Production Apr. 2004 Deputy General Manager of Imaging System Business Strategy Center Printing Business Group) Apr. 2004 General Manager of Imaging Products Business Center of International Business Center June 2004 Senior Vice President June 2004 Deputy General Manager of International Business Group Oct. 2004 Deputy General Manager of MFP Business Group Oct. 2004 General Manager of Products Management & Planning Center of MFP Business Group Oct. 2004 General Manager of Marketing Center of MFP Business Group June 2005 Corporate Vice President Apr. 2007 Corporate Senior Vice President (Current) Apr. 2007 General Manager of Production Printing Business Group (Current) Apr. 2007 General Manager of Marketing Center of Production Printing Business Group Apr. 2007 General Manager of Products Strategy Center of Production Printing Business Group - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Hiroshi Adachi Corporate Senior Vice President Apr. 1968 Joined the Company (January 8, 1946) (President of Thermal Media Oct. 2000 President of Thermal Media Company (Current) Company) (Chairman of Ricoh Thermal Nov. 2001 Chairman of Ricoh Thermal Media (Beijing) Co., Ltd. (Current) Media (Beijing) Co., Ltd.
-79-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- (Chairman of Ricoh June 2002 Senior Vice President International (Shanghai) Co., Ltd.) (Chairman of Ricoh Thermal June 2004 Chairman of Ricoh International (Shanghai) Co., Ltd. (Current) Media (Wuxi) Co., Ltd.) June 2005 Corporate Vice President Dec. 2005 Chairman of Ricoh Thermal Media (Wuxi) Co., Ltd. (Current) Apr. 2008 Corporate Senior Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kenichi Kanemaru Corporate Senior Vice President Apr. 1973 Joined the Company (November 19, 1952) (General Manager of Production Apr. 1998 General Manager of Production Strategic Center Business Group) (General Manager of Procurement June 1999 President of Ricoh UK Products Ltd. Control Center of Production June 2004 Senior Vice President Business Group) (General Manager of Office June 2005 Deputy General Manager of Imaging System Production Business Machine Division of Production Group Business Group) June 2005 General Manager of Procurement Control Center of Production Business Group(Current) June 2005 Corporate Vice President Apr. 2006 General Manager of Imaging System Production Business Group Apr. 2008 Corporate Senior Vice President (Current) Apr. 2008 General Manager of Production Business Group (Current) Apr. 2008 General Manager of Office Machine Division of Production Business Group (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kiyoto Nagasawa Corporate Vice President Apr. 1973 Joined the Company (August 16, 1948) (General Manager of Quality of Apr. 2001 General Manager of C&F Business Division 2 Management Division) June 2002 Senior Vice President June 2005 General Manager of Quality of Management Division (Current) June 2005 Corporate Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Yutaka Ebi Corporate Vice President Apr. 1972 Joined the Company (October 20, 1949) (General Manager of Legal & Apr. 2001 General Manager of Imaging Technology Division Intellectual Property Division) June 2002 Senior Vice President Oct. 2004 General Manager of Legal & Intellectual Property Division (Current) June 2005 Corporate Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Hiroo Matsuda Corporate Vice President Apr. 1972 Joined the Company (April 19, 1948) (General Manager of Printing Apr. 2002 General Manager of Major Accounts Marketing Division Solution Division of Marketing Group) June 2002 Senior Vice President
-80-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- (General Manager of Japan Apr. 2004 General Manager of Solution Partner Sales Division of Marketing Market Sales Center of Group Production Printing Business Oct. 2004 General Manager of Solution Partner Sales Center of LP Business Group) Group June 2005 Corporate Vice President (Current) Apr. 2006 General Manager of Printing Solution Division of Marketing Group (Current) Apr. 2007 General Manager of Japan Market Sales Center of Production Printing Business Group (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Mitsuhiko Ikuno Corporate Vice President May 1975 Joined the Company (March 26, 1953) General Manager of Information June 2000 President of Ricoh Asia Industry Ltd. Technology and Solution June 2004 President of Shanghai Ricoh Facsimile Co., Ltd. Division June 2004 Senior Vice President June 2005 Corporate Vice President (Current) Oct. 2006 President of Shanghai Ricoh Digital Equipment Co., Ltd. Apr. 2008 General Manager of Information Technology and Solution Division (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Sadahiro Arikawa Corporate Vice President Apr. 1971 Joined the Company (March 31, 1949) (General Manager of Major Dec. 2001 President of Ricoh Kyusyu Co., Ltd. Accounts Marketing Division) Apr. 2004 General Manager of Major Accounts Marketing Division (Current) June 2004 Senior Vice President June 2005 Corporate Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Daisuke Segawa Corporate Vice President Mar. 1980 Joined the Company (July 21, 1954) (General Manager of Finance and Dec. 1998 General Manager of Treasury Department Accounting Division) Oct. 2004 General Manager of Corporate Planning Division June 2005 Corporate Vice President (Current) Apr. 2006 General Manager of Finance and Accounting Division (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Hisashi Takata Corporate Vice President Apr. 1974 Joined the Company (May 20, 1951) (General Manager of Printer Apr. 1999 General Manager of Business Strategy Division of International Business Group) Marketing Group Oct. 2004 Deputy General Manager of GJ (GEL JET) Business Division Oct. 2004 General Manager of Marketing Center of GJ (GEL JET) Business Division June 2005 Corporate Vice President (Current) Oct. 2005 General Manager of GJ Marketing Division of Marketing Group Apr. 2007 Deputy General Manager of Printing Business Division
-81-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Apr. 2008 General Manager of Printer Business Group (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kenichi Matsubayashi Corporate Vice President Apr. 1971 Joined the Company (June 5, 1948) (General Manager of RS Products Apr. 1995 Manager of RS Business Planning Department Division of Production Business Group) Oct. 2003 General Manager of RS Products Division of Production Business Group (Current) June 2005 Corporate Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Soichi Nagamatsu Corporate Vice President July 2004 Joined the Company (March 25, 1951) (General Manager of Research July 2004 Vice General Manager of Research and Development Group and Development Group) (General Manager of Corporate Apr. 2006 Coporate Vice President(Current) Technology Development Group) Apr. 2006 General Manager of Research and Development Group (Current) (General Manager of Office Apr. 2006 General Manager of Corporate Technology Planning Division Solution Technology Development Apr. 2007 General Manager of Office System Development Center of Research Center of Corporate Technology and Development Group Development Group) (General Manager of Advanced Apr. 2008 General Manager of Corporate Technology Development Group Technology R&D Center of (Current) Researchand Development Group) Apr. 2008 General Manager of Office Solution Technology Development Center (Chairman of Ricoh Software of Corporate Technology Development Group (Current) Research Center (Beijing) Co., Ltd.) Apr. 2008 General Manager of Advanced Technology R&D Center of Research and Development Group (Current) Apr. 2008 Chairman of Ricoh Software Research Center (Beijing) Co., Ltd. (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kazuhiro Yuasa Corporate Vice President Apr. 1977 Joined the Company (September 1, 1952) (President of Personal Multi Apr. 2001 Deputy General Manager of ICD Division of Personal Multi Media Media Company) Company Oct. 2002 Deputy General Manager of ICS Division of Personal Multi Media Company Nov. 2002 General Manager of ICS Division of Personal Multi Media Company Apr. 2006 Associate Director Apr. 2006 President of Personal Multi Media Company (Current) Apr. 2008 Corporate Vice President (Current)
-82-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Yohzoh Matsuura Corporate Vice President Apr. 1980 Joined the Company (April 15, 1956) (General Manager of Imaging Oct. 2004 General Manager of Imaging Engine Development Division (Current) Engine Development Division) Apr. 2006 Associate Director (General Manager of Fundamental Apr. 2007 Deputy General Manager of MFP Business Group & Control Technology Center of Apr. 2008 Corporate Vice President (Current) Imaging Engine Development Apr. 2008 General Manager of Fundamental & Control Technology Center of Division) Imaging Engine Development Division (Current) Group Executive Officers of the Company as of June 26, 2008 were as follows: - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Makoto Hashimoto Corporate Executive Vice Nov. 1972 Joined the Company (August 26, 1945) President Apr. 1993 General Manager of PPC Division of Imaging System Business Group (Chairman of Ricoh Logistics June 1994 Director System Co., Ltd.) Apr. 1998 General Manager of Imaging System Business Group June 1998 Managing Director June 2000 Executive Vice President Oct. 2000 President of Personal MultiMedia Products Company June 2003 General Manager of CSM (Customer Satisfaction Management) Division June 2005 Corporate Executive Vice President (Current) Jan. 2006 President and CEO of Ricoh Elemex Corporation June.2008 Chairman of Ricoh Logistics System Co., Ltd. (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Yuji Inoue Corporate Senior Vice President Apr. 1971 Joined the Company (April 4, 1948) (President of Ricoh Leasing Apr. 1998 General Manager of Finance and Accounting Division Co., Ltd.) Apr. 2000 President of Ricoh Leasing Co., Ltd. (Current) June 2000 Senior Vice President June 2004 Managing Director June 2005 Corporate Senior Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Hideko Kunii Corporate Senior Vice President May. 1982 Joined the Company (December 13, 1947) (Chairman of Ricoh Software Oct. 1999 General Manager of Software Research Center Co., Ltd.) June 2000 Senior Vice President Oct. 2000 Deputy General Manager of P&S Products Division June 2002 Chairman of Ricoh Software Technology (Shanghai) Co., Ltd Oct. 2002 General Manager of Software R&D Group
-83-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Feb. 2004 Chairman of Ricoh Software Research Center (Beijing) Co., Ltd. June 2004 Executive Vice President June 2005 Corporate Senior Vice President (Current) Apr. 2008 Chairman of Ricoh Software Co., Ltd. (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Shiroh Sasaki Corporate Senior Vice President Apr. 1972 Joined the Company (December 23, 1949) (Chairman of Ricoh Europe PLC) Apr. 2000 President of Gestetner Holdings PLC (President Chairman of Ricoh Apr. 2002 President of NRG Group PLC Europe (Netherlands) B.V.) June 2004 Senior Vice President June 2005 Corporate Vice President Apr. 2006 Corporate Senior Vice President (Current) Apr. 2006 Chairman of Ricoh Europe B.V. Apr. 2006 Chairman of NRG Group PLC Apr. 2007 Chairman of Ricoh Europe PLC (Current) Apr. 2007 President of Ricoh Europe (Netherlands) B.V. (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Hiroshi Tsuruga Corporate Vice President Apr. 1971 Joined the Company (November 18, 1948) (President of Tohoku Ricoh Apr. 1999 General Manager of Information Technology and Solution Division Co., Ltd.) June 2002 Senior Vice President June 2005 Deputy President of Tohoku Ricoh Co., Ltd. June 2005 Corporate Vice President (Current) Apr. 2006 President of Tohoku Ricoh Co., Ltd. (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kohji Sawa Corporate Vice President Apr. 1971 Joined the Company (June 5, 1948) (President of Ricoh Elemex Apr. 1998 General Manager of Imaging System Component Production Division Corporation) Apr. 2000 General Manager of Procurement Control Center July 2001 General Manager of Optical Component Development Center June 2002 Senior Vice President June 2005 Corporate Vice President (Current) General Manager of Information Technology and Solution Division Apr. 2008 Corporate Senior Vice President of Ricoh Elemex Corporation June 2008 President of Ricoh Elemex Corporation (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Norihisa Goto Corporate Vice President Apr. 1972 Joined the Company (March 8, 1949) (Vice Chairman of Ricoh Oct. 1997 President of Ricoh Deutschland GmbH Americas Corporation) Mar. 2001 Chairman of Lanier Worldwide, Inc. (CEO of Ricoh U.S. - Ricoh Jan. 2003 President of Lanier Worldwide, Inc. Americas Corporation) June 2003 Senior Vice President
-84-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- June 2005 Corporate Vice President (Current) June 2006 Vice Chairman of Ricoh Corporation (now Ricoh Americas Corporation) (Current) June 2006 CEO of Ricoh U.S. - Ricoh Corporation (now Ricoh U.S. - Ricoh Americas Corporation) (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Shunsuke Nakanishi Corporate Vice President Apr. 1972 Joined the Company (October 12, 1948) (President of Ricoh UK May 1999 General Manager of Production Strategic Center Products Ltd.) July 2001 President of Ricoh Electronics Inc. June 2004 Senior Vice President June 2005 Corporate Vice President (Current) Apr. 2008 President of Ricoh UK Products Ltd. (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Yoshihiro Niimura Corporate Vice President Apr. 1975 Joined the Company (May 22, 1951) (President of Ricoh China June 2004 President of Ricoh China Co., Ltd. (Current) Co., Ltd.) June 2004 Chairman and President of Ricoh Electronic Technology (China) (Chairman and President of Co., Ltd. (Current) Ricoh Electronic Technology June 2004 Senior Vice President (China) Co., Ltd.) June 2005 Corporate Vice President (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Michel De Bosschere Corporate Vice President June 1993 Managing Director of Nashua/tec Benelux (June 16, 1948) (President of NRG Benelux B.V.) Jan. 2000 President of NRG Benelux B.V. (Chairman of Ricoh Nederland June 2004 Senior Vice President B.V.) June 2005 Corporate Vice President (Current) (Chairman of Ricoh Belgium Aug. 2007 President of Ricoh Nederland B.V. N.V.) Nov. 2007 Chairman of NRG Benelux B.V. (Current) (Chairman of NRG Belgium S.A.) Nov. 2007 Chairman of Ricoh Nederland B.V. (Current) Nov. 2007 Chairman of Ricoh Belgium N.V. (Current) Nov. 2007 Chairman of NRG Belgium S.A. (Current) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Toshiaki Katayama Corporate Vice President Oct. 2004 President of Ricoh Printing Systems, Ltd. (Current) (November 28, 1947) (President of Ricoh Printing June 2005 Corporate Vice President (Current) Systems, Ltd.) Apr. 2007 Deputy General Manager of Production Printing Business Group (Deputy General Manager of (Current) Production Printing Business Group) - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- Kunihiko Satoh Corporate Vice President Mar. 1979 Joined the Company (October 21, 1956) (Deputy President of Ricoh Apr. 2002 President of Hokkaido Ricoh Co., Ltd. Sales Co., Ltd.) Apr. 2004 General Manager of Solution Marketing Center June 2004 General Manager of Customer Contact Center
-85-
Current Position Name (Function/Business area) Date Business Experience - -------------------- ------------------------------- ---------- ----------------------------------------------------------------- June 2005 Corporate Vice President (Current) Apr. 2006 General Manager of Business Strategic Planning Office of Marketing Group Apr. 2006 General Manager of Business Partner Division of Marketing Group Apr. 2006 General Manager of Net RICOH Marketing Division of Marketing Group Apr. 2007 Deputy President of Ricoh Sales Co., Ltd. (Current)
There are no family relationships between any Director, Corporate Auditor or Executive Officer and any other Director, Corporate Auditor or Executive Officer of the Company. There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person named above was selected as a Director, Corporate Auditor, Executive Officer, or a Group Executive Officer. B. Compensation The aggregate remuneration, including bonuses but excluding retirement allowances, paid by the Company for fiscal year 2008 to all Directors, Corporate Auditors, Executive Officers and Group Executive Officers of the Company who served during fiscal year 2008 was Yen 1,163 million. Bonuses to be received by the director are determined by a resolution of an ordinary general meeting of shareholders of the Company. Bonuses so paid are not deductible by the Company for tax purposes and, for financial reporting purposes, are reported under selling, general and administrative expenses as a charge against income and are based on the Company's financial performance for the fiscal year. During fiscal year 2009, the Company will pay bonuses in the total amount of Yen 173 million to Directors as a group in their capacity as such (excluding bonuses for their services as employees) in respect of fiscal year 2009, as approved by the Company's shareholders at the Ordinary General Meeting of Shareholders held on June 26, 2008. In accordance with customary Japanese business practice, when a Director or Corporate Auditor retires, a proposal to pay a lump-sum retirement allowance is submitted to the shareholders for their approval. After shareholders' approval is obtained, the amount of the retirement allowance for a Director or Corporate Auditor is fixed by the Board of Directors or Board of Corporate Auditors and generally reflects his remuneration and position at the time of retirement, the length of his service as a Director or Corporate Auditor and his contribution to the Company's performance. At the Ordinary General Meeting of Shareholders held on June 27, 2007, the shareholders approved the abolishment of this retirement allowance system. Accordingly, the Company will pay incumbent Directors and Corporate Auditors their final retirement allowances corresponding to their tenure through June 27, 2007 in accordance with -86- standards prescribed by the Company. The amount of such final retirement allowance through June 27, 2007 is Yen 498 million, for which the Company has established a reserve. The Company abolished the retirement system as describe above, in its replace the Company introduced stock price-linked remuneration for its Directors by enhancing of the bonuses for directors with the Company's financial performance. Under this new system, the Company will pay a specified amount of remuneration to Directors each month, which amount will be contributed to the stock purchasing system to purchase the Company's stock. Each Director will be required to hold the Company's stock purchased under this system for the tenure of their office. One of the objectives of this system is to align the interests of the Directors with the interests of the shareholders on a long-term basis, which Ricoh believes will also strengthen the incentives to enhance shareholder value. C. Board Practices Under the Corporation Law of Japan, all Directors and Corporate Auditors shall be elected at the General Meeting of Shareholders. In general, under the Articles of Incorporation of the Company, the terms of office of Directors shall expire at the conclusion of the Ordinary General Meeting of Shareholders held with respect to the last fiscal year ending within two years after their election, and the terms of office of Corporate Auditors shall expire at the conclusion of the Ordinary General Meeting of Shareholders held with respect to the last fiscal year ending within four years after their election. However, both the Directors and Corporate Auditors may serve any number of consecutive terms. From among the Directors, the Board of Directors shall elect one or more Representative Directors. Each of the Representative Directors has the statutory authority to represent the Company in the conduct of its affairs. The Corporate Auditors of the Company are not required to be and are not certified public accountants. However, at least half of the Corporate Auditors must be a person who has not been a Director, executive officer, manager, or employee of the Company or any of its subsidiaries prior to his or her election as a Corporate Auditor. The Corporate Auditors may not at the same time be Directors, executive officers, managers, or employees of the Company or any of its subsidiaries. Each Corporate Auditor has the statutory duty to examine the financial statements and business reports to be submitted by the Board of Directors at the General Meeting of Shareholders and also to supervise the administration by the Directors of the Company's affairs. Corporate Auditors are entitled and obligated to participate in meetings of the Board of Directors but are not entitled to vote. Under the Corporation Law, the Board of Corporate Auditors has a statutory duty to prepare and submit its audit report to the Board of Directors each year. A Corporate Auditor may note his or her opinion in the audit report if it is different from the opinion of the Board of Corporate Auditors that is expressed in the audit report. The Board of Corporate Auditors is empowered to establish audit principles, the method of examination by the Corporate Auditors of the Company's affairs and financial position, -87- and other matters concerning the performance of the Corporate Auditors' duties. The Company does not have an audit committee. There are no Director's service contracts with Ricoh providing for benefits upon termination of service. For additional information regarding director compensation, see Item 6.B. D. Employees The table below provides information about employees. As of March 31, ------------------------ 2006 2007 2008 ------ ------ ------ Categorized by Operating Segment Office Solutions 68,685 73,845 75,254 Industrial Products 3,045 3,340 3,421 Other 3,401 3,645 3,751 Headquarters 1,019 1,109 1,030 Total 76,150 81,939 83,456 Categorized by Geographic Location Domestic 39,930 40,342 40,385 Overseas 36,220 41,597 43,071 Total 76,150 81,939 83,456 Ricoh believes it is one of the few companies with a base in Japan with a large labor force which is not unionized. There has been no significant labor dispute in fiscal year 2008 and Ricoh knows of no efforts to organize a union. Ricoh generally believes its employee relations to be good. -88- E. Share Ownership The following table lists the number of Common Stock owned by each Director, Corporate Auditor and Executive Officer of the Company as of June 26, 2008. None of the Company's Directors, Corporate Auditors or Executive Officers is a beneficial owner of more than 1% of the Company's Common Stock. Collectively, the Directors, Corporate Auditors and Executive Officers beneficially own approximately 0.03% of the total Company Common Stock issued.
Name Position Number of Shares - -------------------- ------------------------------------------------- ---------------- Masamitsu Sakurai Chairman of the Board and Representative Director 12,000 Shiro Kondo Representative Director 8,000 Koichi Endo Director 15,747 Katsumi Yoshida Director 6,100 Masayuki Matsumoto Director 6,000 Takashi Nakamura Director 9,693 Kazunori Azuma Director 8,000 Zenji Miura Director 7,000 Kiyoshi Sakai Director 3,000 Takaaki Wakasugi Director 3,000 Koji Tomizawa Corporate Auditor 5,000 Shigekazu Iijima Corporate Auditor 2,000 Kazuo Togashi Corporate Senior Vice President 6,000 Terumoto Nonaka Corporate Senior Vice President 8,050 Etsuo Kobayashi Corporate Senior Vice President 9,000 Kenji Hatanaka Corporate Senior Vice President 3,000 Hiroshi Kobayashi Corporate Senior Vice President 4,000 Susumu Ichioka Corporate Senior Vice President 3,000 Yoshimasa Matsuura Corporate Senior Vice President 5,000 Norio Tanaka Corporate Senior Vice President 2,000 Hiroshi Adachi Corporate Senior Vice President 8,000 Kenichi Kanemaru Corporate Senior Vice President 4,000 Kiyoto Nagasawa Corporate Vice President 4,000 Yutaka Ebi Corporate Vice President 2,000 Sadahiro Arikawa Corporate Vice President 3,000 Hisashi Takata Corporate Vice President 1,000 Kenichi Matsubayashi Corporate Vice President 1,000 Soichi Nagamatsu Corporate Vice President 2,000 Makoto Hashimoto Corporate Executive Vice President 11,000 Yuji Inoue Corporate Senior Vice President 10,000 Hideko Kunii Corporate Senior Vice President 6,000 Hiroshi Tsuruga Corporate Vice President 3,000 Kohji Sawa Corporate Vice President 4,000 Norihisa Goto Corporate Vice President 3,000 Yoshihiro Niimura Corporate Vice President 1,000 Kunihiko Satoh Corporate Vice President 1,000 ------- Total 189,590 =======
-89- All shares of Common Stock of the Company carry the same voting rights. No options to purchase securities from the Company or any of its subsidiaries were outstanding on June 26, 2008. Item 7. Major Shareholders and Related Party Transactions ------------------------------------------------- A. Major Shareholders Major shareholders that are beneficial owners of 5% or more of the Common Stock as of March 31, 2008 are as follows:
Number of Percentage of Shares Owned Outstanding Title of Class Name (in thousands) Shares Owned - -------------- -------------------------------------- -------------- ------------- Common Stock The Master Trust Bank of Japan, Ltd. 72,314 10.03% Common Stock Japan Trustee Services Bank, Ltd. 41,110 5.70 Common Stock The Bank of Tokyo-Mitsubishi UFJ, Ltd. 36,193 5.02
The Master Trust Bank of Japan, Ltd. is a joint venture managed by Mitsubishi UFJ Trust and Banking Corporation, Nippon Life Insurance Company, Meiji Yasuda Life Insurance Company and the Norinchukin Trust and Banking Co., Ltd. Japan Trustee Services Bank, Ltd. is a joint venture managed by Resona Bank, Ltd., the Sumitomo Trust and Banking Co., Ltd. and Chuo Mitsui Trust Holdings, Inc. The Bank of Tokyo-Mitsubishi UFJ, Ltd. is a subsidiary of Mitsubishi UFJ Financial Group, Inc. in Japan. As far as is known to the Company, there has not been any significant change in the percentage ownership held by any major shareholders during fiscal year 2008. The major shareholders do not have different voting rights. American Depositary Receipts ("ADRs") evidencing American Depositary Shares are issued by The Bank of New York. The normal trading unit is 5 American Depositary Shares. As of March 31, 2008, 922,992 American Depositary Shares were held of record by one institutional registered holder in the United States of America. As far as is known to the Company as of this date, it is not directly or indirectly owned or controlled by any other corporation or by the Japanese or any foreign government. As far as is known to the Company as of this date, there is no arrangement, the operation of which may at a subsequent date result in a change in control of the Company. -90- B. Related Party Transactions Ricoh sells or purchases products, materials, supplies and services to or from affiliated companies on normal commercial terms and conditions. See Note 7 to the Consolidated Financial Statements. No Directors, Corporate Auditors or Executive Officers were indebted to the Company or its subsidiaries at any time during the latest three fiscal years. Neither the Company nor its subsidiaries expect to make any loans to Directors, Corporate Auditors or Executive Officers in the future. C. Interest of Experts and Counsel Not applicable. Item 8. Financial Information --------------------- A. Consolidated Statements and Other Information See Item 18. Financial Statements and pages F-1 through F-52. Legal or arbitration proceedings -------------------------------- There are no material pending legal or arbitration proceedings to which Ricoh is a party. Dividend Policy --------------- Ricoh endeavors to provide stable dividends to its shareholders by boosting profitability. At the same time, Ricoh undertakes to increase retained earnings to reinforce its corporate structure and to cultivate new businesses. Ricoh uses such retained earnings to strengthen its core businesses and invest in new fields with medium- and long-term perspectives. See Item 10 "Dividends" for important information on the Company's dividend payment procedure and restrictions. B. Significant Changes No significant changes have occurred since the date of the Consolidated Financial Statements included in this report. Item 9. The Offer and Listing --------------------- A. Offer and Listing Details The primary market for the Company's Common Stock is the Tokyo Stock Exchange (the "TSE") in the form of original Common Stock. -91- The Company's Common Stock has been listed on the TSE since 1949, and in Japan it is also listed on the Osaka Stock Exchange, the Nagoya Stock Exchange, the Fukuoka Stock Exchange and the Sapporo Stock Exchange. In addition, the Company's Common Stock is listed outside of Japan on the following stock exchanges: Amsterdam, Frankfurt and Paris. In the United States, the Company's American Depositary Shares are traded on the Over-the-Counter Market in the form of ADRs and are issued and exchanged by The Bank of New York, as depositary. The following table sets forth for the periods indicated the reported high and low sales prices of the Company's Common Stock on the TSE and the reported high and low sales prices per share of the Company's ADSs on the Over-the-Counter Market. -92- Tokyo Stock Exchange Over-the-Counter Market Price Price Per Share Per American Depositary Share of Common Stock (5 shares of Common Stock) (Japanese Yen) (U.S. Dollars) -------------------- ----------------------------- High Low High Low ----- ----- ------ ------ Annual highs and lows - --------------------- Fiscal Year 2004 2,365 1,607 104.50 68.55 Fiscal Year 2005 2,345 1,782 107.50 84.80 Fiscal Year 2006 2,360 1,646 110.00 73.00 Fiscal Year 2007 2,775 1,991 116.50 88.00 Fiscal Year 2008 2,950 1,395 121.25 69.55 Quarterly highs and lows - ------------------------ Fiscal Year 2007 1st quarter 2,420 1,991 108.00 88.00 2nd quarter 2,415 2,130 105.25 91.00 3rd quarter 2,515 2,130 107.25 91.00 4th quarter 2,775 2,320 116.50 98.00 Fiscal Year 2008 - ---------------- 1st quarter 2,950 2,550 121.25 106.00 2nd quarter 2,915 2,185 119.50 95.25 3rd quarter 2,545 1,905 109.50 87.00 4th quarter 1,977 1,395 95.00 69.55 Monthly highs and lows - ---------------------- December 2007 2,240 2,005 100.90 89.70 January 2008 1,977 1,544 95.00 73.00 February 2008 1,833 1,535 83.99 72.85 March 2008 1,729 1,395 85.50 69.55 April 2008 1,905 1,558 89.85 78.10 May 2008 1,943 1,744 91.85 84.50 Notes: (1) Price per share of Common Stock is as reported by the TSE. (2) Price per ADSs is based upon one ADS representing 5 shares of Common Stock as reported by the Over-the-Counter Market Bulletin Board(R). B. Plan of Distribution Not applicable. C. Markets See Item 9.A. for a list of the stock exchanges on which the securities are listed. -93- See Item 10.B. for certain information relating to the Common Stock of the Company. D. Selling Shareholders Not applicable. E. Dilution Not applicable. F. Expenses of the Issue Not applicable. Item 10. Additional Information ---------------------- A. Share Capital Not applicable. B. Memorandum and Articles of Association ORGANIZATION Ricoh Company, Ltd. was incorporated in Japan under the Commercial Code of Japan and is deemed to remain to exist under the Corporation Law (KAISHA-HO; Law No. 86 of 2005) which took effect as of May 1, 2006. It is registered in the Commercial Register (SHOGYO TOKIBO) maintained by the Tokyo Legal Affairs Bureau of the Ministry of Justice. OBJECTIVES AND PURPOSES Article 3 of the Articles of Incorporation of the Company provides that its purpose is to engage in the following business activities: 1. Manufacture, sale and installation work and electrical communication work of optical, office, audio, electric and measuring equipment, other general machinery and equipment and accessories and supplies therefor. 2. Manufacture and sale of photographic sensitive materials and duplicating papers. 3. Manufacture and sale of various raw materials for photographic sensitive materials, and various chemical materials for chemical industries. 4. Manufacture, processing and sale of papers, pulps, textiles, general merchandise and by-products thereof. 5. Investment in, or sale of the products of, other companies. -94- 6. Import and Export of the goods described in any of the foregoing items and other goods of every kind and description. 7. Brokerage business for casualty insurance and insurance brokerage under the Automobile Liability Security Law of Japan. 8. Direct marketing through the Internet, facsimile, telephone, etc. 9. Any and all business incidental or relating to any of the foregoing items. DIRECTORS Under the Corporation Law, the Board of Directors has executive powers and duties to manage the affairs of the Company and each Representative Director, who is elected from among the Directors by the Board of Directors, has the statutory authority to represent the Company in all respects. Under the Corporation Law, the Directors must refrain from engaging in any business competing with the Company unless approved by the Board of Directors and any Director who has a material interest in the subject matter of a resolution to be taken by the Board of Directors cannot vote in such resolution. The total amount of remuneration to Directors and to Corporate Auditors is subject to approval at the General Meeting of Shareholders. Within such authorized amounts the Board of Directors and the Board of Corporate Auditors respectively determine the compensation to each Director and Corporate Auditor. Except as stated below, neither the Corporation Law nor the Company's Articles of Incorporation make a special provision as to the Director's or Corporate Auditor's power to vote in connection with their compensation, borrowing powers exercisable by a Representative Director (or a Director who is given power by a Representative Director to exercise such powers), their retirement age or requirement to hold any shares of capital stock of the Company. The Corporation Law specifically requires the resolution of the Board of Directors for a corporation to acquire or dispose of material assets; to borrow substantial amounts of money; to employ or discharge from employment important employees, such as managers (SHIHAININ); to establish, change or abolish a material corporate organization such as a branch office; to decide certain important matters related to the offering as to subscription of bonds; to establish a system necessary to ensure appropriateness of business operations of a joint stock corporation (KABUSHIKI KAISHA), including compliance with the laws and regulations and the Articles of Incorporation by the Directors in performing their duties. The Regulations of the Board of Directors of the Company require a resolution of the Board of Directors for the Company's borrowing or lending of a significant amount of money or giving of a guarantee in a large amount. Set forth below is certain information relating to the Common Stock of the Company, including brief summaries of certain provisions of the Company's Articles of Incorporation and Share Handling Regulations, as currently in effect, and of the Corporation Law of Japan relating to a joint stock company (KABUSHIKI KAISHA) and certain related legislation. -95- GENERAL The presently authorized capital stock of the Company is 1,500,000,000 shares. Under the Corporation Law, shares of the Company (which chose under Article 7 of its Articles of Incorporation to issue share certificates) are transferable by delivery of share certificates, but in order to assert shareholders' rights against the Company, the transferee must generally have his name registered in the Company's register of shareholders. Shareholders are required to file their names, addresses and seals with The Chuo Mitsui Trust & Banking Co., Ltd., the custodian of the shareholders' register (KABU-NUSHI MEIBO KANRININ), transfer agent for the Company's Common Stock, and shareholders not resident in Japan are required to file a mailing address in Japan or appoint a resident proxy in Japan. These requirements do not apply to the holders of ADRs. The central clearing system of share certificates under the Law Concerning Central Clearing of Share Certificates and Other Securities of Japan applies to the shares of Common Stock of the Company. Pursuant to this system a holder of shares of Common Stock is able to choose, at his discretion, to participate in this system and all certificates of shares of Common Stock elected to be put into this system are deposited with the central clearing system and all such shares are registered in the name of the clearing house in the Company's register of shareholders. Each participating shareholder is in turn registered in the register of beneficial shareholders and treated the same way as shareholders registered in the Company's register of shareholders. DIVIDENDS The Articles of Incorporation of the Company provide that the accounts shall be closed on March 31 of each year and that dividends, if any, shall be paid to the shareholders of record as of the end of such fiscal period. After the close of the fiscal period, the Board of Directors prepares, among other things, accounting documents (financial statements) and the attachments thereto for dividends and other purposes; these documents are to be submitted to the Corporate Auditors of the Company and to the Accounting Auditors and then submitted for approval by an annual Ordinary General Meeting of Shareholders, which is normally held in June of each year and the distribution of surplus (JOYO-KIN) is to be decided upon by shareholders at such Meeting. In addition to provisions for dividends, if any, and for the reserve, bonuses to Directors and Corporate Auditors will also be decided upon at this Meeting. In addition to a distribution of annual dividends, the Board of Directors of the Company may by its resolution declare an interim dividend pursuant to Article 454, paragraph 5 of the Corporation Law to shareholders who are registered in the Company's register of shareholders at the end of each September 30, subject to the limitations described below. The Corporation Law provides that the Company may not make any distribution of surplus by way of dividends in cash unless it has set aside in its reserve an amount equal to at least one-tenth of any amount paid out as an appropriation of retained earnings (including any payment by way of annual dividend and bonuses to Directors and Corporate Auditors) or equal to one-tenth of any interim dividend. The Corporation Law permits the Company to distribute surplus by way of dividends. First, surplus is -96- calculated by adding (i), (ii), (iii) and (iv) described below and subtracting (v), (vi) and (vii) described below from such aggregate of (i) through (iv): (i) amount determined by subtracting the aggregate of (c), (d) and (e) described below from the aggregate of (a) and (b) described below as of the final date of the last fiscal year; (a) amount of assets, (b) the aggregate amount of the book value of the treasury stock, (c) amount of liabilities, (d) the aggregate amount of the stated capital and the reserve and (e) the aggregate of each amount entered under respective accounting titles (KANJO KAMOKU) set forth under the relevant Ordinance of the Ministry of Justice, (ii) amount determined by subtracting the book value of the treasury stock from the consideration for the treasury stock disposed of, if any, after the final date of the last fiscal year, (iii) amount of reduction of the stated capital, if any, after the final date of the last fiscal year, (iv) amount of reduction of the reserve, if any, after the final date of the last fiscal year, (v) book value of the treasury stock, if any, cancelled after the final date of the last fiscal year, (vi) amount determined by adding (a) through (c) described below in the event that surplus is distributed after the final date of the last fiscal year: (a) the aggregate of the book value of assets for distribution set forth under Article 454, paragraph 1, item 1 of the Corporation Law (regarding distribution of surplus), (b) the aggregate of each sum of the money given to the shareholders who exercised the right to monetary distribution set forth under Article 454, paragraph 4, item 1 of the Corporation Law (regarding distribution in kind) and (c) the aggregate of each sum of the money given to each shareholder holding shares of which number is less than a certain number to be set forth by the Company pursuant to Article 454, paragraph 4, item 2 of the Corporation Law (regarding distribution in kind), (vii) the aggregate of each amount entered under respective accounting titles set forth under the relevant Ordinance of the Ministry of Justice. Second, the distributable amount is calculated by subtracting the aggregate of (iii), (iv), (v) and (vi) described below from the aggregate of (i) and (ii) described below: (i) surplus; (ii) the aggregate of the following items (a) and (b) in the event that extraordinary accounting documents are approved by the shareholders' meeting or by the Board of Directors, as the case may be; (a) the aggregate of each amount entered as profit under respective accounting titles set forth under the relevant Ordinance of the Ministry of Justice during a period of time in question, (b) consideration for the treasury stock disposed of, if any, during such period; (iii) the book value of the treasury stock; (iv) the consideration for treasury stock disposed of, if any, after the final date of the last fiscal year; (v) the aggregate of each amount entered as loss under respective accounting titles set forth under the relevant Ordinance of the Ministry of Justice during the same period as stated in (ii) above; and (vi) the aggregate of each amount entered under the respective accounting titles set forth under the relevant Ordinance of Ministry of Justice. The Company may distribute such distributable amount to shareholders. The Corporation Law does not provide for stock dividends but provides for "free share allotment" under Article 185. The Board of Directors may by resolution issue and allot new shares to the shareholders on a prorated basis without receiving any consideration/contribution as issue price. In addition, under the Corporation Law, the Board of Directors may by resolution issue additional shares by way of a stock split, while the General Meeting of Shareholders by resolution transfers any amount which is distributable as dividends to stated capital, and thus the same effect as a stock dividend can be achieved. -97- In Japan, the "ex-dividend" date and the record date for dividends precede the date of determination of the amount of the dividend to be paid. In accordance with the Company's Articles of Incorporation, once a right to any dividends is accrued and has become due and payable, such right to dividends will lapse after three years from the due date. TRANSFER OF RESERVE TO STATED CAPITAL AND STOCK SPLITS When the Company issues new shares of Common Stock, the entire amount of the issue price of such new shares is required to be accounted for as stated capital, although the Company may account for an amount not exceeding one-half of such issue price as capital surplus. The General Meeting of Shareholders may by resolution transfer the whole or any part of reserve to stated capital. On the other hand, the Board of Directors may by resolution issue to shareholders additional shares of Common Stock without receiving any consideration/contribution as issue price by way of free allotment of shares or stock split without referring to the whole or any part of the amount of reserve so transferred to stated capital. GENERAL MEETING OF SHAREHOLDERS The Ordinary General Meeting of Shareholders to settle accounts of the Company for each fiscal period is normally held in June each year in Ota-ku, Tokyo, Japan. In addition, the Company may hold an extraordinary General Meeting of Shareholders whenever necessary by giving at least two weeks' advance notice to shareholders. Notice of a Shareholders' Meeting setting forth the place, time and purpose thereof, must be mailed to each shareholder having voting rights (or, in the case of a non-resident shareholder, to his resident proxy or mailing address in Japan) at least two weeks prior to the date set for the meeting. Such notice may also be furnished to shareholders by electronic means with such shareholders' consent. Any shareholders' holding at least 300 voting shares or 1% of the total number of outstanding voting shares for six months or more may propose a matter to be considered at a General Meeting of Shareholders by submitting a written request to Directors at least eight weeks prior to the date set for such Meeting. Such request may be submitted by electronic means with the Company's consent. VOTING RIGHTS A shareholder is entitled to one vote per share subject to the limitations on voting rights set forth in the following paragraph below and in the sections entitled "Unit share system" through "Voting rights of a holder of shares representing less than one unit" below. Except as otherwise provided by law or by the Company's Articles of Incorporation, a resolution can be adopted at a General Meeting of Shareholders by a majority of the shares having voting rights represented at the meeting. Special resolutions provided for in paragraph 2, Article 309 of the Corporation Law shall be adopted by the vote of the shareholders not less than two-thirds (2/3) of those present at a -98- meeting whereby one-third (1/3) of voting rights of all of the shareholders shall constitute a quorum. The Corporation Law and the Company's Articles of Incorporation provide, however, that the quorum for the election of Directors and Corporate Auditors shall not be less than one-third of the total number of outstanding shares having voting rights. The Company's shareholders are not entitled to cumulative voting in the election of Directors. A corporate shareholder, more than one-quarter of whose outstanding voting shares are directly or indirectly owned by the Company, may not exercise its voting rights in respect of the shares of the Company. The Company has no voting rights with respect to its own Common Stock. Shareholders may exercise their voting rights through proxies provided that the proxies are also shareholders holding voting rights. The Company's shareholders also may cast their votes in writing. The Corporation Law provides that in order to amend the Articles of Incorporation and in certain other instances, including an increase in the total number of shares authorized to be issued, a reduction of the stated capital, the removal of a Director or Corporate Auditor, dissolution, merger (with an exception of a merger with a company of very small business) or consolidation of a corporation, the transfer of the whole or an important part of the business, the taking over of the whole of the business of any other corporation (with an exception of a merger with a company of very small business), any offering of new shares at a "specially favorable" price (or any offering of convertible bonds or debentures with "specially favorable" conversion conditions or of bonds or debentures with warrants or rights to subscribe for new shares with "specially favorable" conditions) to persons other than shareholders, the quorum shall be one-third of the total number of shares having voting rights outstanding and the approval of the holders of at least two-thirds of the shares having voting rights represented at the Meeting is required (the "special shareholders resolution"). SUBSCRIPTION RIGHTS (KABUSHIKI WARIATEWO UKERU KENRI) Holders of the Company's Common Stock have no preemptive rights under its Articles of Incorporation. Authorized but unissued shares may be issued at such times and upon such terms as the Board of Directors determines, subject to the limitations as to the offering of new shares at a "specially favorable" price mentioned above. The Board of Directors may, however, determine that shareholders shall be given subscription rights regarding a particular issue of new shares, in which case such rights must be given on uniform terms to all shareholders and a notice must be given to shareholders not less than two weeks prior to the date when such rights are to be vested to shareholders. The Corporation Law provides that if a shareholder to whom such rights are given does not apply for subscription by a certain date of subscription, such shareholder will lose such rights. Rights to subscribe for new shares may be made generally transferable by the Board of Directors. In such case, such transferable right is called "call option of new shares (SHINKABU YOYAKUKEN). Whether the Company will make subscription rights generally transferable in future rights offerings will depend upon the circumstances at the time of such offerings. If subscription rights are not made generally transferable, transfers by a non-resident of Japan or a corporation organized under the laws of a -99- foreign country or whose principal office is located in a foreign country will be enforceable against the Company and third parties only if the Company's consent to each such transfer is obtained. When such consent is necessary in the future for the transfer of subscription rights, the Company intends to consent, on request, to all such transfers by such a non-resident or foreign corporation. DILUTION In the future it is possible that market conditions and other factors might make a rights offering to shareholders substantially below the market price of shares of Common Stock desirable. If the number of shares offered in a rights offering is substantial in relation to the number of shares outstanding and the market price exceeds the subscription price at the time of the offering, a shareholder who does not exercise and is unable otherwise to realize the full value of his subscription rights would suffer economic dilution of his equity interest in the Company. LIQUIDATION RIGHTS In the event of a liquidation of the Company, the assets remaining after payment of all debts and liquidation expenses and taxes will be distributed among the shareholders in proportion to the respective numbers of shares held. LIABILITY TO FURTHER CALLS OR ASSESSMENTS All the Company's presently outstanding shares of Common Stock including shares represented by the American Depository Shares are fully paid and non-assessable. CUSTODIAN OF THE SHAREHOLDERS' REGISTER The Chuo Mitsui Trust and Banking Co., Ltd. is the custodian of the shareholders' register of the Company's Common Stock; as such custodian, it keeps the Company's register of shareholders and register of the lost share certificates in its office at 33-1, Shiba 3-chome, Minato-ku, Tokyo, Japan, and makes transfer of record ownership upon presentation of the certificates representing the transferred shares. RECORD DATE March 31 is the record date for the Company's year-end dividends. The shareholders who are registered as the holders of 1,000 shares or more in the Company's register of shareholders at the end of each March 31 are also entitled to exercise shareholders' rights at the Ordinary General Meeting of Shareholders with respect to the fiscal period ending on such March 31. September 30 is the record date for interim dividends. In addition, the Company may set a record date for determining the shareholders entitled to other rights and for other purposes by giving at least two weeks' public notice. The price of the shares generally goes ex-dividend or ex-rights on Japanese stock exchanges on the third business day prior to a record date (or if the record date is not a -100- business day, the fourth business day prior thereto), for the purpose of dividends or rights offerings. PURCHASE BY THE COMPANY OF ITS COMMON STOCK The Company may purchase its own shares only in case of the events falling under Article 155 of the Corporation Law. As a matter of manner of such purchase, the Company may purchase of its own shares (i) through the Tokyo Stock Exchange or other stock exchange on which the shares are listed or by way of tender offer, if authorized by a resolution of the Board of Directors, (ii) from a specific party, if authorized by a special resolution of an Ordinary General Meeting of Shareholders, or (iii) from the Company's own subsidiary, if authorized by a resolution of the Board of Directors. When a repurchase is made by the Company from a specified party pursuant to an authorization by a special resolution of an Ordinary General Meeting of Shareholders as noted above, shareholders may make a demand to a Representative Director, five days or more prior to the relevant Shareholders' Meeting, that the Company also repurchase the shares held by that shareholder. Purchase of shares falling under Article 461, paragraph 1 of the Corporation Law must satisfy, among others, the requirement that the total amount of the repurchase price (of book value) may not exceed the distributable amount as described in "Dividends" above. The Company may hold its own shares as treasury stock so purchased without restriction as to a period of time to hold. However, the Company is not entitled to any voting rights or right to dividends as to such treasury stock. The Company may cancel its treasury stock that it holds by a resolution of the Board of Directors. The Company may otherwise dispose of its treasury stock by a resolution of the Board of Directors. "UNIT" SHARE SYSTEM (TANGENKABU SEIDO) Pursuant to the Corporation Law the Company has adopted 1,000 shares as one unit of shares. TRANSFERABILITY OF SHARES REPRESENTING LESS THAN ONE UNIT As adopted in the Company's Articles of Incorporation, the Company will not issue certificates for shares representing less than one unit. Since the transfer of shares normally requires delivery of the certificates therefor, fractions of a unit for which no share certificates are issued are not transferable. Shares representing less than one unit for which share certificates have been issued continue to be transferable. RIGHT OF A HOLDER OF SHARES REPRESENTING LESS THAN ONE UNIT TO REQUIRE THE COMPANY TO PURCHASE SUCH SHARES A holder of shares representing less than one unit may at any time require the Company to purchase such shares at their last reported sale price on the Tokyo Stock Exchange on the day when such request is made less applicable brokerage commission. The usual securities transfer tax is applicable to such transactions. -101- RIGHT OF THE HOLDER OF SHARES TO DEMAND THE PURCHASE OF SHARES REPRESENTING LESS THAN ONE UNIT As adopted in the Company's Articles of Incorporation and set forth in the Share Handling Regulations, a holder of shares of less-than-one-unit may request the Company to sell additional shares so that their less-than-one-unit can share constitute one unit of shares. OTHER RIGHTS OF A HOLDER OF SHARES REPRESENTING LESS THAN ONE UNIT A holder of shares representing less than one unit has certain rights in respect of such shares, including the following: (i) the right to receive dividends (including interim dividends), (ii) the right to receive shares and/or cash by way of a stock split or upon consolidation or subdivision of shares or upon a capital decrease or merger of the Company, (iii) the right to be allotted subscription rights with respect to new shares, convertible bonds and bonds with warrants to subscribe for shares when such rights are granted to shareholders and (iv) the right to participate in the distribution of surplus assets in the event of the liquidation of the Company. Other rights, including voting rights, cannot be exercised with respect to shares representing less than one unit. VOTING RIGHTS OF A HOLDER OF SHARES REPRESENTING LESS THAN ONE UNIT A holder of shares representing less than one unit cannot exercise any voting rights with respect to such shares. A holder of shares representing one or more whole units will have one vote for each such unit, except as stated in "Voting rights" above. C. Material Contracts All contracts entered into by Ricoh or any member of the Ricoh group during the two years preceding this report were entered into in the ordinary course of business. D. Exchange Controls The Foreign Exchange and Foreign Trade Law of Japan, as amended, and the cabinet orders and ministerial ordinances thereunder (the "Exchange Law") govern certain matters relating to the issuance of equity-related securities by the Company and the acquisition and holding of shares of Common Stock or ADSs representing such shares by "exchange non-residents" and by "foreign investors" as hereinafter defined. The Exchange Law currently in effect does not affect the right of an exchange non-resident to purchase or sell an ADS outside of Japan. "Exchange non-residents" are defined under the Exchange Law as individuals who are not resident in Japan and corporations whose principal offices are located outside of Japan. Generally branches and other offices of Japanese corporations located outside of Japan are regarded as exchange non-residents, but branches and other offices located within Japan of non-resident corporations are regarded as residents of Japan. "Foreign investors" are defined to be (i) individuals not resident in Japan, (ii) corporations which are organized under the laws of foreign countries or whose principal offices are located -102- outside of Japan, and (iii) corporations of which (a) 50% or more of the shares are held by (i) and/or (ii) above, (b) a majority of officers consists of non-resident individuals or (c) a majority of the officers having the power of representation consists of non-resident individuals. Dividends and Proceeds of Sales Under the Exchange Law, dividends paid on, and the proceeds of sales in Japan of, shares of Common Stock held by exchange non-residents in general may be converted into any foreign currency and repatriated abroad. The acquisition of shares of Common Stock by exchange non-resident shareholders by way of stock splits is not subject to any requirements under the Exchange Law. Acquisition of Shares Under the Exchange Law, acquisition of shares of a Japanese company listed on any Japanese stock exchange or traded on the over-the-counter market in Japan ("listed shares") by an exchange non-resident from a resident of Japan is generally not subject to a prior filing requirement. In case a foreign investor acquires listed shares (whether from a resident of Japan or an exchange non-resident, from another foreign investor or from or through a designated securities company) and as a result of such acquisition the number of shares held directly or indirectly by such foreign investor would become 10% or more of the total outstanding shares of the company, the foreign investor is required to make a subsequent report on such acquisition to the Minister of Finance and other Ministers having jurisdiction over the business of the subject company (the "Competent Ministers"). In certain exceptional cases, a prior filing is required and the Competent Ministers may recommend the modification or abandonment of the proposed acquisition and, if the foreign investor does not accept the recommendation, order its modification or prohibition. The deposit of shares of Common Stock by an exchange non-resident of Japan, the issuance of ADRs in exchange therefor and the withdrawal of the underlying shares of Common Stock by an exchange non-resident upon surrender of ADRs are not subject to any requirements under the Exchange Law, except where as a result of such deposit or withdrawal the aggregate number of shares of Common Stock held by the Depositary (or its nominee) or the holder surrendering ADRs, as the case may be, would be 10% or more of the total outstanding shares of Common Stock, in which event a subsequent reporting may be required as described above. E. Taxation JAPANESE TAXATION Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese withholding tax on dividends paid by a Japanese corporation. Generally, stock splits are not subject to Japanese income tax. According to the Income Tax Law of Japan, the rate of Japanese national withholding tax applicable to dividends paid on listed shares issued by the Company to non-residents of Japan or non-Japanese corporations is (i) 7% for the period from January 1, 2004 to March 31, 2008, and (ii) 15% thereafter, except for -103- dividends paid to any individual shareholder who holds 5% or more of the outstanding total of the shares issued by the Company, for which the applicable rate is 20%. Under the new income tax convention between the U.S. and Japan (the "Convention") ratified in March 2004, the maximum rate of Japanese withholding tax that may be imposed on dividends paid to a U.S. resident or corporation not having a "permanent establishment" (as defined therein) in Japan is generally 10%. This 10% withholding tax rate is applicable to dividends declared on or after July 1, 2004. The 15% withholding tax rate under the old income tax convention is still applicable to dividends declared before July 1, 2004. If the tax rate under the domestic tax law is lower than that under the Convention, the domestic tax rate is still applicable. Gains derived by a non-resident of Japan or a non-Japanese corporation from the sale of Common Stock or ADRs outside of Japan, or from the sale of Common Stock within Japan by a non-resident of Japan or by a non-Japanese corporation not having a permanent establishment in Japan, are in general not subject to Japanese income or corporation tax. Japanese inheritance or gift tax at progressive rates may be payable by an individual who has acquired Common Stock or ADRs as a legatee, heir or donee. For purposes of the Convention and the U.S. Internal Revenue Code of 1986, as amended (the "Code"), U.S. holders of ADRs will be treated as the owners of the Common Stock underlying the American Depositary Shares evidenced by the ADRs. U.S. TAXATION This summary describes the material U.S. federal income tax consequences for a U.S. holder (as defined below) of owning and disposing of shares of Common Stock or American Depositary Shares evidenced by the ADRs. This summary applies to you only if you hold shares of Common Stock or American Depositary Shares as capital assets for U.S. federal income tax purposes. This summary does not apply to you if you are a member of a class of holders subject to special rules, such as: . a dealer in securities or currencies; . a trader in securities that elects to use a mark-to-market method of accounting for securities holdings; . a bank; . a life insurance company; . a tax-exempt organization; . a person that holds shares of Common Stock or American Depositary Shares that are a hedge or that are hedged against interest rate or currency risks; . a person that is subject to the alternative minimum tax; . a person that holds shares of Common Stock or American Depositary Shares as part of a straddle or conversion transaction for tax purposes; -104 . a person whose functional currency for U.S. federal income tax purposes is not the U.S. Dollar; or . a person that actually or constructively owns or is deemed to own 10% or more of any class of our stock. This summary is based on laws, treaties, and regulatory interpretations in effect on the date hereof, all of which are subject to change, possibly on a retroactive basis. Moreover, this summary assumes that the Company will not be treated as a passive foreign investment company (a "PFIC") for U.S. federal income tax purposes. See the summary below under the heading "PFIC Rules." Please consult your own tax advisers concerning the U.S. federal, state, local, and other tax consequences of purchasing, owning, and disposing of shares of Common Stock or American Depositary Shares in your particular circumstances. For purposes of this summary, you are a "U.S. holder" if you are a beneficial owner of a share of Common Stock or an American Depositary Share that is for U.S. federal income tax purposes: (i) a citizen or a resident of the United States, (ii) a corporation or a partnership (including an entity treated as a corporation or a partnership for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia (unless, in the case of a partnership, Treasury regulations are adopted that provide otherwise), (iii) an estate whose income is subject to U.S. federal income tax regardless of its source, or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. Certain trusts not described in clause (iv) above in existence on August 20, 1996 that elect to be treated as a United States person will also be a U.S. holder for purposes of this discussion. In general, if you hold ADRs evidencing American Depositary Shares, you will be treated as the owner of the shares of Common Stock represented by those American Depositary Shares for U.S. federal income tax purposes, and no gain or loss will be recognized if you exchange an American Depositary Share for the shares of Common Stock represented by that American Depositary Share. DIVIDENDS The gross amount of cash dividends paid out of the Company's current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, that a U.S. holder receives (prior to deduction of Japanese taxes) generally will be subject to U.S. federal income taxation as foreign source ordinary dividend income. However, in certain circumstances, all or a portion of the cash dividends paid by the Company may be treated as U.S. source dividend income. You should consult your tax advisers regarding the U.S. federal income tax consequences of all or a portion of the cash dividends paid by the Company being treated as U.S. source dividend income. -105- Dividends paid in Japanese Yen will be included in your income in a U.S. Dollar amount calculated by reference to the exchange rate in effect on the date of your (or, in the case of American Depositary Shares, the depositary's) receipt of the dividend, regardless of whether the payment is in fact converted into U.S. Dollars. If such a dividend is converted into U.S. Dollars on the date of receipt, you generally should not be required to recognize a foreign currency gain or loss in respect of the dividend income. You should consult your own tax adviser regarding the treatment of any foreign currency gain or loss realized with respect to any Japanese Yen received by you (or, in the case of American Depositary Shares, the depositary) that are converted into U.S. Dollars on a date subsequent to receipt. Dividends paid by the Company generally will not be eligible for the dividends-received deduction allowed to corporations that are U.S. holders. Notwithstanding the foregoing, pursuant to recently enacted legislation, certain dividends received by individual U.S. holders that constitute "qualified dividend income" will be subject to a reduced maximum marginal U.S. federal income tax rate. Qualified dividend income generally includes, among other dividends, dividends received during the taxable year from "qualified foreign corporations." In general, the term "qualified foreign corporation" includes a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States which the U.S. Treasury Department determines to be satisfactory, and which includes an exchange of information program. In addition, a foreign corporation is treated as a qualified foreign corporation with respect to any dividend paid by the corporation with respect to stock of the corporation that is readily tradable on an established securities market in the United States. Notwithstanding this previous rule, dividends received from a foreign corporation that was a foreign investment company (as defined in section 1246(b) of the Code), a passive foreign investment company (as defined in section 1297 of the Code), or a foreign personal holding company (as defined in section 552 of the Code) in either the taxable year of the corporation in which the dividend was paid or the preceding taxable year will not constitute qualified dividend income. In addition, the term qualified dividend income will not include, among other dividends, any (i) dividends on any share of stock which is held by a taxpayer for 60 days or less during the 121-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividends (as measured under section 246(c) of the Code) or (ii) dividends to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respects to positions in substantially similar or related property. Moreover, special rules apply in determining a taxpayer's foreign tax credit limitation under section 904 of the Code in the case of qualified dividend income. Individual U.S. holders should consult their own tax advisors to determine whether or not amounts received as dividends from the Company will constitute qualified dividend income subject to a reduced maximum marginal U.S. federal income tax rate and, in such case, the effect, if any, on the individual U.S. holder's foreign tax credit. In addition to the foregoing, you should consult your own tax advisers to determine whether any rules limit your ability to make effective use of foreign tax credits, including the possible adverse impact of failing to take advantage of benefits under the income tax treaty between the United States and Japan. If no such rules apply, you -106- generally may claim a credit against your U.S. federal income tax liability for Japanese taxes withheld from dividends on shares of Common Stock or American Depositary Shares, so long as you have owned the shares of Common Stock or American Depositary Shares (and not entered into specified kinds of hedging transactions) for at least a 16-day period that includes the ex-dividend date. Instead of claiming a credit, you may, at your election, deduct such Japanese taxes in computing your taxable income, subject to generally applicable limitations under U.S. federal income tax law. The calculation of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the availability of deductions involve the application of complex rules that depend, in part, on a U.S. holder's particular circumstances. You should consult your own tax advisers regarding the creditability or deductibility of such taxes. SALES AND OTHER DISPOSITIONS A U.S. holder will recognize a gain or loss on the sale or other disposition of shares of Common Stock or American Depositary Shares evidenced by ADRs in an amount equal to the difference between the U.S. Holder's adjusted tax basis in such shares of Common Stock or American Depositary Shares (in U.S. Dollars) and the amount realized on the disposition (in U.S. Dollars, generally determined at the spot rate on the date of disposition if the amount realized is denominated in a foreign currency). For U.S. federal income tax purposes, a gain or loss realized by a U.S. holder on a sale or other disposition of shares of Common Stock or American Depositary Shares will be a capital gain or loss, and will be a long-term capital gain or loss if the shares of Common Stock or American Depositary Shares were held for more than one year. Such gain or loss generally will be treated as U.S. source gain or loss for U.S. foreign tax credit purposes. Your ability to offset capital losses against ordinary income is limited. Long-term capital gain recognized by an individual U.S. holder generally is subject to taxation at a reduced maximum marginal U.S. federal income tax rate. PFIC RULES The Company believes that it will not be treated as a PFIC for U.S. federal income tax purposes. However, that is a factual determination made annually and therefore may be subject to change. If the Company was treated as a PFIC, a U.S. holder of shares of Common Stock or American Depositary Shares evidenced by ADRs would be subject to certain adverse U.S. federal income tax consequences. U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING RULES Payments in respect of the shares of Common Stock or American Depositary Shares that are made within the United States or through certain U.S.-related financial intermediaries are subject to information reporting and may be subject to backup withholding unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred (and certain other conditions are met). -107- F. Dividends and Paying Agents Not applicable. G. Statement by Experts Not applicable. H. Documents on Display The Company is subject to the informational requirements of the Securities and Exchange Act of 1934, as amended. In accordance with these requirements, the Company files reports and other information with the U.S. Securities and Exchange Commission (the "SEC"). These materials, including this annual report and exhibits thereto, may be inspected and copied at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of the materials may be obtained from the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The public may obtain information on the operation of the Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. The documents filed via the Electronic Data Gathering, Analysis, and Retrieval system are also available for inspection on the SEC's website (http://www.sec.gov). I. Subsidiary Information Not Applicable. Item 11. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- Ricoh is exposed to market risks primarily from changes in foreign currency exchange rates and interest rates, which affect outstanding debt and certain assets and liabilities denominated in foreign currencies. To a lesser extent, Ricoh is also exposed to equity price risk. In order to manage these risks that arise in the normal course of business, Ricoh enters into various hedging transactions pursuant to its policies and procedures covering such areas as counterparty exposure and hedging practices. Ricoh does not hold or issue derivative financial instruments for trading purposes or to generate income. Ricoh regularly assesses these market risks based on the policies and procedures established to protect against adverse effects of these risks and other potential exposures, primarily by reference to the market value of the financial instruments. As a result of the latest assessment, Ricoh does not anticipate any material losses in these areas for the fiscal year 2008, and there are no material quantitative changes in market risk exposure at March 31, 2008 when compared to March 31, 2007. In the normal course of business, Ricoh also faces risks that are either non-financial or nonquantifiable. Such risks principally include credit risk and legal risk, and are not represented in the following tables. -108- FOREIGN CURRENCY RISK In the ordinary course of business, Ricoh uses foreign exchange forward contracts to manage the effects of foreign currency exchange risk on monetary assets and liabilities denominated in foreign currencies. The contracts with respect to the operating activities generally have maturities of less than six months, while the contracts with respect to the financing activities have the same maturities as the underlying assets and liabilities. The table below provides information about Ricoh's material derivative financial instruments that are sensitive to foreign currency exchange rates. The table below relating to foreign exchange forward contracts presents the notional amounts, weighted average exchange rates and estimated fair value. These notional amounts generally are used to calculate the contractual payments to be exchanged under the contracts. Foreign Exchange Forward Contracts - ----------------------------------
Year Ended March 31, ------------------------------------------------------------------------------------ 2007 2008 ------------------------------------------------------------------------------------ Contract Estimated fair Contract Estimated fair Average amounts value Average amounts value contractual (Millions of (Million of contractual (Millions of (Million of rates Yen) Yen) rates Yen) Yen) - --------------------------------------------------------------------------------------------- US$/Yen 116.22 10,344 128 109.74 (295) (135) EUR/Yen 155.54 8,710 (76) 163.20 (3,418) (120) US$/EUR 0.75 7,806 (71) 0.67 1,581 (93)
INTEREST RATE RISK In the ordinary course of business, Ricoh enters into interest rate swap agreements to reduce interest rate risk and to modify the interest rate characteristics of its outstanding debt. These agreements primarily involve the exchange of fixed and floating rate interest payments over the life of the agreement without the exchange of the underlying principal amounts. The below table provides information about Ricoh's major derivative and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For debt obligations, the table presents principal cash flows by expected maturity date, related weighted average interest rates and estimated fair value. For interest rate swaps, the table presents notional amounts by expected maturity date, weighted average interest rates. Notional amounts are generally used to calculate the contractual payments to be exchanged under the contract. -109-
LONG-TERM INDEBTEDNESS Year ended March 31, 2007 - --------------------------------------------------------------------------------------------------------------------------------- Millions of Yen ----------------------------------------------------------------------------------- (Excluding Capital Expected maturity date Lease Obligations and Average ----------------------------------------------------------------------------------- SFAS No. 133 pay Fair fair value adjustment) rate Total 2008 2009 2010 2011 2012 Thereafter Value - --------------------------------------------------------------------------------------------------------------------------------- Bonds 1.32% 64,999 10,000 25,000 20,000 9,999 -- -- 63,900 Convertible Bonds -- 55,256 -- -- -- -- 55,256 -- 50,650 Loans 1.48 201,580 76,764 52,119 49,919 11,594 11,169 15 200,464 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL 321,835 86,764 77,119 69,919 21,593 66,425 15 315,014 - ---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INDEBTEDNESS Year ended March 31, 2008 - --------------------------------------------------------------------------------------------------------------------------------- Millions of Yen ----------------------------------------------------------------------------------- (Excluding Capital Expected maturity date Lease Obligations and Average ----------------------------------------------------------------------------------- SFAS No. 133 pay Fair fair value adjustment) rate Total 2009 2010 2011 2012 2013 Thereafter Value - --------------------------------------------------------------------------------------------------------------------------------- Bonds 1.43% 54,999 25,000 20,000 9,999 -- -- -- 54,577 Convertible Bonds -- 55,202 -- -- -- 55,202 -- -- 51,865 Loans 1.66 196,818 57,377 56,690 57,072 24,643 1,033 3 196,438 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL 307,019 82,377 76,690 67,071 79,845 1,033 3 302,880 - --------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAPS Year ended March 31, 2007 - ---------------------------------------------------------------------------------------------------------------------------------- Millions of Yen ---------------------------------------------------------------------------- Expected maturity date Notional Average Average ---------------------------------------------------------------------------- amounts Type of receive pay Fair (Millions) swap rate rate Total 2008 2009 2010 2011 2012 Thereafter Value - ---------------------------------------------------------------------------------------------------------------------------------- Yen 90,000 Receive floating /Pay fixed 0.64% 0.95% 90,000 10,000 45,000 15,000 20,000 -- -- 1 24,000 Receive fixed /Pay floating 1.92 0.61 24,000 -- 6,000 -- 10,000 8,000 -- 517 - ----------------------------------------------------------------------------------------------------------------------------------- US$ 190 Receive floating /Pay fixed 5.62% 4.64% 22,430 -- -- 22,430 -- -- -- 227 45 Receive fixed /Pay fixed 6.00 5.90 5,312 5,312 -- -- -- -- -- 6 - -----------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAPS Year ended March 31, 2008 - ----------------------------------------------------------------------------------------------------------------------------------- Millions of Yen ---------------------------------------------------------------------------- Expected maturity date Notional Average Average ---------------------------------------------------------------------------- amounts Type of receive pay Fair (Millions) swap rate rate Total 2009 2010 2011 2012 2013 Thereafter Value - ----------------------------------------------------------------------------------------------------------------------------------- Yen130,000 Receive floating /Pay fixed 1.04% 0.96% 130,000 45,000 15,000 54,000 16,000 -- -- (368) 18,000 Receive fixed /Pay floating 2.04 1.08 18,000 -- 10,000 8,000 -- -- -- 392 - ----------------------------------------------------------------------------------------------------------------------------------- US$ 190 Receive floating /Pay fixed 3.00% 4.64% 19,036 -- 19,036 -- -- -- -- (380) 4 Receive fixed /Pay fixed 6.00 5.92 366 366 -- -- -- -- -- (238) - -----------------------------------------------------------------------------------------------------------------------------------
-110- CREDIT RISK Ricoh is also exposed to credit-related losses in the event of nonperformance by counterparties to the financial instrument; however, credit risk arising from the nonperformance of counterparties to meet the terms of financial instrument contracts is generally limited to the amounts by which the counterparties' obligations exceed the obligations of Ricoh. It is Ricoh's policy to only enter into financial instrument contracts with a diversified group of financial institutions having credit ratings satisfactory to Ricoh to minimize the concentration of credit risk. Therefore, Ricoh does not expect to incur material credit losses on its financial instruments. DEBT/EQUITY PRICE RISK Ricoh has a relatively small portion of marketable securities which are subject to equity price risk arising from changes in their market prices. Marketable securities consist of a diversified pool of Japanese equity securities. Ricoh's overall investment policy is to invest in highly-liquid, low risk investments. The table below provides information about contractual maturities for available-for-sale securities and the fair values for market risk sensitive.
(Millions of Yen) - ---------------------------------------------------------------------------------------- Year ended March 31, ---------------------------------------------- 2007 2008 ---------------------- ---------------------- Cost Fair Value Cost Fair Value ---------- ---------- ---------- ---------- Debt Securities Due within one year 176 176 -- -- Due after one year through five years 6,000 6,010 6,000 5,246 Equity Securities 49,261 64,110 62,208 64,716 Other 243 243 0 0 - ---------------------------------------------------------------------------------------- TOTAL 55,680 70,539 68,208 69,962 - ----------------------------------------------------------------------------------------
Item 12. Description of Securities Other Than Equity Securities ------------------------------------------------------ Not applicable. PART II Item 13. Defaults, Dividend Arrearages and Delinquencies ----------------------------------------------- None. Item 14. Material Modifications to the Rights of Security Holders and Use of ------------------------------------------------------------------- Proceeds -------- None. -111- Item 15. Controls and Procedures ----------------------- DISCLOSURE CONTROLS AND PROCEDURES Ricoh's disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed by Ricoh in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to Ricoh's management, including its Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of its management, including the CEO and CFO, Ricoh evaluated its disclosure controls and procedures. Based on this evaluation, the CEO and the CFO concluded that Ricoh's disclosure controls and procedures were effective as of March 31, 2008 at a reasonable assurance level, provided that it be understood that any system of control is based in part upon certain assumptions designed to obtain reasonable (but not absolute) assurance as to its effectiveness, and there can be no assurance that Ricoh's system of control will succeed in achieving its stated objectives. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Ricoh's management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and Rule 15d-15(f) of the Securities Exchange Act of 1934, as amended. Ricoh's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Ricoh; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Ricoh are being made only in accordance with authorizations of management and directors of Ricoh; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Ricoh's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with internal control policies or procedures may deteriorate. As permitted by the rules and regulations of the SEC, Ricoh's management excluded from its assessment of the effectiveness of Ricoh's internal control over financial reporting as of March 31, 2008 an assessment of internal control over financial reporting of InfoPrint Solutions Company, LLC (a joint venture company with IBM -112- which commenced its operations on June 1, 2007), except for the goodwill and intangibles relating to this joint venture company that were included within the scope of such assessment. InfoPrint Solutions Company, LLC, had total assets of Yen 46,281 million (excluding goodwill and intangibles relating to this joint venture company) and total sales of Yen 68,577 million that were reflected in the consolidated financial statements of the Company as of and for the year ended March 31, 2008. Ricoh's management assessed the effectiveness of Ricoh's internal control over financial reporting as of March 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in INTERNAL CONTROL - INTEGRATED FRAMEWORK. Management's assessment included evaluating the design of Ricoh's internal control over financial reporting and testing of the operational effectiveness of Ricoh's internal control over financial reporting. Based on such assessment, management concluded that, as of March 31, 2008, Ricoh's internal control over financial reporting was effective based on the criteria issued by COSO. The effectiveness of Ricoh's internal control over financial reporting as of March 31, 2008 has been audited by KPMG AZSA & Co., an independent registered public accounting firm, as stated in their report, which is included on page F-3 of the Consolidated Financial Statements. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There has been no change in Ricoh's internal control over financial reporting that occurred during the period covered by this Form 20-F that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting. Item 16. [RESERVED] Item 16A. Audit Committee Financial Expert -------------------------------- The Board of Directors of the Company has determined that it does not have an "audit committee financial expert" as defined in Item 16A. of Form 20-F serving on the Board of Corporate Auditors. The Company is considering the issues related to and the ramifications of such a designation. In Japan, there are limited numbers of qualified persons who meet all of the criteria established by the SEC for financial experts to be designated by issuers. Accordingly, it is taking some time for the Company to identify such a qualified person. Although the Board of Directors is satisfied that that members of the Board of Corporate Auditors possess the appropriate skills and experience, as a group, to carry out their -113- duties as members of the Board of Corporate Auditors, the Company will continue to strive to identify potential candidates that might qualify for this position. The Board of Corporate Auditors will keep under active review the financial expert matter during fiscal year 2009 as part of their overall risk management and compliance program. Item 16B. Code of Ethics -------------- Ricoh has adopted a code of ethics that applies to its employees, including the President, Chief Executive Officer, Chief Operating Officer, and the senior management of accounting and finance. Such code of ethics of Ricoh is provided hereto as Exhibit 11. Item 16C. Principal Accountant Fees and Services -------------------------------------- The aggregate fees for professional services and other services rendered by KPMG AZSA & Co. and the various member firms of KPMG International to Ricoh for the years ended March 31, 2007 and 2008, were: (Millions of Yen) - ----------------------------------------- Year ended March 31, -------------------- 2007 2008 - ----------------------------------------- Audit Fees 1,486 1,629 Audit-related Fees 10 15 Tax Fees 43 185 All Other Fees 135 4 - ----------------------------------------- TOTAL 1,674 1,833 - ----------------------------------------- Audit Fees consist of fees for the annual audit of Ricoh's consolidated financial statements, and audit services that are normally provided by our independent accountants. Audit-related Fees consist of fees for assurance and related services that are reasonably related to due diligence related to mergers and acquisitions and consultation concerning financial accounting and reporting standards. Tax Fees consist of fees for tax compliance, tax advice and tax consulting associated with international transfer prices. All Other Fees consist of fees for all other services not included in any of the categories noted above. -114- AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES In accordance with Japanese law, the Company's independent accountants (KAIKEI KANSANIN) ("Accounting Auditors") are appointed by the shareholders at the Ordinary General Meeting of Shareholders with the consent of the Company's Board of Corporate Auditors. In addition, the Board of Corporate Auditors may, by its resolution, request the Company's Board of Directors to submit a proposal as to the appointment of Accounting Auditors at the Ordinary General Meeting of Shareholders. Subsequent to the appointment of the Accounting Auditors, the Board of Corporate Auditors is responsible, among other matters, for the oversight of the Accounting Auditors, subject to the requirements of Japanese law. No proposal was submitted to discharge KPMG AZSA & Co. as the Company's Accounting Auditors at the most recent Ordinary General Meeting of Shareholders held on June 26, 2008. The Board of Corporate Auditors has adopted policies and procedures to pre-approve all audit and permissible non-audit services provided by the Accounting Auditor ("Pre-approval Policies"). Under the Pre-approval Policies, proposed services either (i) may be pre-approved by the Board of Corporate Auditors without specific consideration on a case-by-case basis if such services do not exceed pre-approved fee levels ("general pre-approval"), or (ii) require the specific pre-approval of the Board of Corporate Auditors ("specific pre-approval"). The Board of Corporate Auditors may delegate its specific pre-approval authority to one or more of its independent members who shall be designated by the Board of Corporate Auditors. Under the Pre-approval Policies, the Accounting Auditors are not allowed to perform any non-audit services which may impair the auditors independence under the rules of the SEC. The appendices to the Pre-approval Policies set out the audit, audit-related, tax and other services, including those described above, that have received the general pre-approval of the Board of Corporate Auditors. The term of any general pre-approval is twelve months from the date of pre-approval, unless the Board of Corporate Auditors specifically provides for a different period and sets forth such different period in the relevant appendix to the Pre-approval Policies. The Board of Corporate Auditors will annually review the Pre-approval Policies and revise the list of services that it has provided general pre-approval. Requests or applications to provide services that require specific pre-approval by the Board of Corporate Auditors will be submitted to the Board of Corporate Auditors by the Chief Officer of a company or division to which services are provided, accompanied by a draft engagement letter from the Accounting Auditor. During fiscal year 2008, none of the services provided to the Company by KPMG AZSA & Co. were approved by the Board of Corporate Auditors pursuant to the de minimis exception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. -115- Item 16D. Exemptions from the Listing Standards for Audit Committees ---------------------------------------------------------- Not applicable. Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers ---------------------------------------------------------------------- Not applicable. PART III Item 17. Financial Statements -------------------- Not applicable. Item 18. Financial Statements -------------------- See Consolidated Financial Statements and Schedule attached hereto. Item 19. Exhibits -------- Documents filed as exhibits to this annual report: 1.1 Articles of Incorporation, as amended (English translation) 1.2 Share Handling Regulations, as amended (English translation) 1.3 Regulations of the Board of Directors, as amended (English translation) 1.4 Regulation of the Board of Corporate Auditors, as amended (English translation) 8.1 List of Significant Subsidiaries (See "Organizational structure" in Item 4.C. of this Form 20-F) 11 Code of Ethics (English translation) 12.1 Certification Pursuant to Rule 13a-14(a)/15d-14(a) 12.2 Certification Pursuant to Rule 13a-14(a)/15d-14(a) 13.(a)(1) Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code 13.(a)(2) Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code -116- SIGNATURES ---------- Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Company hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. RICOH COMPANY, LTD. By: /s/ ZENJI MIURA ---------------------------------------- Zenji Miura Director, Corporate Executive Vice President and Chief Financial Officer Date: June 27, 2008 RICOH COMPANY, LTD. Consolidated Financial Statements and Schedule For the years ended March 31, 2006, 2007 and 2008 With Reports of Independent Registered Public Accounting Firm Thereon RICOH COMPANY, LTD. AND CONSOLIDATED SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page - ------------------------------------------------------------------------------- Reports of Independent Registered Public Accounting Firm ........ F-2 to F-3 Consolidated Balance Sheets as of March 31, 2007 and 2008 ...................................... F-4 to F-5 Consolidated Statements of Income for the years ended March 31, 2006, 2007 and 2008 ............ F-6 Consolidated Statements of Shareholders' Investments for the years ended March 31, 2006, 2007 and 2008 ............ F-7 to F-8 Consolidated Statements of Cash Flows for the years ended March 31, 2006, 2007 and 2008 ............ F-9 Notes to Consolidated Financial Statements ...................... F-10 to F-52 Schedule: II. Valuation and Qualifying Accounts and Reserves ........... F-53 All schedules not listed have been omitted because they are not applicable, or the required information has been otherwise supplied in the consolidated financial statements or the notes thereto. F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Ricoh Company, Ltd.: We have audited the consolidated financial statements of Ricoh Company, Ltd. (a Japanese corporation) and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ricoh Company, Ltd. and subsidiaries as of March 31, 2007 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2008, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Ricoh Company, Ltd. and subsidiaries' internal control over financial reporting as of March 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 27, 2008 expressed an unqualified opinion on the effective operation of internal control over financial reporting. The accompanying consolidated financial statements as of and for the year ended March 31, 2008 have been translated into United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated financial statements, expressed in yen, have been translated into dollars on the basis set forth in Note 2 to the consolidated financial statements. KPMG AZSA & Co. Tokyo, Japan June 27, 2008 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Ricoh Company, Ltd.: We have audited Ricoh Company, Ltd. (a Japanese corporation) and subsidiaries' internal control over financial reporting as of March 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Ricoh Company, Ltd. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of March31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Ricoh Company, Ltd. acquired InfoPrint Solutions Company, LLC during the year ended March 31, 2008, and management excluded from its assessment of the effectiveness of Ricoh Company, Ltd. and subsidiaries' internal control over financial reporting as of March 31, 2008, InfoPrint Solutions Company, LLC's internal control over financial reporting associated with total assets of Yen 46,281 million, excluding goodwill and intangibles which were included within the scope of the assessment, and total revenues of Yen 68,577 million included in the consolidated financial statements of Ricoh Company, Ltd. and subsidiaries as of and for the year ended March 31, 2008. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the effectiveness of the internal control over financial reporting of InfoPrint Solutions Company, LLC. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Ricoh Company, Ltd. and subsidiaries as listed in the accompanying index, and our report dated June 27, 2008 expressed an unqualified opinion on those consolidated financial statements. KPMG AZSA & Co. Tokyo, Japan June 27, 2008 F-3 RICOH COMPANY, LTD. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2007 AND 2008
Thousands of Millions of Yen U.S. Dollars ----------------------------- ------------ ASSETS 2007 2008 2008 - --------------------------------------------------------------------------------------------------------- Current assets: Cash and cash equivalents 255,737 170,607 $ 1,706,070 Time deposits 1,417 1,531 15,310 Trade receivables: Notes 66,474 57,068 570,680 Accounts 450,231 463,999 4,639,990 Less - Allowance for doubtful receivables (16,555) (16,666) (166,660) Current maturities of long-term finance receivables, net 193,087 194,642 1,946,420 Inventories: Finished goods 113,379 117,658 1,176,580 Work in process and raw materials 70,975 74,365 743,650 Deferred income taxes and other 65,347 60,936 609,360 - --------------------------------------------------------------------------------------------------------- Total current assets 1,200,092 1,124,140 11,241,400 - --------------------------------------------------------------------------------------------------------- Property, plant and equipment, at cost: Land 47,007 46,681 466,810 Buildings 227,900 235,106 2,351,060 Machinery and equipment 636,577 587,956 5,879,560 Construction in progress 12,512 12,884 128,840 - --------------------------------------------------------------------------------------------------------- Total 923,996 882,627 8,826,270 Less - accumulated depreciation (659,328) (627,994) (6,279,940) - --------------------------------------------------------------------------------------------------------- Net property, plant and equipment 264,668 254,633 2,546,330 - --------------------------------------------------------------------------------------------------------- Investments and other assets: Long-term finance receivables, net 435,874 445,436 4,454,360 Investment securities 74,836 71,244 712,440 Investments in and advances to affiliates 15,608 1,977 19,770 Goodwill 72,048 112,538 1,125,380 Other intangible assets 81,925 114,402 1,144,020 Lease deposits and other 98,355 89,998 899,980 - --------------------------------------------------------------------------------------------------------- Total investments and other assets 778,646 835,595 8,355,950 - --------------------------------------------------------------------------------------------------------- Total 2,243,406 2,214,368 $ 22,143,680 - ---------------------------------------------------------------------------------------------------------
F-4
Thousands of Millions of Yen U.S. Dollars ----------------------------- ------------ LIABILITIES AND SHAREHOLDERS' INVESTMENT 2007 2008 2008 - --------------------------------------------------------------------------------------------------------- Current liabilities: Short-term borrowings 91,673 75,784 $ 757,840 Current maturities of long-term indebtedness 87,174 82,658 826,580 Trade payables: Notes 25,000 18,942 189,420 Accounts 342,211 341,627 3,416,270 Accrued income taxes 46,194 28,909 289,090 Accrued expenses and other 143,360 165,836 1,658,360 - --------------------------------------------------------------------------------------------------------- Total current liabilities 735,612 713,756 7,137,560 - --------------------------------------------------------------------------------------------------------- Long-term liabilities: Long-term indebtedness 236,801 225,930 2,259,300 Accrued pension and severance costs 99,028 99,830 998,300 Deferred income taxes 44,183 36,373 363,730 - --------------------------------------------------------------------------------------------------------- Total long-term liabilities 380,012 362,133 3,621,330 - --------------------------------------------------------------------------------------------------------- Minority interests 56,869 58,283 582,830 - --------------------------------------------------------------------------------------------------------- Commitments and contingent liabilities (Note 17) Shareholders' investment: Common stock; Authorized - 1,500,000,000 shares in 2007 and 2008 Issued and outstanding - 744,912,078 shares and 729,987,673 shares in 2007 and 744,912,078 shares and 720,951,250 shares in 2008 135,364 135,364 1,353,640 Additional paid-in capital 186,454 186,448 1,864,480 Retained earnings 752,398 835,238 8,352,380 Accumulated other comprehensive income (loss) 26,998 (31,005) (310,050) Treasury stock at cost; 14,924,405 shares in 2007 and 23,960,828 shares in 2008 (30,301) (45,849) (458,490) - --------------------------------------------------------------------------------------------------------- Total shareholders' investment 1,070,913 1,080,196 10,801,960 - --------------------------------------------------------------------------------------------------------- Total 2,243,406 2,214,368 $ 22,143,680 - ---------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE BALANCE SHEETS. F-5 RICOH COMPANY, LTD. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED MARCH 31, 2006, 2007 AND 2008
Thousands of Millions of Yen U.S. Dollars --------------------------------------------- ------------ 2006 2007 2008 2008 - -------------------------------------------------------------------------------------------------------------------------- Net sales: Products 1,108,746 1,189,548 1,292,228 $ 12,922,280 Post sales and rentals 693,138 768,965 817,230 8,172,300 Other revenue 107,354 110,412 110,531 1,105,310 - -------------------------------------------------------------------------------------------------------------------------- Total 1,909,238 2,068,925 2,219,989 22,199,890 - -------------------------------------------------------------------------------------------------------------------------- Cost of sales: Products 738,962 783,681 855,852 8,558,520 Post sales and rentals 293,559 335,444 346,945 3,469,450 Other revenue 81,717 87,394 89,465 894,650 - -------------------------------------------------------------------------------------------------------------------------- Total 1,114,238 1,206,519 1,292,262 12,922,620 - -------------------------------------------------------------------------------------------------------------------------- Gross profit 795,000 862,406 927,727 9,277,270 Selling, general and administrative expenses 646,416 688,026 746,221 7,462,210 - -------------------------------------------------------------------------------------------------------------------------- Operating income 148,584 174,380 181,506 1,815,060 - -------------------------------------------------------------------------------------------------------------------------- Other (income) expenses: Interest and dividend income (2,896) (5,501) (6,341) (63,410) Interest expense 5,244 7,350 4,835 48,350 Foreign currency exchange (gain) loss, net (3,748) 1,199 10,901 109,010 Other, net (2,782) (3,187) (2,558) (25,580) - -------------------------------------------------------------------------------------------------------------------------- Total (4,182) (139) 6,837 68,370 - -------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before Income taxes, minority interests and equity in earnings of affiliates 152,766 174,519 174,669 1,746,690 Provision for income taxes: Current 60,857 66,523 58,426 584,260 Deferred (4,692) (2,197) 4,970 49,700 - -------------------------------------------------------------------------------------------------------------------------- Total 56,165 64,326 63,396 633,960 - -------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before minority interests and equity in earnings of affiliates 96,601 110,193 111,273 1,112,730 Minority interests 4,185 5,508 6,057 60,570 Equity in earnings of affiliates 2,606 1,539 1,247 12,470 - -------------------------------------------------------------------------------------------------------------------------- Income from continuing operations 95,022 106,224 106,463 1,064,630 Income from discontinued operations, net of tax 2,035 5,500 -- -- - -------------------------------------------------------------------------------------------------------------------------- Net income 97,057 111,724 106,463 $ 1,064,630 - -------------------------------------------------------------------------------------------------------------------------- Yen U.S. Dollars --------------------------------------------- ------------ Per share of common stock: 2006 2007 2008 2008 - -------------------------------------------------------------------------------------------------------------------------- Basic: Income from continuing operations 129.56 145.56 146.04 $ 1.46 Income from discontinued operations, net of tax 2.77 7.54 -- -- - -------------------------------------------------------------------------------------------------------------------------- Net income 132.33 153.10 146.04 1.46 - -------------------------------------------------------------------------------------------------------------------------- Diluted: Income from continuing operations 129.56 144.41 142.15 $ 1.42 Income from discontinued operations, net of tax 2.77 7.48 -- -- - -------------------------------------------------------------------------------------------------------------------------- Net income 132.33 151.89 142.15 1.42 - -------------------------------------------------------------------------------------------------------------------------- Cash dividends paid per share 22.00 25.00 31.00 $ 0.31 - -------------------------------------------------------------------------------------------------------------------------- Per American Depositary Share, each representing 5 shares of common stock: - -------------------------------------------------------------------------------------------------------------------------- Basic: Income from continuing operations 647.80 727.80 730.20 $ 7.30 Income from discontinued operations, net of tax 13.85 37.70 -- -- - -------------------------------------------------------------------------------------------------------------------------- Net income 661.65 765.50 730.20 7.30 - -------------------------------------------------------------------------------------------------------------------------- Diluted: Income from continuing operations 647.80 722.05 710.75 $ 7.10 Income from discontinued operations, net of tax 13.85 37.40 -- -- - -------------------------------------------------------------------------------------------------------------------------- Net income 661.65 759.45 710.75 7.10 - -------------------------------------------------------------------------------------------------------------------------- Cash dividends paid per share 110.00 125.00 155.00 $ 1.55 - --------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS. F-6 RICOH COMPANY, LTD. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT FOR THE YEARS ENDED MARCH 31, 2006, 2007 AND 2008
Millions of Yen -------------------------------------------------------------------------------- Accumulated Additional other Total Common paid-in Retained comprehensive Treasury shareholders' stock capital earnings income (loss) stock investment - ------------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 2005 135,364 186,551 584,515 (21,963) (21,469) 862,998 - ------------------------------------------------------------------------------------------------------------------------------- Gain (loss) on disposal of treasury stock (101) (101) Dividends declared and approved (16,178) (16,178) Comprehensive income (loss) Net income 97,057 97,057 Net unrealized holding gains (losses) on available-for-sale securities 4,137 4,137 Minimum pension liability adjustments 7,009 7,009 Net unrealized gains (losses) on derivative instruments 40 40 Cumulative translation adjustments 14,876 14,876 ------------- Total comprehensive income (loss) 123,119 Net changes in treasury stock (9,593) (9,593) - ------------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 2006 135,364 186,450 665,394 4,099 (31,062) 960,245 - ------------------------------------------------------------------------------------------------------------------------------- Cumulative effect of adjustment from applying SAB 108 -- -- (6,464) -- -- (6,464) - ------------------------------------------------------------------------------------------------------------------------------- Balance at April 1, 2006, as adjusted 135,364 186,450 658,930 4,099 (31,062) 953,781 - ------------------------------------------------------------------------------------------------------------------------------- Gain (loss) on disposal of treasury stock 4 4 Dividends declared and approved (18,256) (18,256) Comprehensive income (loss) Net income 111,724 111,724 Net unrealized holding gains (losses) on available-for-sale securities 73 73 Minimum pension liability adjustments 970 970 Net unrealized gains (losses) on derivative instruments (185) (185) Cumulative translation adjustments 24,774 24,774 ------------- Total comprehensive income (loss) 137,356 Adjustment to initially apply SFAS 158 (2,733) (2,733) Net changes in treasury stock 761 761 - ------------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 2007 135,364 186,454 752,398 26,998 (30,301) 1,070,913 - ------------------------------------------------------------------------------------------------------------------------------- Cumulative effect of adjustment from applying EITF 06-2 -- -- (995) -- -- (995) - ------------------------------------------------------------------------------------------------------------------------------- Balance at April 1, 2007, as adjusted 135,364 186,454 751,403 26,998 (30,301) 1,069,918 - ------------------------------------------------------------------------------------------------------------------------------- Gain (loss) on disposal of treasury stock (6) (6) Dividends declared and approved (22,628) (22,628) Comprehensive income (loss) Net income 106,463 106,463 Net unrealized holding gains (losses) on available-for-sale securities (7,685) (7,685) Pension liability adjustments (11,382) (11,382) Net unrealized gains (losses) on derivative instruments (380) (380) Cumulative translation adjustments (38,556) (38,556) ------------- Total comprehensive income (loss) 48,460 Net changes in treasury stock (15,548) (15,548) - ------------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 2008 135,364 186,448 835,238 (31,005) (45,849) 1,080,196 - -------------------------------------------------------------------------------------------------------------------------------
F-7
Thousands of U.S. Dollars --------------------------------------------------------------------------------- Accumulated Additional other Total Common paid-in Retained comprehensive Treasury shareholders' stock capital earnings income (loss) stock investment - -------------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 2007 $1,353,640 $1,864,540 $7,523,980 $ 269,980 $(303,010) $10,709,130 - -------------------------------------------------------------------------------------------------------------------------------- Cumulative effect of adjustment from applying EITF 06-2 -- -- (9,950) -- -- (9,950) - -------------------------------------------------------------------------------------------------------------------------------- Balance at April 1, 2007,as adjusted 1,353,640 1,864,540 7,514,030 269,980 (303,010) 10,699,180 - -------------------------------------------------------------------------------------------------------------------------------- Gain (loss) on disposal of treasury stock (60) (60) Dividends declared and approved (226,280) (226,280) Comprehensive income (loss) Net income 1,064,630 1,064,630 Net unrealized holding gains (losses) on available-for-sale securities (76,850) (76,850) Pension liability adjustments (113,820) (113,820) Net unrealized gains (losses) on derivative instruments (3,800) (3,800) Cumulative translation adjustments (385,560) (385,560) ------------ Total comprehensive income (loss) 484,600 Net changes in treasury stock (155,480) (155,480) - -------------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 2008 $1,353,640 $1,864,480 $8,352,380 $(310,050) $(458,490) $10,801,960 - --------------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS. F-8 RICOH COMPANY, LTD. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2006, 2007 AND 2008
Thousands of Millions of Yen U.S. Dollars ---------------------------------------- ------------ 2006 2007 2008 2008 - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income 97,057 111,724 106,463 $ 1,064,630 Income from discontinued operations, net of tax (2,035) (5,500) -- -- ------------------------------------------------------- Income from continuing operations 95,022 106,224 106,463 1,064,630 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 84,089 89,632 95,788 957,880 Equity in earnings of affiliates, net of dividends received (1,431) (711) (622) (6,220) Deferred income taxes (4,692) (2,197) 4,970 49,700 Losses on disposals and sales of property, plant and equipment 920 3,722 2,174 21,740 Pension and severance costs, less payments 3,340 (773) (320) (3,200) Changes in assets and liabilities, net of effects from acquisition- (Increase) decrease in trade receivables 13,411 (15,919) (16,567) (165,670) (Increase) decrease in inventories 3,726 (1,494) 129 1,290 Increase in finance receivables (30,029) (28,047) (17,183) (171,830) (Decrease) increase in trade payables (4,442) 2,199 (7,491) (74,910) Increase in accrued income taxes and accrued expenses and other 2,505 11,175 5,216 52,160 Other, net 11,060 3,486 21,806 218,060 - -------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 173,479 167,297 194,363 1,943,630 - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment 3,085 463 1,194 11,940 Expenditures for property, plant and equipment (101,788) (85,747) (85,205) (852,050) Payments for purchases of available-for-sale securities (138,607) (97,158) (97,958) (979,580) Proceeds from sales of available-for-sale securities 141,620 96,087 100,025 (1,000,250) (Increase) decrease in time deposits (136) 64 (240) (2,400) Proceeds from sales of discontinued operations -- 12,000 -- -- Purchase of business, net of cash acquired -- (23,200) (96,796) (967,960) Other, net (24,225) (17,941) (19,370) (193,700) - -------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (120,051) (115,432) (198,350) (1,983,500) - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term indebtedness 63,751 60,157 67,166 671,660 Repayment of long-term indebtedness (93,752) (49,115) (75,716) (757,160) (Decrease) increase in short-term borrowings, net 39,618 8,362 (14,598) (145,980) Proceeds from issuance of long-term debt securities 10,000 65,274 -- -- Repayment of long-term debt securities (52,000) (55,000) (10,000) (100,000) Dividends paid (16,178) (18,240) (22,628) (226,280) Payment for purchase of treasury stock (10,653) (799) (15,770) (157,700) Other, net (775) (1,357) (639) (6,390) - -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (59,989) 9,282 (72,185) (721,850) - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS OF DISCONTINUED OPERATIONS: (Note 2 (u)) Net, operating cash flows 3,390 838 -- -- Net, investing cash flows (14) (13) -- -- Net, financing cash flows -- -- -- -- Effect of exchange rate change on cash and cash equivalents from discontinued operations -- -- -- -- - -------------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents from discontinued operations 3,376 825 -- -- - -------------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS 3,383 6,710 (8,958) (89,580) - -------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 198 68,682 (85,130) (851,300) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 186,857 187,055 255,737 2,557,370 - -------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR 187,055 255,737 170,607 $ 1,706,070 - -------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: CASH PAID DURING THE YEAR FOR- Interest 5,717 8,222 8,619 $ 86,190 Income taxes 44,854 66,603 76,220 762,200 - --------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS. F-9 RICOH COMPANY, LTD. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS Ricoh Company, Ltd. (the "Company") was established in 1936 and is headquartered in Tokyo, Japan. The Company and its consolidated subsidiaries ("Ricoh" as a consolidated group) is a world-wide supplier of office automation equipment, including copiers, facsimile machines, data processing systems, printers and related supplies. Ricoh is also well known for its state-of-the-art electronic devices, digital photographic equipment and other products. Ricoh distributes its products primarily through domestic (Japanese) and foreign sales subsidiaries. Overseas, Ricoh owns and distributes not only Ricoh brand products but also other brands, such as Gestetner, Lanier and Savin. Ricoh manufactures its products primarily in 15 plants in Japan and 6 plants overseas, which are located in the United States, United Kingdom, France and China. 2. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES The accompanying consolidated financial statements of Ricoh have been prepared in conformity with U.S. generally accepted accounting principles. Significant accounting and reporting policies are summarized below: (A) BASIS OF PRESENTATION The accompanying consolidated financial statements for each of the years in the three year period ended March 31, 2008 are presented in Japanese yen, the functional currency of the Company and its domestic subsidiaries. The translation of Japanese yen into U.S. Dollar equivalents for the year ended March 31, 2008 is included solely for the convenience of readers outside Japan and has been made using the exchange rate of Yen 100 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Bank of New York on March 31, 2008. The books of the Company and its domestic subsidiaries are maintained in conformity with Japanese accounting principles and practices, while foreign subsidiaries maintain their books in conformity with the standards of their country of domicile. The accompanying consolidated financial statements reflect necessary adjustments, not recorded in the books, to present them in conformity with U.S. generally accepted accounting principles. F-10 (B) PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. The accounts of variable interest entity as defined by the FASB Interpretation ("FIN") No. 46 (revised December 2003), "Consolidated of Variable Interest Entities" are included in the consolidated financial statements, if applicable. Investments in entities in which Ricoh has the ability to exercise significant influence over the entities' operating and financial policies (generally 20 to 50 % ownership) are accounted for on an equity basis. All significant intercompany balances and transactions have been eliminated in consolidation. The accounts of certain consolidated subsidiaries have been included on the basis of fiscal periods ended within three months prior to March 31. (C) REVENUE RECOGNITION Ricoh generates revenue principally through the sale of equipment, supplies and related services under separate contractual arrangements for each. Ricoh recognizes revenue when (1) it has a firm contract, (2) the product has been shipped to and accepted by the customer or the service has been provided, (3) the sales price is fixed or determinable and (4) amounts are reasonably assured of collection. Products sales is recognized at the time of delivery and installation at the customer location. Equipment revenues are based on established prices by product type and model and are net of discounts. A sales return is accepted only when the equipment is defective and does not meet Ricoh's product performance specifications. Other than installation, there are no customer acceptance clauses in the sales contract. Post sales and rentals result primarily from maintenance contracts that are normally entered into at the time the equipment is sold. Standard service fee prices are established depending on equipment classification and include a cost value for the estimated services to be performed based on historical experience plus a profit margin thereon. As a matter of policy, Ricoh does not discount such prices. On a monthly basis, maintenance service revenues are earned and recognized by Ricoh and billed to the customer in accordance with the contract and include a fixed monthly fee plus a variable amount based on usage. The length of the contract ranges up to five-years, however, most contracts are cancelable at any time by the customer upon a short notice period. Leases not qualifying as sales-type leases or direct financing leases are accounted for as operating leases and related revenue is recognized over the lease term. Ricoh enters into arrangements with multiple elements, which may include any combination of products, equipment, installation and maintenance. Ricoh allocates revenue to each element based on its relative fair value if such element meets the criteria for treatment as a separate unit of accounting as prescribed in Emerging Issues Task Force ("EITF") Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." Pursuant to EITF 00-21, the delivered item in a multiple element arrangement should be considered a separate unit of accounting if all of the following criteria are met: (1) a delivered item has value to customers on a stand-alone basis, (2) there is objective and reliable evidence of fair value of an undelivered item, and (3) the delivery of the undelivered item must be probable and controlled by Ricoh if the arrangement includes the right of return. The price charged when the element is sold separately generally determines fair value. Otherwise, revenue is deferred until the undelivered elements are fulfilled as a single unit of accounting. Revenue from the sale of equipment under sales-type leases is recognized as product sales at the inception of the lease. Other revenue consists primarily of interest income on sales-type leases and direct-financing leases, which are recognized as Other revenue over the life of each respective lease using the interest method. F-11 (D) FOREIGN CURRENCY TRANSLATION For foreign operations with functional currencies other than the Japanese yen, assets and liabilities are translated at the exchange rates in effect at each fiscal year-end, and income and expenses are translated at the average rates of exchange prevailing during each fiscal year. The resulting translation adjustments are included as a part of accumulated other comprehensive income (loss) in shareholders' investment. All foreign currency transaction gains and losses are included in other income and expenses in the period incurred. (E) CASH EQUIVALENTS Cash and cash equivalents include highly liquid investments with maturities of three months or less at the date of purchase such as time deposits and short-term investment securities which are available-for sale at any time, present insignificant risk of changes in value due to being readily convertible into cash and have an original maturity of three months or less, such as money management funds and free financial funds. (F) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES As discussed further in Note 16, Ricoh manages its exposure to certain market risks, primarily foreign currency and interest rate risks, through the use of derivative instruments. As a matter of policy, Ricoh does not enter into derivative contracts for trading or speculative purposes. In accordance with Statement of Financial Accounting Standards ("SFAS") No.133, "Accounting for Derivative Instruments and Hedging Activities", SFAS No.138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities--an amendment of FASB Statement No.133" and SFAS No.149, "Amendment of Statement No.133 on Derivative Instruments and Hedging Activities" as amended, Ricoh recognizes all derivative instruments as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. When Ricoh enters into a derivative contract, it makes a determination as to whether or not for accounting purposes the derivative is part of a hedging relationship. In general, a derivative may be designated as either (1) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"), (2) a hedge of the variability of the expected cash flows associated with an existing asset or liability or a forecasted transaction ("cash flow hedge"), or (3) a foreign currency fair value or cash flow hedge ("foreign currency hedge"). Ricoh formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value, cash flow, or foreign currency hedges to specific assets and liabilities on the consolidated balance sheets or to specific firm commitments or forecasted transactions. For derivative contracts that are designated and qualify as fair value hedges including foreign currency fair value hedges, the derivative instrument is marked-to-market with gains and losses recognized in current period earnings to offset the respective losses and gains recognized on the underlying exposure. For derivative contracts that are designated and qualify as cash flow hedges including foreign currency cash flow hedges, the effective portion of gains and losses on these contracts is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period the hedged item or transaction affects earnings. Any hedge ineffectiveness on cash flow hedges is immediately recognized in earnings. For all derivative instruments that are not designated as part of a hedging relationship and for designated derivative instruments that do not qualify for hedge accounting, the contracts are recorded at fair value with the gain or loss recognized in current period earnings. F-12 (G) ALLOWANCE FOR DOUBTFUL TRADE RECEIVABLES AND FINANCE RECEIVABLES Ricoh records allowances for doubtful receivables that are based upon historical experience and specific customer collection issues. The estimated amount of probable credit losses in its existing receivables is determined from write-off history adjusted to reflect current economic conditions and specific allowances for receivables including nonperforming leases, impaired loans or other accounts for which Ricoh has concluded it will be unable to collect all amounts due according to original terms of the lease or loan agreement. Account balances net of expected recovery from available collateral are charged-off against the allowances when collection is considered remote. (H) SECURITIES Ricoh applies SFAS No.115, "Accounting for Certain Investments in Debt and Equity Securities" which requires all investments in debt and marketable equity securities to be classified as either held-to-maturity, trading, or available-for-sale securities. As of March 31, 2007 and 2008, all of Ricoh's investments in debt and marketable equity securities are classified as available-for-sale securities. Those available-for-sale securities are reported at fair value with unrealized gains and losses, net of related taxes, excluded from earnings and reported in accumulated other comprehensive income (loss). Available-for-sale securities, which mature or are expected to be sold in one year, are classified as current assets. Individual securities classified as available-for-sale securities are reduced to fair market value by a charge to income for other than temporary declines in value. Factors considered in assessing whether an indication of other than temporary impairment exists with respect to available-for-sale securities include: length of time and extent of decline, financial condition and near term prospects of issuer and intent and ability of 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. Non-marketable equity securities owned by Ricoh primarily relate to less than 20% owned companies and are stated at cost. (I) INVENTORIES Inventories are mainly stated at the lower of average cost or net realizable values. Inventory costs include raw materials, labor and manufacturing overheads. F-13 (J) PROPERTY, PLANT AND EQUIPMENT For the Company and its domestic subsidiaries, depreciation of property, plant and equipment is computed principally by using the declining-balance method over the estimated useful lives. Most of the foreign subsidiaries have adopted the straight-line method for computing depreciation, which currently accounts for approximately 33% of the consolidated depreciation expense. The depreciation period generally ranges from 5 years to 50 years for buildings and 2 years to 12 years for machinery and equipment. Effective rates of depreciation for the years ended March 31, 2006, 2007 and 2008 are summarized below: 2006 2007 2008 - -------------------------------------------- Buildings 8.9% 9.8% 10.1% Machinery and equipment 40.5 40.8 43.1 Certain leased buildings, machinery and equipment are accounted for as capital leases in conformity with SFAS No.13, "Accounting for Leases." The aggregate cost included in property, plant and equipment and related accumulated depreciation as of March 31, 2007 and 2008 are as follows: Thousands of Millions of Yen U.S. Dollars --------------------- ------------ 2007 2008 2008 - --------------------------------------------------------------- Aggregate cost 7,341 7,269 $72,690 Accumulated depreciation 5,761 6,072 60,720 The related future minimum lease payments and the present value of the net minimum lease payments as of March 31, 2008 were Yen 1,259 million ($12,590 thousand) and Yen 1,177 million ($11,770 thousand), respectively. Ordinary maintenance and repairs are charged to expense as incurred. Major replacements and improvements are capitalized. When properties are retired or otherwise disposed of, the property and related accumulated depreciation accounts are relieved of the applicable amounts, and any differences are included in earnings. (K) CAPITALIZED SOFTWARE COSTS In accordance with Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," Ricoh capitalizes qualifying cost of computer software. Costs incurred during the application development stage as well as upgrades and enhancements that results in additional functionality are capitalized. The capitalized software is amortized on a straight line basis over their estimated useful lives. F-14 (L) GOODWILL AND OTHER INTANGIBLE ASSETS SFAS No.141, "Business Combinations" requires the use of only the purchase method of accounting for business combinations and refines the definition of intangible assets acquired in a purchase business combination. SFAS No.142, "Goodwill and Other Intangible Assets" eliminates the amortization of goodwill and instead requires annual impairment testing thereof. SFAS 142 also requires acquired intangible assets with a definite useful life to be amortized over their respective estimated useful lives and reviewed for impairment when an indication of impairment is identified in accordance with SFAS No.144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Other intangible assets with definite useful lives, consisting primarily of software, patents, customer relationships and tradenames are amortized on a straight line basis over 1 year to 20 years. Any acquired intangible asset determined to have an indefinite useful life is not amortized, but instead is tested annually for impairment based on its fair value until its life would be determined to no longer be indefinite. Ricoh completed its annual assessment of the carrying value of indefinite-lived intangible assets, including goodwill for the years ended March 31, 2006, 2007 and 2008 and determined that no impairment charge was necessary. (M) PENSION AND RETIREMENT ALLOWANCES PLANS The measurement of pension costs and liabilities is determined in accordance with SFAS No.87, "Employers' Accounting for Pensions" as amended by SFAS No.158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" and SFAS 158. Under SFAS 158 which was adopted effective March 31, 2007, Ricoh recognizes the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of its pension fund plans as of the end of fiscal year, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax, and a charge to other comprehensive income for periods subsequent to adoption. The expected long-term rate of return on plan assets used for pension accounting is determined based on the historical long-term rate of return on plan 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. (N) INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. On April 1, 2007, Ricoh adopted FIN 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109", which requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. Ricoh recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes in the consolidated statements of income. F-15 (O) RESEARCH AND DEVELOPMENT EXPENSES AND ADVERTISING COSTS Research and development expenses and advertising costs are expensed as incurred. (P) SHIPPING AND HANDLING COSTS Shipping and handling costs, which mainly include transportation to customers, are included in selling, general and administrative expenses on the consolidated statements of income. (Q) IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS Long-lived assets and acquired intangible assets with a definite life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of assets to be held and used is assessed by comparing the carrying amount of an asset or asset group to the expected future undiscounted net cash flows of the asset or group of assets. If an asset or group of assets is considered to be impaired, the impairment charge to be recognized is measured as the amount by which the carrying amount of the asset or group of assets exceeds fair value. Long-lived assets meeting the criteria to be considered as held for sale are reported at the lower of their carrying amount or fair value less costs to sell. (R) EARNINGS PER SHARE Basic net income per share of common stock is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the period. The calculation of diluted net income per share of common stock is similar to the calculation of basic net income per share, except that the weighted-average number of shares outstanding includes the additional dilution from potential common stock equivalents such as convertible bonds. (S) NON-CASH TRANSACTIONS The non-cash transactions related to capital lease obligation incurred and issuance of treasury stock in exchange for subsidiary's stock in the amount of Yen 261 million and Yen 905 million, respectively, for the year ended March 31, 2006 have been excluded from the consolidated statements of cash flows. There were no significant non-cash transactions for the years ended March 31, 2007 or 2008. (T) USE OF ESTIMATES Management of Ricoh has made a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, including impairment losses of long-lived assets and the disclosures of fair value of financial instruments and contingent assets and liabilities, to prepare these financial statements in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates. Ricoh has identified five 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, realizability of deferred tax assets and pension accounting. F-16 (U) DISCONTINUED OPERATIONS On May 31, 2006, the Company's subsidiary San-Ai Co., Ltd. sold its digital content distribution business to Giga Networks Co., Ltd. (former Mobile Alliance Co., Ltd.). Because Ricoh has no significant continuing involvement in the operation sold, the operating result of the business units sold were reclassified to a discontinued operation pursuant to the requirement of SFAS 144. Reclassifications have been made to the prior year's consolidated statements of income and consolidated statements of cash flows to conform the presentation used for the year ended March 31, 2007. (V) ADOPTION OF SAB 108 The Securities and Exchange Commission of the U.S. issued Staff Accounting Bulletin ("SAB") No.108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" in September 2006. SAB 108 requires companies to quantify misstatements using both the balance sheet approach and the income statement approach ("dual" method), and to evaluate the importance of misstatements taking into account relevant quantitative and qualitative factors. Historically, Ricoh used the income statement ("rollover") approach to quantify misstatements. Upon adoption, Ricoh recorded adjustment for the cumulative effect of misstatements that were previously considered immaterial under the rollover method that were considered material under the dual method. Ricoh adopted SAB 108 in the fourth quarter of the fiscal year ended March 31, 2007. The Company and some of its domestic consolidated subsidiaries previously set the residual value of tangible fixed assets at 5% of acquisition cost in principle using the standards provided in the Corporate Tax Law. However, based on an evaluation of residual values realized from disposition of property, plant and equipment, Ricoh concluded that the residual value of substantially all long lived assets is negligible at the end of useful life. This misstatement had been considered immaterial to Ricoh's historical consolidated financial statements using the income statement approach prior to the adoption of SAB 108. Accordingly, upon adoption of SAB 108, Ricoh recorded an increase in accumulated depreciation of Yen 11,464 million and an increase in deferred tax assets (included in "Lease deposits and other") of Yen 4,675 million as of April 1, 2006 with a net reduction of the beginning balance of retained earnings of Yen 6,464 million. F-17 (W) NEW ACCOUNTING STANDARDS In June 2006, the FASB ratified the EITF consensus on EITF 06-2, "Accounting for sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No.43." Accordingly, Ricoh recorded an increase in the beginning balance of accrued expenses of Yen 1,680 million ($16,800 thousand) and an increase in the beginning balance of deferred tax assets (included in "Lease deposits and other") of Yen 672 million ($6,720 thousand) as of April 1, 2007, with a decrease in the beginning balance of retained earnings of Yen 995 million ($9,950 thousand). In September 2006, the FASB issued SFAS No.157, "Fair Value Measurements," which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, where fair value is the relevant measurement attribute. SFAS 157 does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and is required to be adopted by Ricoh in fiscal year beginning April 1, 2008. In February 2008, the FASB issued Staff Positions ("FSP") No. FAS 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13" and No. FAS 157-2, "Effective Date of FASB Statement No. 157," which delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) and remove certain leasing transactions from its scope. The adoption of SFAS 157 did not have a material effect on Ricoh's consolidated financial position or results of operations. In September 2006, the FASB issued SFAS 158. SFAS 158 requires companies to recognize an asset or liability for the overfunded or underfunded status of their benefit plans in their financial statements and to recognize changes in that funded status in comprehensive income (loss) in the year in which the changes occur. SFAS 158 also requires the measurement date for plan assets and liabilities to coincide with the sponsor's year-end. The standard provides two transition alternatives related to the change in measurement date provisions. The recognition of an asset and liability related to the funded status provision is effective for fiscal years ending after December 15, 2006. The effect of adoption of SFAS 158 on Ricoh's financial condition as of March 31, 2007 has been included in the accompanying consolidated financial statements. The change in measurement date provisions is effective for fiscal years ending after December 15, 2008 and is required to be adopted by Ricoh in fiscal year beginning April 1, 2008. Ricoh is currently evaluating the effect that the adoption of measurement date provisions will have on its consolidated results of operations and financial condition. In February 2007, the FASB issued SFAS No.159, "The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB statement No.115." SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings. SFAS 159 is effective for fiscal year beginning after November 15, 2007, and is required to be adopted by Ricoh in fiscal year beginning April 1, 2008. The adoption of SFAS 159 did not have a material effect on Ricoh's consolidated financial position or results of operations. In December 2007, the FASB issued SFAS No.141 (revised 2007), "Business Combinations" ("SFAS 141R"). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning on or after December 15, 2008 and is required to be adopted by Ricoh in the first F-18 quarter beginning April 1, 2009. Ricoh will apply prospectively to all business combinations subsequent to the effective date. In December 2007, the FASB issued SFAS No.160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51." This Statement requires that the noncontrolling interest in the equity of a subsidiary be accounted for and reported as equity, provides revised guidance on the treatment of net income and losses attributable to the noncontrolling interest and changes in ownership interests in a subsidiary and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also requires additional disclosures that identify and distinguish between the interests of the controlling and noncontrolling owners. Pursuant to the transition provisions of SFAS 160, Ricoh will adopt SFAS 160 in fiscal year 2009 via retrospective application of the presentation and disclosure requirements. Ricoh is currently evaluating the effect that the adoption of SFAS 160 will have on its consolidated results of operations and financial condition. In March 2008, the FASB issued SFAS No.161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133". SFAS 161 requires disclosures of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008, with early adoption permitted. Ricoh is currently evaluating the effect that the adoption of SFAS 161 will have on its consolidated results of operations and financial condition. In April 2008, the FASB finalized FSP 142-3, "Determination of the Useful Life of Intangible Assets". The position amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. The position applies to intangible assets that are acquired individually or with a group of other assets and both intangible assets acquired in business combinations and asset acquisitions. FSP 142-3 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Ricoh is currently evaluating the effect that the adoption of FSP 142-3 will have on its consolidated results of operations and financial condition. 3. ACQUISITION In June 2007, Ricoh and International Business Machines Corporation ("IBM") completed formation of a joint venture company (now known as InfoPrint Solutions Company, LLC) which was spun-out from IBM's Printing Systems Division to provide output solutions for production printing area. InfoPrint Solutions Company, LLC will benefit from access to IBM's powerful worldwide distribution and sales network, as well as extensive printer development capabilities. The consideration was paid in a form of cash for the initial 51% acquisition of InfoPrint Solutions Company, LLC by Ricoh as well as a prepayment for the remaining 49% to be acquired and certain royalties and services to be provided by IBM to InfoPrint Solutions Company, LLC. Ricoh will progressively acquire the remaining 49% over the next three years, approximately 4% per each quarter, as InfoPrint Solutions Company, LLC becomes a fully owned subsidiary. Ricoh applied the purchase method of accounting to account for the acquisition. Final consideration for this transaction will be determined at the end of the three-year period based upon the participation in the profits and losses recorded by the equity partners. Therefore, the amount of goodwill may be adjusted at the determination of final consideration. Assets, liabilities and operations of InfoPrint Solutions Company, LLC have been included in the accompanying consolidated financial statements since the acquisition date. F-19 The following table reflects the condensed balance sheet of InfoPrint Solutions Company, LLC, as adjusted to give effect to the purchase method accounting adjustments: Thousands of Millions of Yen U.S. Dollars - --------------------------------------------------------------- Receivables and other assets 18,121 $ 181,210 Property and equipment 2,214 22,140 Identifiable intangible assets 38,091 380,910 Goodwill 50,301 503,010 Liabilities (15,772) (157,720) - --------------------------------------------------------------- Total cash consideration 92,955 $ 929,550 - --------------------------------------------------------------- Identifiable intangible assets of InfoPrint Solutions Company, LLC primarily comprised trademark of Yen 16,852 million ($168,520 thousand) which were estimated to have remaining useful life of 5 years to 7 years, existing maintenance contracts of Yen 8,289 million ($82,890 thousand) which were estimated to have remaining useful life of 9 years, outsourcing agreement of Yen 5,162 million ($51,620 thousand) which were estimated to have remaining useful life of 1 year to 6 years, and other intangible assets of Yen 7,788 million ($77,880 thousand). Goodwill arising from the acquisition of InfoPrint Solutions Company, LLC has been allocated to the Office Solutions segment. Pro forma results of operations, assuming this acquisition was made at the beginning of fiscal year 2008, have not been presented, because the results of operations related to InfoPrint Solutions Company, LLC were impracticable. Furthermore, Ricoh acquired other immaterial entities during the year ended March 31, 2008 for a consideration of Yen 3,840 million ($38,400 thousand), net of cash acquired. In January 2007, Ricoh Europe B.V., a wholly-owned subsidiary of the Company, acquired the European operations of Danka Business Systems PLC ("Danka's European operations") for total cash consideration of Yen 27,132 million including direct acquisition costs. Ricoh made the acquisition to strengthen its sales and service network in major countries in Europe. Ricoh applied the purchase method of accounting to account for the acquisition and, accordingly, the purchase price has been allocated to the tangible and intangible net assets of Danka's European operations based on the estimated fair value of such net assets. The amount of consideration paid in excess of the estimated fair value of the net assets acquired of Yen 18,658 million was recorded as goodwill which is not tax deductible. Assets, liabilities and operations of Danka's European operations have been included in the accompanying consolidated financial statements since the acquisition date. The following table reflects the January 31, 2007 condensed balance sheet of Danka's European operations, as adjusted to give effect to the purchase method accounting adjustments: Millions of Yen - ------------------------------------------------ Cash and cash equivalents 3,839 Receivables and other assets 22,385 Property and equipment 1,434 Identifiable intangible assets 4,883 Goodwill 18,658 Liabilities (24,067) - ------------------------------------------------ Total cash consideration 27,132 - ------------------------------------------------ F-20 Identifiable intangible assets of Danka's European operations primarily comprised customer relationships of Yen 4,700 million, which were estimated to have a remaining useful life of 10 years to 18 years. Goodwill arising from the acquisition of Danka's European operations has been allocated to the Office Solutions segment. 4. DISCONTINUED OPERATIONS Summarized selected financial information for the years ended March 31, 2006 and 2007 for the discontinued operations reclassified during the year ended March 31, 2007 is as follows: Millions of Yen --------------------- 2006 2007 - ----------------------------------------------------------------------- Net sales 5,852 1,487 - ----------------------------------------------------------------------- Income from discontinued operations before gain on disposal of discontinued operations and provision for income taxes 3,433 866 Gain on disposal of discontinued operations -- 8,830 Provision for income taxes 1,398 4,196 - ----------------------------------------------------------------------- Income from discontinued operations, net of tax 2,035 5,500 - ----------------------------------------------------------------------- 5. FINANCE RECEIVABLES Finance receivables as of March 31, 2007 and 2008 are comprised primarily of lease receivables and installment loans. Ricoh's products are leased to domestic customers primarily through Ricoh Leasing Company, Ltd., a majority-owned domestic subsidiary, and to overseas customers primarily through certain overseas subsidiaries. These leases are accounted for as sales-type leases in conformity with SFAS 13. Sales revenue from sales-type leases is recognized at the inception of the leases. Information pertaining to Ricoh's lease receivables as of March 31, 2007 and 2008 is as follows:
Thousands of Millions of Yen U.S. Dollars ------------------------- ------------ 2007 2008 2008 - --------------------------------------------------------------------------------------------- Minimum lease payments receivable 636,174 645,198 $ 6,451,980 Estimated non-guaranteed residual value 5,000 6,358 63,580 Unearned income (52,341) (56,408) (564,080) Allowance for doubtful receivables (12,520) (9,935) (99,350) - --------------------------------------------------------------------------------------------- Lease receivables, net 576,313 585,213 5,852,130 Less - Current portion of lease receivable, net (191,529) (193,497) (1,934,970) - --------------------------------------------------------------------------------------------- Amounts due after one year, net 384,784 391,716 $ 3,917,160 - ---------------------------------------------------------------------------------------------
F-21 As of March 31, 2008, the minimum lease payments receivable due in each of the next five years and thereafter are as follows: Thousands of Years ending March 31 Millions of Yen U.S. Dollars - ------------------------------------------------------ 2009 216,434 $2,164,340 2010 178,680 1,786,800 2011 129,159 1,291,590 2012 79,217 792,170 2013 33,348 333,480 2014 and thereafter 8,360 83,600 - ------------------------------------------------------ Total 645,198 $6,451,980 - ------------------------------------------------------ Ricoh Leasing Company, Ltd. has also extended certain other types of loans as part of its business activity, which are primarily residential housing loans to current and former employees in Japan secured by the underlying real estate properties. Loan terms range from 15 years to 30 years with monthly repayments. The total balance of these loans, net of allowance for doubtful receivables, as of March 31, 2007 and 2008 was Yen 52,648 million and Yen 54,863 million ($548,630 thousand), respectively. The current portion of loans receivable was Yen 1,559 million and Yen 1,145 million ($11,450 thousand), respectively, as of March 31, 2007 and 2008, and was included in short-term finance receivables, net in the accompanying consolidated balance sheets. Loan activity for the years ended March 31, 2006, 2007 and 2008 is as follows:
Thousands of Millions of Yen U.S. Dollars ------------------------------------ ------------ 2006 2007 2008 2008 - ------------------------------------------------------------------------------------ Extension of new loans 12,657 11,883 14,356 $143,560 Repayment of outstanding loans 10,495 11,621 12,319 123,190 - ------------------------------------------------------------------------------------
Ricoh sold finance lease receivables in prior years through securitization transactions. The value assigned to undivided interests retained in these transactions was based on the fair value of retained interests as of a transfer of these receivables and was reflected in its consolidated balance sheets. Ricoh recognized the expected unrecoverable receivables and reflected it in its consolidated balance sheets. Servicing assets or liabilities related to securitization transactions initiated were not recorded, because the servicing fees adequately compensate Ricoh. Ricoh's retained interests are subordinate to the investor's interests. Their value is subject to credit, prepayment and interest rate risk on the sold financial assets. The investors and special purpose entities that hold the lease receivables have limited recourse to Ricoh's retained interest in such receivables for failure of debtors to pay. Ricoh determines the fair value of the retained interests by discounting the future cash flows. Those cash flows are estimated based on credit losses and other information as available and are discounted at a rate which Ricoh believes is commensurate with the risk free rate plus a risk premium. Key economic assumptions used in measuring the fair value of retained interests related to securitization transactions completed during the years ended March 31, 2007 and 2008 are as follows: 2007 2008 - ----------------------------------------------------- Expected credit losses 0.50% - 0.65% 0.70% - 0.95% Discount rate 2.00% - 3.00% 2.00% - 3.00% Annual prepayment rate 5.07% - 5.33% 4.01% - 5.37% - ----------------------------------------------------- F-22 The impacts of 10% and 20% adverse changes to the key economic assumptions on the fair value of retained interests as of March 31, 2008 are presented below.
Thousands of Millions of Yen U.S. Dollars --------------- ------------ 2008 2008 - ------------------------------------------------------------------------------- Carrying value of retained interests (included in lease deposits and other in the consolidated balance sheet) 5,887 $58,870 Expected credit losses: +10% (59) (590) +20% (117) (1,170) Discount rate: +10% (22) (220) +20% (44) (440) Annual prepayment rate: +10% (331) (3,310) +20% (661) (6,610) - -------------------------------------------------------------------------------
The hypothetical scenario does not reflect expected market conditions and should not be used as a prediction of future performance. As the figures indicate, changes in fair value may not be linear. Also, in the above table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities. The following table summarizes certain cash flows received from and paid to the special purpose entities for all securitization activity for the years ended March 31, 2006, 2007 and 2008:
Thousands of Millions of Yen U.S. Dollars --------------------------------- ------------ 2006 2007 2008 2008 - ------------------------------------------------------------------------------------------------- Servicing fees received 22 21 20 $ 200 Repurchases of delinquent or ineligible assets 2,575 2,776 2,527 25,270 - -------------------------------------------------------------------------------------------------
The components of all receivables managed and securitized, amounts of delinquencies and the components of net credit losses as of March 31, 2007 and 2008, and for the years then ended, are as follows:
Millions of Yen --------------------------------------------------------------------------------------- 2007 2008 -------------------------------------------- ---------------------------------------- Principal Principal amount of Total amount of Total principal receivables principal receivables amount of 4 months or Net credit amount of 4 months or Net credit receivables more past due losses receivables more past due losses - --------------------------------------------------------------------------------------------------------------------------- Principal amount outstanding 633,324 1,619 2,808 635,095 1,977 3,383 Less - Receivables securitized (44,491) (40,442) ----------- ----------- Receivables held in portfolio 588,833 594,653 - ---------------------------------------------------------------------------------------------------------------------------
Thousands of U.S. Dollars -------------------------------------------- 2008 -------------------------------------------- Principal amount of Total principal receivables amount of 4 months or Net credit receivables more past due losses - -------------------------------------------------------------------------------- Principal amount outstanding $6,350,950 $19,770 $33,830 Less - Receivables securitized (404,420) ---------- Receivables held in portfolio $5,946,530 - -------------------------------------------------------------------------------- F-23 6. SECURITIES Marketable securities and investment securities as of March 31, 2007 and 2008 consist of the following: Thousands of Millions of Yen U.S. Dollars ----------------------- ------------ 2007 2008 2008 - ---------------------------------------------------------------------------- Marketable securities: Available-for-sale securities 177 0 $ 0 - ---------------------------------------------------------------------------- Investment securities: Available-for-sale securities 70,362 69,962 $699,620 Non-marketable equity securities 4,474 1,282 12,820 - ---------------------------------------------------------------------------- 74,836 71,244 $712,440 - ---------------------------------------------------------------------------- The current and noncurrent security types of available-for-sale securities, and the respective cost, gross unrealized holding gains, gross unrealized holding losses and fair value as of March 31, 2007 and 2008 are as follows:
Millions of Yen ---------------------------------------------------------------------------------------------- 2007 2008 ---------------------------------------------- ---------------------------------------------- Gross Gross Gross Gross unrealized unrealized unrealized unrealized holding holding Fair holding holding Fair Cost gains losses value Cost gains losses value - ---------------------------------------------------------------------------------------------------------------- Current: Corporate debt securities 176 -- -- 176 -- -- -- -- Other 1 -- -- 1 0 -- -- 0 - ---------------------------------------------------------------------------------------------------------------- 177 -- -- 177 0 -- -- 0 - ---------------------------------------------------------------------------------------------------------------- Non-current: Equity securities 49,261 14,991 142 64,110 62,208 6,231 3,723 64,716 Corporate debt securities 6,000 10 -- 6,010 6,000 -- 754 5,246 Other 242 -- -- 242 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------- 55,503 15,001 142 70,362 68,208 6,231 4,477 69,962 - ---------------------------------------------------------------------------------------------------------------- Thousands of U.S. Dollars ------------------------------------------ 2008 ------------------------------------------ Gross Gross unrealized unrealized holding holding Fair Cost gains losses value - ------------------------------------------------------------ Current: Corporate debt securities $ -- $ -- $ -- $ -- Other 0 -- -- 0 - ------------------------------------------------------------ $ 0 $ -- $ -- $ 0 - ------------------------------------------------------------ Non-current: Equity securities $622,080 $62,310 $37,230 $647,160 Corporate debt securities 60,000 -- 7,540 52,460 Other -- -- -- -- - ------------------------------------------------------------ $682,080 $62,310 $44,770 $699,620 - ------------------------------------------------------------
Other non-current securities mainly include investment trusts consisting of investment in marketable debt and equity securities. F-24 Gross unrealized holding losses on available-for-sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2008 are as follows:
Millions of Yen --------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------------------------------------- 2008: Noncurrent: Available-for-sale: Equity securities 12,651 3,477 553 246 13,204 3,723 Corporate debt securities 5,246 754 -- -- 5,246 754 - ---------------------------------------------------------------------------------------------------------- Total 17,897 4,231 553 246 18,450 4,477 - ----------------------------------------------------------------------------------------------------------
Thousands of U.S. Dollars --------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------------------------------------- 2008: Noncurrent: Available-for-sale: Equity securities $126,510 $34,770 $5,530 $2,460 $132,040 $37,230 Corporate debt securities 52,460 7,540 -- -- 52,460 7,540 - ---------------------------------------------------------------------------------------------------------- Total $178,970 $42,310 $5,530 $2,460 $184,500 $44,770 - ----------------------------------------------------------------------------------------------------------
Ricoh judged this decline in fair value of investment securities to be temporary, with considering relevant factors. The contractual maturities of debt securities classified as available-for-sale as of March 31, 2008, regardless of their balance sheet classification, are as follows:
Thousands of Millions of Yen U.S. Dollars ---------------------- -------------------- Cost Fair value Cost Fair value - ------------------------------------------------------------------------------------- Due after one year through five years 6,000 5,246 $60,000 $52,460
Proceeds from the sales of available-for-sale securities were Yen 141,620 million, Yen 96,087 million and Yen 100,025 million ($1,000,250 thousand) for the years ended March 31, 2006, 2007 and 2008, respectively. The realized gains on the sales of available-for-sale securities for the year ended March 31, 2006 was Yen 1,053 million. There were no significant realized gains of available-for-sale securities for the years ended March 31, 2007 or 2008. There were no significant realized losses of available-for-sale securities for the years ended March 31, 2006, 2007 and 2008. F-25 Effective October 1, 2005, UFJ Holdings, Inc. ("UFJ") and Mitsubishi Tokyo Financial Group, Inc. completed a merger, in which the UFJ shares of common stock owned by the Company were exchanged for shares of common stock of the newly merged entity, Mitsubishi UFJ Financial Group, Inc. ("MUFG"). As a result of this merger and common stock exchange, Ricoh recognized a gain on securities of Yen 992 million between the cost of UFJ shares surrendered and the current market value of MUFG shares in "Other, net" as other (income) expenses on its consolidated statements of income for the year ended March 31, 2006. F-26 7. INVESTMENTS IN AND ADVANCES TO AFFILIATES The investments in and advances to affiliates primarily relate to 20% to 50% owned companies. Ricoh's equity in the underlying net book values of the companies is approximately equal to their individual carrying values of Yen 15,608 million and Yen 1,977 million ($19,770 thousand) at March 31, 2007 and 2008, respectively. On July 1, 2006, "Coca-Cola West Japan Co., Ltd. (former affiliate company)" and "Kinki Coca-Cola Bottling Co., Ltd. (former unrelated company)" established a joint holding company "Coca-Cola West Holdings Co., Ltd." On November 30, 2007, Ricoh sold the part of shares of common stock of SINDO RICOH CO., LTD. The gain on sale of the shares was not material. As a result, proportion of ownership interest of Coca-Cola West Holdings Co., Ltd. and SINDO RICOH CO., LTD. by Ricoh decreased under 20%, and according to Accounting Principles Board ("APB") Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock," Ricoh excluded these companies from affiliate companies on October 1, 2006 and February 29, 2008, respectively. Summarized financial information for all affiliates as of March 31, 2007 and 2008 and for the years ended March 31, 2006, 2007 and 2008 is as follows:
Thousands of Millions of Yen U.S. Dollars ---------------------- ------------ FINANCIAL POSITION 2007 2008 2008 - --------------------------------------------------------------------------------- Assets: Current assets 63,626 4,088 $40,880 Other assets 20,791 1,581 15,810 - --------------------------------------------------------------------------------- 84,417 5,669 $56,690 - --------------------------------------------------------------------------------- Liabilities and shareholders' investment: Current liabilities 10,217 3,489 $34,890 Other liabilities 3,399 581 5,810 Shareholders' investment 70,801 1,599 15,990 - --------------------------------------------------------------------------------- 84,417 5,669 $56,690 - ---------------------------------------------------------------------------------
Thousands of Millions of Yen U.S. Dollars -------------------------------------- ------------ OPERATIONS 2006 2007 2008 2008 - -------------------------------------------------------------------------- Sales 320,537 193,753 68,662 $686,620 Costs and expenses 309,164 186,199 64,013 640,130 Net income 11,373 7,554 4,648 $ 46,480 - -------------------------------------------------------------------------- F-27 The significant transactions of Ricoh with these affiliates for the years ended March 31, 2006, 2007 and 2008, and the related account balances at March 31, 2007 and 2008 are summarized as follows: Thousands of Millions of Yen U.S. Dollars -------------------------------------- ------------ 2006 2007 2008 2008 - -------------------------------------------------------------------------- Transactions: Sales 20,205 16,158 20,184 $201,840 Purchases 25,617 28,993 21,274 212,740 Dividend income 1,175 828 625 6,250 - -------------------------------------------------------------------------- Unrealized profits regarding the above transactions were eliminated in the consolidated financial statements. Thousands of Millions of Yen U.S. Dollars --------------------- ------------ 2007 2008 2008 - -------------------------------------------------------- Account balances: Receivables 3,541 3,080 $30,800 Payables 2,611 1,930 19,300 - -------------------------------------------------------- As of March 31, 2008, consolidated retained earnings included undistributed earnings of 20% to 50% owned companies accounted for by the equity method in the amount of Yen 45,119 million ($451,190 thousand). This amount included undistributed earnings of Yen 35,104 million of Coca-Cola West Holdings Co., Ltd. and of Yen 9,487 million ($94,870 thousand) of SINDO RICOH CO., LTD. as of the date that Ricoh ceased applying the equity method. F-28 8. GOODWILL AND OTHER INTANGIBLE ASSETS The information for intangible assets subject to amortization and for intangible assets not subject to amortization as of March 31, 2007 and 2008 is as follows:
Millions of Yen ------------------------------------------------------------------------------------- 2007 2008 ------------------------------------------------------------------------------------- Gross Gross carrying Accumulated Net carrying carrying Accumulated Net carrying amount amortization amount amount amortization amount - ------------------------------------------------------------------------------------------------------------------- Other intangible assets subject to amortization: Software 100,903 (55,659) 45,244 113,072 (61,383) 51,689 Trade name and customer base 34,306 (15,286) 19,020 56,201 (20,385) 35,816 Other 28,260 (11,923) 16,337 36,360 (10,750) 25,610 ---------------------------------------- ----------------------------------------- Total 163,469 (82,868) 80,601 205,633 (92,518) 113,115 Other intangible assets not subject to amortization 1,324 1,287 ---------- ----------- Total other intangible assets 81,925 114,402 - -------------------------------------------------------------------------------------------------------------------
Thousands of U.S. Dollars ---------------------------------------- 2008 ---------------------------------------- Gross carrying Accumulated Net carrying amount amortization amount - ---------------------------------------------------------------------- Other intangible assets subject to amortization: Software $1,130,720 $(613,830) $ 516,890 Trade name and customer base 562,010 (203,850) 358,160 Other 363,600 (107,500) 256,100 --------------------------------------- Total 2,056,330 (925,180) 1,131,150 Other intangible assets not subject to amortization 12,870 ------------ Total other intangible assets $1,144,020 - ---------------------------------------------------------------------- Gross carrying amount of software was increased for the year ended March 31, 2008 mainly due to the capitalization of costs to develop back-office information systems. The aggregate amortization expense of other intangible assets subject to amortization for the years ended March 31, 2006, 2007 and 2008 was Yen 16,624 million, Yen 17,200 million and Yen 23,026 million ($230,260 thousand). The future amortization expense for each of the next five years relating to intangible assets currently recorded in the consolidated balance sheets is estimated to be the following at March 31, 2008: Thousands of Years ending March 31 Millions of Yen U.S. Dollars - ------------------------------------------------------ 2009 22,618 $226,180 2010 18,375 183,750 2011 15,302 153,020 2012 13,536 135,360 2013 9,989 99,890 - ------------------------------------------------------ F-29 The changes in the carrying amounts of goodwill for the years ended March 31, 2007 and 2008, are as follows: Thousands of Millions of Yen U.S. Dollars ------------------------ ------------ 2007 2008 2008 - --------------------------------------------------------------------------- Balance at beginning of year 51,934 72,048 $ 720,480 Goodwill acquired during the year 20,172 53,971 539,710 Goodwill sold during the year 608 -- -- Foreign exchange impact 550 (13,481) (134,810) - --------------------------------------------------------------------------- Balance at end of year 72,048 112,538 $1,125,380 - --------------------------------------------------------------------------- As of March 31, 2008, all of the carrying value of goodwill was allocated to the Office Solutions segment. 9. INCOME TAXES Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates and provision for income taxes for the years ended March 31, 2006, 2007 and 2008 are as follows:
Thousands of Millions of Yen U.S. Dollars --------------------------------------- ------------ 2006 2007 2008 2008 - -------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates: Domestic 105,785 107,749 110,986 $1,109,860 Foreign 46,981 66,770 63,683 636,830 - -------------------------------------------------------------------------------------------------------- 152,766 174,519 174,669 $1,746,690 - -------------------------------------------------------------------------------------------------------- Provision for income taxes: Current: Domestic 43,584 47,530 38,199 $ 381,990 Foreign 17,273 18,993 20,227 202,270 - -------------------------------------------------------------------------------------------------------- 60,857 66,523 58,426 $ 584,260 - -------------------------------------------------------------------------------------------------------- Deferred: Domestic (2,178) (741) 6,694 $ 66,940 Foreign (2,514) (1,456) (1,724) (17,240) - -------------------------------------------------------------------------------------------------------- (4,692) (2,197) 4,970 $ 49,700 - -------------------------------------------------------------------------------------------------------- Consolidated provision for income taxes 56,165 64,326 63,396 $ 633,960 - --------------------------------------------------------------------------------------------------------
F-30 Total income taxes are allocated as follows:
Thousands of Millions of Yen U.S. Dollars ------------------------------------ ------------ 2006 2007 2008 2008 - --------------------------------------------------------------------------------------------------------- Provision for income taxes relating to continuing operations 56,165 64,326 63,396 $ 633,960 Provision for income taxes relating to discontinued operations 1,398 4,196 -- -- Shareholders' investment: Foreign currency translation adjustments 1,266 (50) 78 780 Unrealized gains (losses) on securities 2,472 25 (4,879) (48,790) Unrealized gains (losses) on derivatives 27 (128) (259) (2,590) Minimum pension liability adjustments 5,195 693 -- -- Adjustment to initially apply SFAS 158 -- 1,066 -- -- Pension liability adjustments -- -- (10,014) (100,140) - --------------------------------------------------------------------------------------------------------- 66,523 70,128 48,322 $ 483,220 - ---------------------------------------------------------------------------------------------------------
The Company and its domestic subsidiaries are subject to a National Corporate tax of 30%, an inhabitant tax of approximately 6% and a deductible Enterprise tax approximately 8%, which in the aggregate resulted in the normal statutory tax rate of approximately 41%. The normal statutory tax rate differs from the effective tax rate for the years ended March 31, 2006, 2007 and 2008 as a result of the following:
2006 2007 2008 - --------------------------------------------------------------------------------------------- Normal statutory tax rate 41% 41% 41% Nondeductible expenses 0 0 1 Tax benefits not recognized on operating losses of certain consolidated subsidiaries 2 1 2 Utilization of net operating loss carryforward not previously recognized (2) (1) (3) Tax credit for increased research and development expense (4) (3) (4) Other, net (0) (1) (1) - --------------------------------------------------------------------------------------------- Effective tax rate 37% 37% 36% - ---------------------------------------------------------------------------------------------
Nondeductible expenses include directors' bonuses and entertainment expenses. The tax effects of temporary differences and carryforwards giving rise to the consolidated deferred tax assets and liabilities as of March 31, 2007 and 2008 are as follows:
Thousands of Millions of Yen U.S. Dollars ------------------------ ------------ 2007 2008 2008 - ----------------------------------------------------------------------------------------------- Assets: Accrued expenses 22,622 24,263 $ 242,630 Property, plant and equipment 7,197 3,858 38,580 Accrued pension and severance costs 25,139 40,341 403,410 Net operating loss carryforwards 9,574 12,684 126,840 Other 32,813 23,193 231,930 - ----------------------------------------------------------------------------------------------- 97,345 104,339 $1,043,390 Less - Valuation allowance (12,399) (10,661) (106,610) - ----------------------------------------------------------------------------------------------- 84,946 93,678 $ 936,780 - -----------------------------------------------------------------------------------------------
F-31
Thousands of Millions of Yen U.S. Dollars ------------------------ ------------ 2007 2008 2008 - ----------------------------------------------------------------------------------------------- Liabilities: Sales-type leases (6,463) (6,555) $ (65,550) Undistributed earnings of foreign subsidiaries and affiliates, etc. (21,170) (20,664) (206,640) Net unrealized holding gains on available-for-sale securities (5,664) (333) (3,330) Basis difference of acquired intangible assets (8,358) (10,498) (104,980) Other (7,506) (7,673) (76,730) - ----------------------------------------------------------------------------------------------- (49,161) (45,723) $(457,230) - ----------------------------------------------------------------------------------------------- Net deferred tax assets 35,785 47,955 $ 479,550 - -----------------------------------------------------------------------------------------------
Net deferred tax assets as of March 31, 2007 and 2008 are included in the consolidated balance sheets as follows:
Thousands of Millions of Yen U.S. Dollars ----------------------- ------------ 2007 2008 2008 - ----------------------------------------------------------------------------------------- Deferred income taxes and other (Current Assets) 44,682 41,581 $ 415,810 Lease deposits and other (Non-current Assets) 35,652 43,528 435,280 Accrued expenses and other (Current Liabilities) (366) (781) (7,810) Deferred income taxes (Long-Term Liabilities) (44,183) (36,373) (363,730) - ----------------------------------------------------------------------------------------- 35,785 47,955 $ 479,550 - -----------------------------------------------------------------------------------------
The net changes in the total valuation allowance for the years ended March 31, 2006, 2007 and 2008 were a decrease of Yen 1,118 million, an increase of Yen 4,202 million and a decrease of Yen 1,738 million ($17,380 thousand), respectively. The valuation allowance primarily relates to deferred tax assets of the consolidated subsidiaries with net operating loss carryforwards for tax purposes that are not expected to be realized. In assessing the realizability of deferred tax assets, Ricoh considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and whether loss carryforwards are utilizable. Ricoh considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, Ricoh believes it is more likely than not that the benefits of these deductible differences, net of the existing valuation allowance will be realized. The amount of the deferred tax asset considered realizable, however, would be reduced if estimates of future taxable income during the carryforward period are reduced. As of March 31, 2008, certain subsidiaries had net operating losses carried forward for income tax purposes of approximately Yen 33,086 million ($330,860 thousand) which were available to reduce future income taxes, if any. Approximately Yen 1,294 million ($12,940 thousand) of the operating losses will expire within 3 years and Yen 13,056 million ($130,560 thousand) will expire within 4 years to 7 years. The remainder principally have an indefinite carryforward period. Ricoh has not recognized a deferred tax liability for certain portion of the undistributed earnings of its foreign subsidiaries of Yen 249,361 million ($2,493,610 thousand) as of March 31, 2008 because Ricoh considers these earnings to be permanently reinvested. Calculation of related unrecognized deferred tax liability is not practicable. F-32 Ricoh adopted FIN48 effective April 1, 2007. Total unrecognized tax benefits as of the date of adoption were Yen 8,508 million ($85,080 thousand), and no change to the balance was required as a result of the adoption of FIN 48. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Thousands of Millions of Yen U.S. dollars - ------------------------------------------------------------------------------ Balance at April 1, 2007 8,508 $ 85,080 Additions for tax positions of the current year 2,972 29,720 Additions for tax positions of prior years 2,456 24,560 Reductions for tax positions of prior years (1,768) (17,680) Settlements (5,662) (56,620) Other (883) (8,830) - ------------------------------------------------------------------------------ Balance at March 31, 2008 5,623 $ 56,230 - ------------------------------------------------------------------------------ Total amount of unrecognized tax benefits that would reduce the effective tax rate, if recognized, is Yen 4,503 million ($45,030 thousand). Although Ricoh believes its estimates and assumptions of unrecognized tax benefits are reasonable, uncertainty regarding the final determination of tax audit settlements and any related litigation could affect the effective tax rate in the future periods. Based on each of the items of which Ricoh is aware at March 31, 2008, no significant changes to the unrecognized tax benefits are expected within the next twelve months. Ricoh recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes in the consolidated statements of income. Both interest and penalties accrued as of March 31, 2008 and interest and penalties included in income taxes for the year ended March 31, 2008 are not material. Ricoh files income tax returns in Japan and various foreign tax jurisdictions. In Japan, Ricoh is no longer subject to regular income tax examinations by the tax authority for years before 2007. While there has been no specific indication by the tax authority that Ricoh will be subject to a transfer pricing examination in the near future, the tax authority could conduct a transfer pricing examination for years after 2001. In other major foreign tax jurisdictions, including the United States and United Kingdom, Ricoh is no longer subject to income tax examinations by tax authorities for years before 2006 with few exceptions. F-33 10.SHORT-TERM BORROWINGS Short-term borrowings as of March 31, 2007 and 2008 consist of the following:
Weighted average Thousands of interest rate Millions of Yen U.S. Dollars ------------------------------------------------------ 2007 2008 2007 2008 2008 - ------------------------------------------------------------------------------------------ Borrowings, principally from banks 2.4% 1.3% 21,682 5,599 $ 55,990 Commercial paper 3.7 2.3 69,991 67,070 670,700 Medium-Term Notes -- 3.5 -- 3,114 31,140 - ------------------------------------------------------------------------------------------ 91,673 75,784 $757,840 - ------------------------------------------------------------------------------------------
These short-term borrowings included borrowings, principally from banks, commercial paper and medium-term notes denominated in foreign currencies amounting to Yen 57,480 million and Yen 41,413 million ($414,130 thousand) as of March 31, 2007 and 2008, respectively. The Company and certain of its subsidiaries enter into the contracts with financial institutions regarding lines of credit and overdrawing. Those same financial institutions hold the issuing programs of commercial paper and medium-term notes. Ricoh had aggregate lines of credit of Yen 806,526 million and Yen 784,645 million ($7,846,450 thousand) as of March 31, 2007 and 2008, respectively. Unused lines of credit amounted to Yen 693,791 million and Yen 675,959 million ($6,759,590 thousand) as of March 31, 2007 and 2008, respectively, of which Yen 237,854 million and Yen 232,023 million ($2,320,230 thousand) related to commercial paper and Yen 129,855 million and Yen 101,957 million ($1,019,570 thousand) related to medium-term notes programs at prevailing interest rates and the unused portion is available for immediate borrowings. F-34 11. LONG-TERM INDEBTEDNESS Long-term indebtedness as of March 31, 2007 and 2008 consists of the followings:
Thousands of Millions of Yen U.S. Dollars -------------------------------------- 2007 2008 2008 - ---------------------------------------------------------------------------------------------------- Bonds: 1.34%, straight bonds, payable in yen, due March 2009 25,000 25,000 $ 250,000 0.70%, straight bonds, payable in yen, due June 2007 issued by a consolidated subsidiary 10,000 -- -- 2.10%, straight bonds, payable in yen, due October 2009 issued by a consolidated subsidiary 10,000 10,000 100,000 1.11%, straight bonds, payable in yen, due March 2010 issued by a consolidated subsidiary 10,000 10,000 100,000 1.30%, straight bonds, payable in yen, due December 2010 issued by a consolidated subsidiary 9,999 9,999 99,990 Euro Yen Zero Coupon Convertible Bonds, due December 2011 55,256 55,202 552,020 - ---------------------------------------------------------------------------------------------------- Total bonds 120,255 110,201 1,102,010 - ---------------------------------------------------------------------------------------------------- Unsecured loans- Banks and insurance companies, 1.66% weighted average, due through 2012 200,983 196,353 1,963,530 - ---------------------------------------------------------------------------------------------------- Secured loans- Banks, insurance companies and other financial institution, 0.32% weighted average, due through 2013 597 465 4,650 - ---------------------------------------------------------------------------------------------------- Capital lease obligations (see Note 2(j)) 1,623 1,177 11,770 - ---------------------------------------------------------------------------------------------------- Total 323,458 308,196 3,081,960 SFAS 133 fair value adjustment 517 392 3,920 Less - Current maturities included in current liabilities (87,174) (82,658) (826,580) - ---------------------------------------------------------------------------------------------------- 236,801 225,930 $2,259,300 - ----------------------------------------------------------------------------------------------------
Secured loans are collateralized by land, buildings and lease receivables with a book value of Yen 3,200 million ($32,000 thousand) as of March 31, 2008. All bonds outstanding as of March 31, 2008 are redeemable at the option of Ricoh at 100% of the principal amounts under certain conditions as provided in the applicable agreements. Bonds are subject to certain covenants such as restrictions on certain additional secured indebtedness, as defined in the agreements. Ricoh presently is in compliance with such covenants as of March 31, 2008. The Company issued Euro Yen Zero Coupon Convertible Bonds of Yen 55,275 million in December 2006. Bondholders are able to convert their holdings into common stock under certain circumstances. As of March 31, 2008, the conversion price was Yen 2,800 per share and 19,741 thousand shares would have been issued on conversion of all convertible debt. The conversion price shall be adjusted for certain events such as a stock split, consolidation of stock or issuance of stock at less than the current market price of the shares. As is customary in Japan, substantially all of the bank borrowings are subject to general agreements with each bank which provide, among other things, that the banks may request additional security for these loans if there is reasonable and probable cause and may treat any security furnished to the banks as well as cash deposited as security for all present and future indebtedness. Ricoh has never been requested to submit such additional security. F-35 The aggregate annual maturities of long-term indebtedness subsequent to March 31, 2008 are as follows: Thousands of Years ending March 31 Millions of Yen U.S. Dollars - ------------------------------------------------------ 2009 82,658 $ 826,580 2010 76,930 769,300 2011 67,280 672,800 2012 80,017 800,170 2013 1,159 11,590 2014 and thereafter 152 1,520 - ------------------------------------------------------ Total 308,196 $3,081,960 - ------------------------------------------------------ 12. PENSION AND RETIREMENT ALLOWANCE PLANS The Company and certain of its subsidiaries have various contributory and noncontributory employees' pension fund plans in trust covering substantially all of their employees. Under the plans, employees are entitled to lump-sum payments at the time of termination or retirement, or to pension payments. Contributions to above pension plans have been made to provide future pension payments in conformity with an actuarial calculation determined by the current basic rate of pay. On March 31, 2007, Ricoh adopted the recognition and disclosure provisions of SFAS No.158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans," for the measurement of pension liabilities. Under SFAS 158, Ricoh recognized the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of its pension fund plans in the consolidated balance sheets as of March 31, 2007, with a corresponding adjustment in initially applying SFAS 158 to accumulated other comprehensive income, net of tax. The adjustment to accumulated other comprehensive income at adoption represents the unrecognized net actuarial loss, unrecognized prior service cost, and unrecognized transition obligations, all of which were previously netted against the plans' funded status in the consolidated balance sheets pursuant to the provisions of SFAS 87. These amounts will be subsequently recognized as net periodic benefit cost pursuant to Ricoh's historical accounting policy for amortizing such amounts. Furthermore, actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic benefit cost in the same periods will be recognized as a component of other comprehensive income. Those amounts will be subsequently recognized as a component of total net periodic benefit cost on the same basis as the amounts recognized in accumulated other comprehensive income at adoption of SFAS 158. F-36 The changes in the benefit obligations and plan assets of the pension plans for the years ended March 31, 2007 and 2008 are as follows:
Thousands of Millions of Yen U.S. Dollars ------------------------- ------------ 2007 2008 2008 - -------------------------------------------------------------------------------------------- Change in benefit obligations: Benefit obligations at beginning of year 368,813 397,971 $3,979,710 Service cost 15,687 15,592 155,920 Interest cost 11,121 12,335 123,350 Plan participants' contributions 682 780 7,800 Actuarial loss 963 (7,394) (73,940) Settlement (142) (23) (230) Benefits paid (16,473) (19,512) (195,120) Foreign exchange impact 9,817 (13,563) (135,630) Benefit obligations assumed in connection with business acquisition 7,503 2,218 22,180 - -------------------------------------------------------------------------------------------- Benefit obligations at end of year 397,971 388,404 $3,884,040 - -------------------------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year 294,936 320,580 $3,205,800 Actual return on plan assets 6,889 (20,781) (207,810) Employer contribution 14,725 14,505 145,050 Plan participants' contributions 682 780 7,800 Settlement (57) (9) (90) Benefits paid (10,924) (12,447) (124,470) Foreign exchange impact 7,957 (13,081) (130,810) Plan assets acquired in connection with business acquisition 6,372 1,878 18,780 - -------------------------------------------------------------------------------------------- Fair value of plan assets at end of year 320,580 291,425 $2,914,250 - -------------------------------------------------------------------------------------------- Funded status (77,391) (96,979) $ (969,790) - --------------------------------------------------------------------------------------------
Amounts recognized in the consolidated balance sheet as of March 31, 2007 and 2008 consist of:
Thousands of Millions of Yen U.S. Dollars ------------------------- ------------ 2007 2008 2008 - -------------------------------------------------------------------------------------------- Lease deposits and other 25,161 9,085 $ 90,850 Accrued expenses and other (4,414) (7,441) (74,410) Accrued pension and severance costs (98,138) (98,623) (986,230) - -------------------------------------------------------------------------------------------- Net amount recognized (77,391) (96,979) $(969,790) - --------------------------------------------------------------------------------------------
F-37 Amounts recognized in accumulated other comprehensive income as of March 31, 2007 and 2008 consist of:
Thousands of Millions of Yen U.S. Dollars ------------------------ ------------ 2007 2008 2008 - --------------------------------------------------------------------------------------- Net actuarial loss 64,990 82,328 $ 823,280 Prior service cost (50,232) (46,895) (468,950) Net asset at transition, net of amortization (82) -- -- - --------------------------------------------------------------------------------------- Net amount recognized 14,676 35,433 $ 354,330 - ---------------------------------------------------------------------------------------
The accumulated benefit obligations are as follows:
Thousands of Millions of Yen U.S. Dollars ------------------------ ------------ 2007 2008 2008 - --------------------------------------------------------------------------------------- Accumulated benefit obligations 376,203 371,460 $3,714,600 - ---------------------------------------------------------------------------------------
Weighted-average assumptions used to determine benefit obligations as of March 31, 2007 and 2008 are as follows: 2007 2008 - ------------------------------------------------------------- Discount rate 3.1% 3.1% Rate of compensation increase 5.3% 5.3% - ------------------------------------------------------------- Weighted-average assumptions used to determine the net periodic benefit cost for the years ended March 31, 2006, 2007 and 2008 are as follows: 2006 2007 2008 - ------------------------------------------------------------- Discount rate 3.0% 2.8% 3.1% Rate of compensation increase 5.0% 5.4% 5.3% Expected long-term return on plan assets 3.2% 3.1% 3.2% - ------------------------------------------------------------- The net periodic benefit costs of the pension plans for the years ended March 31, 2006, 2007 and 2008 consist of the following components:
Thousands of Millions of Yen U.S. Dollars ------------------------------------ ------------ 2006 2007 2008 2008 - ------------------------------------------------------------------------------------- Service cost 14,691 15,687 15,592 $ 155,920 Interest cost 10,192 11,121 12,335 123,350 Expected return on plan assets (7,645) (9,186) (10,234) (102,340) Net amortization 1,833 (1,420) (982) (9,820) Settlement benefit (140) (18) -- -- - ------------------------------------------------------------------------------------- Total net periodic pension cost 18,931 16,184 16,711 $ 167,110 - -------------------------------------------------------------------------------------
F-38 The projected benefit obligations and the fair value of plan assets for the pension plans with projected benefit obligations in excess of plan assets, and the accumulated benefit obligations and the fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets are as follows:
Thousands of Millions of Yen U.S. Dollars ------------------------- ------------ 2007 2008 2008 - ------------------------------------------------------------------------------------ Plans with projected benefit obligations in excess of plan assets: Projected benefit obligations 240,593 379,662 $3,796,620 Fair value of plan assets 150,746 284,268 2,842,680 Plans with accumulated benefit obligations in excess of plan assets: Accumulated benefit obligations 221,023 362,827 $3,628,270 Fair value of plan assets 145,278 279,585 2,795,850 - ------------------------------------------------------------------------------------
Ricoh's benefit plan asset allocation as of March 31, 2007 and 2008 are as follows: 2007 2008 - --------------------------------------------------------- Equity securities 51.5% 45.7% Debt securities 17.0% 20.9% Life insurance company general accounts 24.2% 15.1% Other 7.3% 18.3% - --------------------------------------------------------- Total 100.0% 100.0% - --------------------------------------------------------- Common stock and bonds of the Company and certain of its domestic subsidiaries included in plan assets were immaterial at March 31, 2007 and 2008. Ricoh's investment policies and strategies for the pension benefits do not use target allocations for the individual asset categories. Ricoh's investment goals are to maximize returns subject to specific risk management policies. Its risk management policies permit investments in mutual funds and debt and equity securities and prohibit direct investment in derivative financial instruments. Ricoh addresses diversification by the use of mutual fund investments whose underlying investments are in domestic and international fixed income securities and domestic and international equity securities. These mutual funds are readily marketable and can be sold to fund benefit payment obligations as they become payable. Ricoh uses a December 31 measurement date for the pension plans. Ricoh expects to contribute Yen 13,100 million ($131,000 thousand) to its pension plans for the year ending March 31, 2009. The estimated net actuarial loss and prior service cost for Ricoh's pension fund plans that will be amortized from accumulated other comprehensive income (loss) into net periodic pension cost over the next year ending March, 2009 are Yen 5,094 million ($50,940 thousand) and Yen (4,124) million ($(41,240) thousand), respectively. F-39 The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: Thousands of Years ending March 31 Millions of Yen U.S. Dollars - ------------------------------------------------------- 2009 20,801 $ 208,010 2010 21,162 211,620 2011 19,926 199,260 2012 20,211 202,110 2013 21,487 214,870 2014-2018 111,082 1,110,820 - ------------------------------------------------------- Employees of certain domestic subsidiaries not covered by the employee's pension fund ("EPF") plan are primarily covered by unfunded retirement allowances plans. 13. SHAREHOLDERS' INVESTMENT The Corporation Law of Japan provides that an amount equal to 10% of cash dividends and other distributions from retained earnings paid by the Company and its domestic subsidiaries be appropriated as additional paid-in capital or legal reserve. No further appropriation is required when the total amount of the additional paid-in capital and legal reserve equals to 25% of common stock. Certain foreign subsidiaries are also required to appropriate their earnings to legal reserves under the laws of the respective countries. Legal reserves included in retained earnings as of March 31, 2007 and 2008 were Yen 17,318 million and Yen 17,462 million ($174,620 thousand), respectively, and are restricted from being used as dividends. The Corporation Law of Japan requires a company to obtain the approval of shareholders for transferring on amount between common stock and additional paid-in capital. The Law also permits a company to transfer an amount of common stock or additional paid-in capital to retained earnings in principle upon approval of shareholders. Cash dividends are approved by the shareholders after the end of each fiscal period or are declared by the Board of Directors after the end of each interim six-month period. Such dividends are payable to shareholders of record at the end of each such fiscal or interim six-month period. At the Ordinary General Meeting of Shareholders held on June 26, 2008, the shareholders approved the declaration of a cash dividend (Yen 17 per share) on the common stock totaling Yen 12,256 million ($122,560 thousand), which would be paid to shareholders of record as of March 31, 2008. The declaration of this dividend has not been reflected in the consolidated financial statements as of March 31, 2008. The amount of retained earnings legally available for dividend distribution is that recorded in the Company's non-consolidated books and amounted to Yen 424,067 million ($4,240,670 thousand) as of March 31, 2008. F-40 14. OTHER COMPREHENSIVE INCOME (LOSS) Tax effects allocated to each component of other comprehensive income (loss) are as follows:
Millions of Yen -------------------------------------- Before-tax Tax Net-of-tax amount expense amount - -------------------------------------------------------------------------------------------------------- 2006: Foreign currency translation adjustments 16,142 (1,266) 14,876 Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year 8,662 (3,308) 5,354 Less - Reclassification adjustment for (gains) losses realized in net income (2,053) 836 (1,217) Net unrealized gains (losses) 6,609 (2,472) 4,137 Unrealized gains (losses) on derivatives: Unrealized holding gains (losses) arising during the year (527) 216 (311) Less- Reclassification adjustment for (gains) losses realized in net income 594 (243) 351 Net unrealized gains (losses) 67 (27) 40 Minimum pension liability adjustments 12,204 (5,195) 7,009 - -------------------------------------------------------------------------------------------------------- Other comprehensive income (loss) 35,022 (8,960) 26,062 - -------------------------------------------------------------------------------------------------------- 2007: Foreign currency translation adjustments 24,724 50 24,774 Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year 197 (65) 132 Less - Reclassification adjustment for (gains) losses realized in net income (99) 40 (59) Net unrealized gains (losses) 98 (25) 73 Unrealized gains (losses) on derivatives: Unrealized holding gains (losses) arising during the year (749) 307 (442) Less- Reclassification adjustment for (gains) losses realized in net income 436 (179) 257 Net unrealized gains (losses) (313) 128 (185) Minimum pension liability adjustments 1,663 (693) 970 - -------------------------------------------------------------------------------------------------------- Other comprehensive income (loss) 26,172 (540) 25,632 - -------------------------------------------------------------------------------------------------------- 2008: Foreign currency translation adjustments (38,478) (78) (38,556) Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year (12,147) 4,709 (7,438) Less - Reclassification adjustment for (gains) losses realized in net income (417) 170 (247) Net unrealized gains (losses) (12,564) 4,879 (7,685) Unrealized gains (losses) on derivatives: Unrealized holding gains (losses) arising during the year (767) 311 (456) Less- Reclassification adjustment for (gains) losses realized in net income 128 (52) 76 Net unrealized gains (losses) (639) 259 (380) Pension liability adjustments: Unrealized holding gains (losses) arising during the year (20,361) 9,556 (10,805) Less- Reclassification adjustment for (gains) losses realized in net income (1,035) 458 (577) Net unrealized gains (losses) (21,396) 10,014 (11,382) - -------------------------------------------------------------------------------------------------------- Other comprehensive income (loss) (73,077) 15,074 (58,003) - --------------------------------------------------------------------------------------------------------
F-41
Thousands of U.S. Dollars -------------------------------------- Before-tax Tax Net-of-tax amount expense amount - -------------------------------------------------------------------------------------------------------- 2008: Foreign currency translation adjustments $ (384,780) $ (780) $ (385,560) Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year (121,470) 47,090 (74,380) Less - Reclassification adjustment for (gains) losses realized in net income (4,170) 1,700 (2,470) Net unrealized gains (losses) (125,640) 48,790 (76,850) Unrealized gains (losses) on derivatives: Unrealized holding gains (losses) arising during the year (7,670) 3,110 (4,560) Less- Reclassification adjustment for (gains) losses realized in net income 1,280 (520) 760 Net unrealized gains (losses) (6,390) 2,590 (3,800) Pension liability adjustments: Unrealized holding gains (losses) arising during the year (203,610) 95,560 (108,050) Less- Reclassification adjustment for (gains) losses realized in net income (10,350) 4,580 (5,770) Net unrealized gains (losses) (213,960) 100,140 (113,820) - -------------------------------------------------------------------------------------------------------- Other comprehensive income (loss) $ (730,770) $ 150,740 $ (580,030) - --------------------------------------------------------------------------------------------------------
For fiscal year 2008, pension liability adjustments included Yen (20,567) million ($(20,5670) thousand) of gains (losses) arising during the year, Yen 2,935 million ($29,350 thousand) of amortization of gains (losses), Yen 206 million ($206 thousand) of prior service cost arising during the year and Yen (3,970) million ($(39,700) thousand) of amortization of prior service cost - net of deferred taxes of Yen (9,673) million ($(96,730) thousand), Yen 1,165 million ($11,650 thousand), Yen 117 million ($1,170 thousand) and Yen (1,623) million ($(16,230) thousand), respectively. F-42 Changes in accumulated other comprehensive income (loss) are as follows:
Thousands of Millions of Yen U.S. Dollars -------------------------------------- ------------ 2006 2007 2008 2008 - ----------------------------------------------------------------------------------------------------------- Foreign currency translation adjustments: Beginning balance (12,219) 2,657 27,431 $ 274,310 Change during the year 14,876 24,774 (38,556) (385,560) - ----------------------------------------------------------------------------------------------------------- Ending balance 2,657 27,431 (11,125) $(111,250) - ----------------------------------------------------------------------------------------------------------- Unrealized gains (losses) on securities: Beginning balance 4,791 8,928 9,001 $ 90,010 Change during the year 4,137 73 (7,685) (76,850) - ----------------------------------------------------------------------------------------------------------- Ending balance 8,928 9,001 1,316 $ 13,160 - ----------------------------------------------------------------------------------------------------------- Unrealized gains (losses) on derivatives: Beginning balance 117 157 (28) $ (280) Change during the year 40 (185) (380) (3,800) - ----------------------------------------------------------------------------------------------------------- Ending balance 157 (28) (408) $ (4,080) - ----------------------------------------------------------------------------------------------------------- Minimum pension liability adjustments: Beginning balance (14,652) (7,643) -- $ -- Change during the year 7,009 970 -- -- Adjustment to initially apply SFAS 158 -- 6,673 -- -- - ----------------------------------------------------------------------------------------------------------- Ending balance (7,643) -- -- $ -- - ----------------------------------------------------------------------------------------------------------- Pension liability adjustments: Beginning balance -- -- (9,406) $ (94,060) Change during the year -- -- (11,382) (113,820) Adjustment to initially apply SFAS 158 -- (9,406) -- -- - ----------------------------------------------------------------------------------------------------------- Ending balance -- (9,406) (20,788) $(207,880) - ----------------------------------------------------------------------------------------------------------- Total accumulated other comprehensive income (loss) Beginning balance (21,963) 4,099 26,998 $(269,980) Change during the year 26,062 25,632 (58,003) (580,030) Adjustment to initially apply SFAS 158 -- (2,733) -- -- - ----------------------------------------------------------------------------------------------------------- Ending balance 4,099 26,998 (31,005) $(310,050) - -----------------------------------------------------------------------------------------------------------
F-43 15. PER SHARE DATA Dividends per share shown in the consolidated statements of income are computed based on dividends paid for the year. A reconciliation of the numerator and the denominators of the basic and diluted per share computations for income before cumulative effect of accounting change, cumulative effect of accounting change, net of tax and net income is as follows:
Thousands of shares --------------------------- 2006 2007 2008 - ------------------------------------------------------------------------------------------- Weighted average number of shares of common stock outstanding 733,434 729,745 729,010 Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 -- 5,758 19,741 - ------------------------------------------------------------------------------------------- Diluted shares of common stock outstanding 733,434 735,503 748,752 - -------------------------------------------------------------------------------------------
Thousands of Millions of Yen U.S. Dollars -------------------------------------- ------------ 2006 2007 2008 2008 - ------------------------------------------------------------------------------------------------------- Income from continuing operations 95,022 106,224 106,463 $ 1,064,630 Income from discontinued operations, net of tax 2,035 5,500 -- -- - ------------------------------------------------------------------------------------------------------- Net income 97,057 111,724 106,463 1,064,630 - ------------------------------------------------------------------------------------------------------- Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 -- (8) (25) (250) - ------------------------------------------------------------------------------------------------------- Diluted net income 97,057 111,716 106,438 $ 1,064,380 - -------------------------------------------------------------------------------------------------------
Yen U.S. Dollars ------------------------------------ ------------ 2006 2007 2008 2008 - ------------------------------------------------------------------------------------------------- Earnings per share: Basic: Income from continuing operations 129.56 145.56 146.04 $1.46 Income from discontinued operations, net of tax 2.77 7.54 -- -- - ------------------------------------------------------------------------------------------------- Net income 132.33 153.10 146.04 1.46 - ------------------------------------------------------------------------------------------------- Diluted: Income from continuing operations 129.56 144.41 142.15 $1.42 Income from discontinued operations, net of tax 2.77 7.48 -- -- - ------------------------------------------------------------------------------------------------- Net income 132.33 151.89 142.15 1.42 - -------------------------------------------------------------------------------------------------
F-44 16. DERIVATIVE FINANCIAL INSTRUMENTS RISK MANAGEMENT POLICY Ricoh enters into various derivative financial instrument contracts in the normal course of business in connection with the management of its assets and liabilities. Ricoh uses derivative instruments to reduce risk and protect market value of assets and liabilities in conformity with 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 those assets and liabilities denominated in foreign currencies. INTEREST RATE RISK MANAGEMENT Ricoh enters into interest rate swap agreements to hedge against the potential adverse impacts of changes in fair value or cash flow fluctuations on interest of its outstanding debt. FAIR VALUE HEDGES Changes in the fair value of derivative instruments and the related hedged items designated and qualifying as fair value hedges are included in other (income) expenses on the consolidated statements of income. There is no hedging ineffectiveness nor are net gains or losses excluded from the assessment of hedge effectiveness for the years ended March 31, 2006, 2007 and 2008 as the critical terms of the interest rate swap match the terms of the hedged debt obligations. CASH FLOW HEDGES Changes in the fair value of derivative instruments designated and qualifying as cash flow hedges are included in accumulated other comprehensive income (loss) on the consolidated balance sheets. These amounts are reclassified into earnings as interest on the hedged loans is paid. There is no hedging ineffectiveness nor are net gains or losses excluded from the assessment of hedge effectiveness for the years ended March 31, 2006, 2007 and 2008 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 293 million ($2,930 thousand) of the balance of accumulated other comprehensive income as of March 31, 2008. UNDESIGNATED DERIVATIVE INSTRUMENTS Derivative instruments not designated as hedging instruments are held to reduce the risk relating to the variability in exchange rates on assets and liabilities denominated in foreign currencies. Changes in the fair value of these instruments are included in other (income) expenses on the consolidated statements of income. F-45 17. COMMITMENTS AND CONTINGENT LIABILITIES As of March 31, 2008, Ricoh had outstanding contractual commitments for acquisition or construction of property, plant and equipment and other assets aggregating Yen 7,071 million ($70,710 thousand). As of March 31, 2008, Ricoh was also contingently liable for certain guarantees including employees housing loans of Yen 453 million ($4,530 thousand). Ricoh made rental payments totaling Yen 42,046 million, Yen 40,722 million and Yen 45,379 million ($453,790 thousand) for the years ended March 31, 2006, 2007 and 2008, respectively, under cancelable and non-cancelable operating lease agreements for office space and machinery and equipment. The minimum rental payments required under operating lease that have lease terms in excess of one year as of March 31, 2008 are as follows: Thousands of Years ending March 31 Millions of Yen U.S. Dollars - ------------------------------------------------------ 2009 20,770 $207,700 2010 17,654 176,540 2011 12,452 124,520 2012 8,419 84,190 2013 7,215 72,150 2014 and thereafter 10,989 109,890 - ------------------------------------------------------ Total 77,499 $774,990 - ------------------------------------------------------ As of March 31, 2008, the Company and certain of its subsidiaries were parties to litigation involving routine matters, such as patent rights. In the opinion of management, the ultimate liability, if any, resulting from such litigation will not materially affect the consolidated financial position or the results of operations of Ricoh. F-46 18. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (A) CASH AND CASH EQUIVALENTS, TIME DEPOSITS, TRADE RECEIVABLES, SHORT-TERM BORROWINGS, CURRENT MATURITIES OF LONG-TERM INDEBTEDNESS, TRADE PAYABLES AND ACCRUED EXPENSES The carrying amounts approximate fair values because of the short maturities of these instruments. (B) MARKETABLE SECURITIES AND INVESTMENT SECURITIES The fair value of the marketable securities and investment securities is principally based on quoted market price. (C) INSTALLMENT LOANS The fair value of installment loans is based on the present value of future cash flows using the current interest rate for similar instruments of comparable maturity. (D) LONG-TERM INDEBTEDNESS The fair value of each of the long-term indebtedness instruments is based on the quoted price in the most active market or the present value of future cash flows associated with each instrument discounted using the current borrowing rate for similar instruments of comparable maturity. (E) INTEREST RATE SWAP AGREEMENTS The fair value of interest rate swap agreements is estimated by obtaining quotes from brokers. (F) FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY OPTIONS The fair value of foreign currency contracts and foreign currency options is estimated by obtaining quotes from brokers. The estimated fair value of the financial instruments as of March 31, 2007 and 2008 is summarized as follows:
Thousands of Millions of Yen U.S. Dollars ------------------------------------------------------ ------------------------ 2007 2008 2008 -------------------------- -------------------------- ------------------------ Carrying Estimated Carrying Estimated Carrying Estimated amount fair value amount fair value amount fair value - --------------------------------------------------------------------------------------------------------------------------------- Marketable securities and Investment securities 75,013 75,013 71,244 71,244 $ 712,440 $ 712,440 Installment loans 52,648 52,697 54,863 54,852 548,630 548,520 Long-term indebtedness (236,801) (229,981) (225,930) (221,792) (2,259,300) (2,217,920) Interest rate swap agreements, net 751 751 (594) (594) (5,940) (5,940) Foreign currency contracts, net 633 633 1,349 1,349 13,490 13,490 Foreign currency options, net (2) (2) 100 100 1,000 1,000 - ---------------------------------------------------------------------------------------------------------------------------------
F-47 Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. 19. SEGMENT INFORMATION The operating segments presented below are the segments of Ricoh for which separate financial information is available and for which a measure of profit or loss is evaluated regularly by Ricoh's management in deciding how to allocate resources and in assessing performance. The accounting policies of the segments are substantially the same as those described in the summary of significant accounting policies, as discussed in Note 2. Ricoh's operating segments are comprised of Office Solutions, including copiers and related supplies, communications and information systems, Industrial Products, including thermal media and semiconductors, and Other, including optical discs and digital cameras. The following tables present certain information regarding Ricoh's operating segments and operations by geographic areas for the years ended March 31, 2006, 2007 and 2008. During the year ended March 31, 2007, a subsidiary of the Company sold its content distribution business. As a result of such sale, sales and operating income of such business were reclassified as a discontinued operation and was excluded from the segment data for the years ended March 31, 2006 and 2007 in accordance with SFAS 144. F-48 (A) OPERATING SEGMENT INFORMATION
Thousands of Millions of Yen U.S. Dollars --------------------------------------------- ------------ 2006 2007 2008 2008 - ----------------------------------------------------------------------------------------------------- Sales: Office Solutions 1,637,228 1,774,467 1,909,573 $19,095,730 Industrial Products 123,200 138,112 148,883 1,488,830 Other 151,374 161,071 166,076 1,660,760 Intersegment transaction (2,564) (4,725) (4,543) (45,430) - ----------------------------------------------------------------------------------------------------- Consolidated 1,909,238 2,068,925 2,219,989 $22,199,890 - ----------------------------------------------------------------------------------------------------- Operating expenses: Office Solutions 1,434,279 1,549,156 1,674,940 $16,749,400 Industrial Products 124,108 135,164 144,708 1,447,080 Other 148,692 158,868 163,529 1,635,290 Intersegment transaction (2,594) (4,727) (4,545) (45,450) Unallocated expense 56,169 56,084 59,851 598,510 - ----------------------------------------------------------------------------------------------------- Consolidated 1,760,654 1,894,545 2,038,483 $20,384,830 - ----------------------------------------------------------------------------------------------------- Operating income: Office Solutions 202,949 225,311 234,633 $ 2,346,330 Industrial Products (908) 2,948 4,175 41,750 Other 2,682 2,203 2,547 25,470 Elimination and unallocated expense (56,139) (56,082) (59,849) (598,490) - ----------------------------------------------------------------------------------------------------- Consolidated 148,584 174,380 181,506 $ 1,815,060 - ----------------------------------------------------------------------------------------------------- Other income (expenses) 4,182 139 (6,837) $ (68,370) - ----------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates 152,766 174,519 174,669 $ 1,746,690 - -----------------------------------------------------------------------------------------------------
Thousands of Millions of Yen U.S. Dollars --------------------------------------------- ------------ 2006 2007 2008 2008 - ----------------------------------------------------------------------------------------------------- Total assets: Office Solutions 1,426,635 1,570,757 1,643,500 $16,435,000 Industrial Products 84,595 93,346 91,635 916,350 Other 114,925 112,255 106,233 1,062,330 Elimination (2,088) (1,327) (1,063) (10,630) Corporate assets 417,116 468,375 374,063 3,740,630 - ----------------------------------------------------------------------------------------------------- Consolidated 2,041,183 2,243,406 2,214,368 $22,143,680 - ----------------------------------------------------------------------------------------------------- Expenditure for segment assets: Office Solutions 90,383 72,465 74,758 $ 747,580 Industrial Products 7,451 8,580 6,503 65,030 Other 2,361 2,630 2,140 21,400 Corporate assets 1,854 2,125 1,814 18,140 - ----------------------------------------------------------------------------------------------------- Consolidated 102,049 85,800 85,215 $ 852,150 - -----------------------------------------------------------------------------------------------------
F-49
Thousands of Millions of Yen U.S. Dollars --------------------------------------------- ------------ 2006 2007 2008 2008 - ----------------------------------------------------------------------------------------------------- Depreciation: Office Solutions 57,326 62,862 63,162 $ 631,620 Industrial Products 6,631 6,099 5,820 58,200 Other 2,352 2,072 2,128 21,280 Corporate assets 1,156 1,399 1,652 16,520 - ----------------------------------------------------------------------------------------------------- Consolidated 67,465 72,432 72,762 $ 727,620 - -----------------------------------------------------------------------------------------------------
Unallocated expense represents expenses for corporate headquarters. Intersegment sales are not separated by operating segment because they are immaterial. Corporate assets consist primarily of cash and cash equivalents and marketable securities maintained for general corporate purposes. (B) GEOGRAPHIC INFORMATION Sales which are attributed to countries based on location of customers and long-lived assets by location for the years ended March 31, 2006, 2007 and 2008 are as follows:
Thousands of Millions of Yen U.S. Dollars --------------------------------------------- ------------ 2006 2007 2008 2008 - ----------------------------------------------------------------------------------------------------- Sales: Japan 966,224 1,002,251 1,016,034 $10,160,340 The Americas 387,412 426,453 434,799 4,347,990 Europe 434,800 507,158 603,219 6,032,190 Other 120,802 133,063 165,937 1,659,370 - ----------------------------------------------------------------------------------------------------- Consolidated 1,909,238 2,068,925 2,219,989 $22,199,890 - ----------------------------------------------------------------------------------------------------- Property, plant and equipment: Japan 210,973 199,308 197,290 $ 1,972,900 The Americas 18,111 18,102 17,552 175,520 Europe 26,783 28,345 20,505 205,050 Other 12,376 18,913 19,286 192,860 - ----------------------------------------------------------------------------------------------------- Consolidated 268,243 264,668 254,633 $ 2,546,330 - -----------------------------------------------------------------------------------------------------
(C) ADDITIONAL INFORMATION The following information shows net sales and operating income recognized by geographic origin for the years ended March 31, 2006, 2007 and 2008. In addition to the disclosure requirements under SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," Ricoh discloses this information as supplemental information in light of the disclosure requirements of the Japanese Financial Instrument and Exchange Law, which a Japanese public company is subject to. F-50
Thousands of Millions of Yen U.S. Dollars --------------------------------------------- ------------ 2006 2007 2008 2008 - ------------------------------------------------------------------------------------------------------- Sales: Japan External customers 992,945 1,026,663 1,050,923 $10,509,230 Intersegment 413,087 495,304 484,590 4,845,900 - ------------------------------------------------------------------------------------------------------- Total 1,406,032 1,521,967 1,535,513 15,355,130 - ------------------------------------------------------------------------------------------------------- The Americas External customers 385,746 426,009 432,287 4,322,870 Intersegment 7,630 3,253 3,496 34,960 - ------------------------------------------------------------------------------------------------------- Total 393,376 429,262 435,783 4,357,830 - ------------------------------------------------------------------------------------------------------- Europe External customers 434,304 508,200 602,224 6,022,240 Intersegment 4,449 3,595 2,585 25,850 - ------------------------------------------------------------------------------------------------------- Total 438,753 511,795 604,809 6,048,090 - ------------------------------------------------------------------------------------------------------- Other External customers 96,243 108,053 134,555 1,345,550 Intersegment 104,045 160,990 183,043 1,830,430 - ------------------------------------------------------------------------------------------------------- Total 200,288 269,043 317,598 3,175,980 - ------------------------------------------------------------------------------------------------------- Elimination of intersegment sales (529,211) (663,142) (673,714) (6,737,140) - ------------------------------------------------------------------------------------------------------- Consolidated 1,909,238 2,068,925 2,219,989 $22,199,890 - ------------------------------------------------------------------------------------------------------- Operating expenses: Japan 1,310,233 1,411,653 1,427,575 $14,275,750 The Americas 378,108 408,150 433,429 4,334,290 Europe 417,341 478,380 565,736 5,657,360 Other 185,283 251,486 291,141 2,911,410 - ------------------------------------------------------------------------------------------------------- Elimination of intersegment sales (530,311) (655,124) (679,398) (6,793,980) - ------------------------------------------------------------------------------------------------------- Consolidated 1,760,654 1,894,545 2,038,483 $20,384,830 - ------------------------------------------------------------------------------------------------------- Operating income: Japan 95,799 110,314 107,938 $ 1,079,380 The Americas 15,268 21,112 2,354 23,540 Europe 21,412 33,415 39,073 390,730 Other 15,005 17,557 26,457 264,570 - ------------------------------------------------------------------------------------------------------- Elimination of intersegment profit 1,100 (8,018) 5,684 (56,840) - ------------------------------------------------------------------------------------------------------- Consolidated 148,584 174,380 181,506 $ 1,815,060 - ------------------------------------------------------------------------------------------------------- Other expenses 4,182 139 (6,837) $ (68,370) - ------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes, minority interests and equity in earnings of affiliates 152,766 174,519 174,669 $ 1,746,690 - ------------------------------------------------------------------------------------------------------- Total assets: Japan 1,220,780 1,282,085 1,272,110 $12,721,100 The Americas 240,726 256,049 310,028 3,100,280 Europe 235,897 314,815 326,824 3,268,240 Other 79,102 101,550 102,451 1,024,510 Elimination (152,438) (179,468) (171,108) (1,711,080) Corporate assets 417,116 468,375 374,063 3,740,630 - ------------------------------------------------------------------------------------------------------- Consolidated 2,041,183 2,243,406 2,214,368 $22,143,680 - -------------------------------------------------------------------------------------------------------
Intersegment sales between geographic areas are made at cost plus profit. Operating income by geographic area is sales less expense related to the area's operating revenue. F-51 No single customer accounted for 10% or more of the total revenues for the periods ended as of March 31, 2006, 2007 and 2008. 20. SUPPLEMENTARY INFORMATION TO THE STATEMENT OF INCOME The following amounts are charged to selling, general and administrative expenses for the years ended March 31, 2006, 2007 and 2008:
Thousands of Millions of Yen U.S. Dollars ------------------------------------------------------ 2006 2007 2008 2008 - --------------------------------------------------------------------------------------- Research and development costs 110,381 114,985 126,033 $1,260,330 Advertising costs 15,725 14,456 16,700 167,000 Shipping and handling costs 16,058 19,280 23,970 239,700 - ---------------------------------------------------------------------------------------
F-52 RICOH COMPANY, LTD. AND CONSOLIDATED SUBSIDIARIES SCHEDULE II. - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE THREE YEARS ENDED MARCH 31, 2008 r
Additions (Millions of Yen) ----------------------- Balance at Charged to Charged to Deduction Balance at beginning costs and other from Translation end of Description of period expenses accounts reserves(2)(3) adjustment period - ----------------------------------------------------------------------------------------------------------------------------- For the year ended March 31, 2006: Allowance for doubtful receivables(1): Trade receivables 17,451 1,424 (27) (3,366) 549 16,031 Finance receivables 16,566 1,744 -- (1,992) 76 16,394 Deferred tax assets valuation allowance 7,079 3,843 (56) (2,959) 290 8,197 For the year ended March 31, 2007: Allowance for doubtful receivables(1)- Trade receivables 16,031 716 2,224 (3,076) 660 16,555 Finance receivables 16,394 324 -- (3,016) 77 13,779 Deferred tax assets valuation allowance 8,197 2,160 2,483 (1,136) 695 12,399 For the year ended March 31, 2008: Allowance for doubtful receivables(1)- Trade receivables 16,555 2,473 -- (1,734) (628) 16,666 Finance receivables 13,779 449 -- (3,542) (151) 10,535 Deferred tax assets valuation allowance 12,399 3,545 -- (4,692) (591) 10,661 - -----------------------------------------------------------------------------------------------------------------------------
Notes: (1) See Note 2(g) to Consolidated Financial Statements. (2) Receivables - Write-offs (3) Deferred tax - Realization of tax benefits F-53 EX-1 2 rex011.txt EX-1.1 ARTICLES OF INCORPORATION (ENGLISH TRANSLATION) Exhibit 1.1 (Translation) ARTICLES OF INCORPORATION OF RICOH COMPANY, LTD. (As amended on June 28, 2006) CHAPTER I. GENERAL PROVISIONS (Trade Name) Article 1. The name of the Company is Kabushiki Kaisha Ricoh and is expressed RICOH COMPANY, LTD. in English. (Location of Head Office) Article 2. The head office of the Company is to be located in Ohta-ku, Tokyo. (Objectives) Article 3. The objectives of the Company are to engage in the following businesses: 1. Manufacture, sale, installation work and electrical communication work of optical, office, audio, electric and measuring equipment, other general machinery and equipment and accessories and supplies therefor; 2. Manufacture and sale of photographic sensitive materials and duplicating papers; 3. Manufacture and sale of various raw materials for photographic sensitive materials, and various chemical materials for chemical industries; 4. Manufacture, processing and sale of papers, pulps, textiles, general merchandise and by-products thereof; 5. Investment in, or sale of the products of, other companies; 6. Import and export of the goods described in any of the foregoing items and other goods of every kind and description; 7. Brokerage business for casualty insurance and the insurance brokerage business under the Automobile Liability Security Law of Japan; 8. Direct marketing through the Internet, facsimile and telephone, etc.; and 1 9. Any and all business incidental or relating to any of the foregoing items. (Organizations) Article 4. In addition to the general meeting of shareholders and directors, the Company shall establish the following organizations: i) Board of Directors; ii) Corporate Auditors; iii) Board of Corporate Auditors; and iv) Accounting Auditors. (Method of Public Notices) Article 5. Public notices of the Company shall appear in the Nihon Keizai Shimbun. CHAPTER II. SHARES (Total Number of Issuable Shares) Article 6. The total number of issuable shares by the Company is one billion and five hundred million (1,500,000,000) shares. (Issuance of Share Certificates) Article 7. The Company shall issue share certificates for the shares. (Purchase of Treasury Stocks) Article 8. The Company may acquire the shares of its own stocks by a resolution of the Board of Directors pursuant to Paragraph 2, Article 165 of the Corporation Law. (Number of Shares Constituting One Unit and Non-Issuance of Certificates for Less-Than-One-Unit Shares) Article 9. 1. The number of shares constituting one unit of shares of the Company shall be one thousand (1,000) shares. 2. Notwithstanding the provisions of Article 7, the Company shall not issue any certificates for less-than-one-unit shares, unless otherwise provided for in the Share Handling Regulations. (Rights Concerning Less-Than-One-Unit Shares) Article 10. A shareholder (including the beneficial shareholder; the same applies hereinafter) of the Company shall not exercise any rights other than those described below with respect to the less-than-one-unit shares held by it. 2 i) Right described in each Item of Paragraph 2, Article 189 of the Corporation Law. ii) Right to make a request under the provision of Paragraph 1, Article 166 of the Corporation Law. iii) Right to receive allocation of offered shares and allocation of offered stock purchase warrants in accordance with the number of shares held by the shareholder. iv) Right to make a request provided for in the following Article. (Sale of Shares Constituting Less-Than-One-Unit Shares to Constitute One Unit) Article 11. A shareholder of the Company may request that the Company sell such number of shares as may, together with the number of less-than-one-unit shares held by the shareholder, constitute one unit of shares, in accordance with the Share Handling Regulations. (Administrator of Register of Shareholders) Article 12. 1. The Company shall have an administrator of the register of shareholders. 2. The administrator of the register of shareholders and its handling office shall be determined by resolution of the Board of Directors and public notice shall be given thereof. 3. The register of shareholders (including the register of beneficial shareholders; the same applies hereinafter), the register of stock purchase warrants and the register of the lost share certificates of the Company shall be prepared and kept, and all other business pertaining to the register of shareholders, the register of stock purchase warrants and the register of the lost share certificates shall be handled by the administrator of the register of shareholders and not by the Company. (Share Handling Regulations) Article 13. The business and the service charges pertaining to the shares of the Company shall be subject to laws, ordinances or these Articles of Incorporation and the Share Handling Regulations established by the Board of Directors. CHAPTER III. GENERAL MEETING OF SHAREHOLDERS (Calling of Meeting) Article 14. The ordinary general meeting of shareholders shall be called in June each year and an extraordinary general meeting of shareholders shall be called as the necessity arises. (Record Date of General Meeting of Shareholders) Article 15. The record date of voting rights for the Company's general meeting of shareholders shall be March 31 every year. 3 (Exercise of Voting Rights by Proxy) Article 16. 1. A shareholder may exercise his voting rights by proxy who shall be another shareholder of the Company that has voting rights. 2. Such shareholder or proxy shall submit a document certifying the power of attorney to the Company for each general meeting of shareholders. (Person with the Right to Call the Meeting and Chairman) Article 17. 1. A meeting of the shareholders shall be called and presided over by a Representative Director previously appointed by the Board of Directors. 2. In case the Representative Director is unable to act, one of the other directors shall call and preside over the meeting of the shareholders in accordance with the order determined in advance by resolution of the Board of Directors. (Disclosure and Deemed Provision of Reference Materials for General Meeting of Shareholders via the Internet) Article 18. In calling the general meeting of shareholders, the Company may deem that the information regarding the matters which should be described or shown in the reference materials for the general meeting of shareholders, business reports, financial documents and consolidated financial documents have been provided to the shareholders by disclosing them via the Internet in accordance with the Ministerial Ordinance of the Ministry of Justice. (Method of Adopting Resolutions) Article 19. 1. Except as otherwise provided for in laws, ordinances or these Articles of Incorporation, resolutions at a general meeting of shareholders shall be adopted by a majority of the votes of the shareholders present thereat who are entitled to vote. 2. Resolutions provided for in Paragraph 2, Article 309 of the Corporation Law shall be adopted by the vote of the shareholders not less than two-thirds (2/3) of those present at the meeting whereby not less than one-third (1/3) of voting rights of the shareholders entitled to exercise voting rights shall constitute a quorum. (Minutes) Article 20. The proceedings in outline, the resultant actions taken and other matters subject to laws and ordinances at a general meeting of shareholders shall be entered in the minutes, which shall bear the names and seals of the chairman of the meeting and the directors present and shall be kept by the Company. 4 CHAPTER IV. DIRECTORS AND BOARD OF DIRECTORS (Number) Article 21. The Company shall have not more than fifteen (15) directors. (Election) Article 22. 1. Directors shall be elected at a general meeting of shareholders. 2. Resolutions for the election of directors shall be adopted by a majority of the votes of the shareholders present who hold not less than one-third (1/3) of the voting rights of the shareholders entitled to exercise voting rights. 3. Cumulative voting shall not be used for the adoption of resolutions for the election of directors. (Term of Office) Article 23. 1. The term of office of directors shall be until the close of the ordinary general meeting of shareholders relating to the last fiscal year ending within two (2) years after their election. 2. The term of office of a director elected to fill a vacancy of a director who has resigned before the completion of his/her term, or elected to increase the number of directors, shall be for the remaining balance of the term of office of the other directors currently in office. (Representative Directors) Article 24. Representative Directors shall be elected by resolution of the Board of Directors. (Person with the Right to Call the Meeting of Board of Directors and Chairman) Article 25. 1. A meeting of the Board of Directors shall be called and presided over by a Director previously appointed by the Board of Directors. 2. In case the Director is unable to act, one of the other directors shall call and preside over the meeting of the Board of Directors in accordance with the order determined in advance by resolution of the Board of Directors. 5 (Calling Meetings of Board of Directors) Article 26. 1. Notice of a meeting of the Board of Directors shall be dispatched to each director and each corporate auditor three (3) days before the date of the meeting; provided, however, that such period may be shortened in case of emergency. 2. A meeting of the Board of Directors may be held without going through the procedure for calling, if so agreed by all the directors and the corporate auditors. (Resolutions of Meetings of Board of Directors) Article 27. 1. The Board of Directors shall decide important matters concerning the execution of business and affairs of the Company as well as such matters as are provided for in laws and ordinances. 2. Resolutions of the Board of Directors shall be adopted by the affirmative vote of a majority of the directors present at the meeting, whereby a majority of all directors shall constitute a quorum. (Omission of Resolution of Board of Directors) Article 28. The Company shall deem that the resolution of the Board of Directors has been adopted if the requirements under Article 370 of the Corporation Law are satisfied. (Remuneration and other interests) Article 29. Remuneration and bonus of directors and other property interests received by the directors from the Company in consideration of the performance of their duties (hereinafter referred to as the "Remuneration") shall be determined by resolution at a general meeting of shareholders. (Exemption of Liability of Outside Directors) Article 30. The Company may enter into an agreement with outside directors under which their liability for damages due to the failure in performing their duties shall be limited in accordance with the provisions of Paragraph 1, Article 427 of the Corporation Law; provided, however, that the limit of liability under such agreement shall be the higher of the predetermined amount of not less than ten million (10,000,000) yen, or the amount provided for under the laws and ordinances. CHAPTER V. CORPORATE AUDITORS AND BOARD OF CORPORATE AUDITORS (Number) Article 31. The Company shall have not more than five (5) corporate auditors. 6 (Election) Article 32. 1. Corporate auditors shall be elected at a general meeting of shareholders. 2. Resolutions for the election of corporate auditors shall be adopted by a majority of the votes of the shareholders present who hold not less than one-third (1/3) of the voting rights of the shareholders entitled to exercise voting rights. (Term of Office) Article 33. 1. The term of office of corporate auditors shall be until the close of the ordinary general meeting of shareholders relating to the last fiscal year ending within four (4) years after their election. 2. The term of office of a corporate auditor elected to fill a vacancy of an auditor resigned before the completion of the term shall be for the remaining balance of the term of office of the retired corporate auditor. (Person with the Right to Call the Meeting of Board of Corporate Auditors) Article 34. A meeting of the Board of Corporate Auditors shall be called by each corporate auditor. (Calling Meetings of Board of Corporate Auditors) Article 35. 1. Notice of a meeting of the Board of Corporate Auditors shall be dispatched to each corporate auditor three (3) days before the date of the meeting; provided, however, that such period may be shortened in case of emergency. 2. A meeting of the Board of Corporate Auditors may be held without going through the procedure for calling, if so agreed by all the corporate auditors. (Resolutions of Meetings of Board of Corporate Auditors) Article 36. 1. The Board of Corporate Auditors shall decide matters concerning the audit policy, the methods for investigating the state of the business and property and the execution of other duties of corporate auditors as well as such matters as are provided for in laws and ordinances. 2. Except as otherwise provided for in laws or ordinances, resolutions at a meeting of the Board of Corporate Auditors shall be adopted by a majority of the corporate auditors. 7 (Full-Time Corporate Auditor) Article 37. A full-time corporate auditor or auditors shall be elected by resolution of the Board of Corporate Auditors. (Remuneration and other interests) Article 38. Remuneration and other interests of corporate auditors shall be determined by resolution at a general meeting of shareholders. (Exemption of Liability of Outside Corporate Auditors) Article 39. The Company may enter into an agreement with outside corporate auditors under which their liability for damages due to the failure in performing their duties shall be limited in accordance with the provisions of Paragraph 1, Article 427 of the Corporation Law; provided, however, that the limit of liability under such agreement shall be the higher of the predetermined amount not less than five million (5,000,000) yen, or the amount provided for under the laws or regulations. CHAPTER VI. ACCOUNTS (Fiscal Year) Article 40. The fiscal year of the Company shall be one year from April 1 of each year to March 31 of the following year. (Record Date for Dividends at Fiscal Year End) Article 41. The record date for the dividends to be paid by the Company at the end of fiscal year shall be March 31 of each year. (Interim Dividends) Article 42. The Company may, by resolution of the Board of Directors, pay interim dividends by regarding September 30 of each year as the record date. (Period of Limitations for Dividends) Article 43. The Company shall be relieved from the obligation to pay any property available for distribution if such property available for distribution is cash and still remains unreceived after the lapse of three (3) full years from the date on which the same became due and payable. ----------------- 8 EX-1 3 rex012.txt EX-1.2 SHARE HANDLING REGULATIONS (ENGLISH TRANSLATION) Exhibit 1.2 (Translation) SHARE HANDLING REGULATIONS OF RICOH COMPANY, LTD. CHAPTER I. GENERAL PROVISIONS (Purpose) Article 1. Pursuant to Article 13 of the Articles of Incorporation, the business and the service charges pertaining to the shares of the Company shall be governed by these Regulations; provided, however, that in addition to these Regulations, handling procedures with respect to the beneficial shareholders shall be governed by the rules provided by Japan Securities Depository Center, Inc. (hereinafter referred to as the "Center"). (Administrator of Register of Shareholders) Article 2. The administrator of register of shareholders of the Company, its handling office and forwarding offices are as follows: Administrator of Register of Shareholders: The Chuo Mitsui Trust and Banking Company, Limited 33-1, Shiba 3-chome Minato-ku, Tokyo Handling Office: The Chuo Mitsui Trust and Banking Company, Limited (Head Office) 33-1, Shiba 3-chome Minato-ku, Tokyo Forwarding Offices: All branch offices in Japan of The Chuo Mitsui Trust and Banking Company, Limited and the head office and all branches offices in Japan of the Japan Securities Agents, Ltd. 1 (Types of Share Certificates) Article 3. The share certificates to be issued by the Company shall be in the following seven (7) denominations: one (1) share, five (5) shares, ten (10) shares, fifty (50) shares, one-hundred (100) shares, five-hundred (500) shares, and one-thousand (1,000) shares; provided, however, that share certificates representing any number of shares less than one-hundred (100) shares may be issued by stating the number of shares. 2. The shareholders shall not request the issuance of share certificates representing a number of shares constituting less than one unit, except as provided in Articles 13 (Request for Delivery of Non-Possessed Share Certificates), 21 (Re-issuance due to Defacement or Mutilation) and 22 (Re-issuance due to Filled Columns) hereof. (Request and Notification, etc.) Article 4. The procedures to submit a request, notification, submission or application with respect to the businesses delegated to the administrator of register of shareholders by the Company shall be addressed to the administrator of register of shareholders. 2. Any request, notification, submission or application to be made under these Regulations shall be in the form prescribed by the Company and shall be affixed with the seal, which seal impression has been registered with the Company in accordance with the provisions of Article 14 hereof. 3. In the case that any request, notification, submission or application hereunder is made or given by a proxy, a document certifying the power of the proxy must be submitted. In the event that any request, notification or application requires the consent of a curator or assistant, a document certifying such consent must be submitted. CHAPTER II. REGISTRATION OR RECORDING, ETC. IN REGISTER OF SHAREHOLDERS (Registration of Transfer) Article 5. In the case of registration or recording in the register of shareholders (hereinafter the "Registration of Transfer"), an application together with the share certificates on which 2 applicant name is appeared shall be requested. 2. In the case of an application for the Registration of Transfer of shares for the reasons other than an assignment, a document evidencing the acquisition thereof shall be requested in addition to the requirements provided for in the preceding Paragraph; provided, however, that in the case the share certificates have not been issued, submission of the share certificates thereof shall not be required. (Registration of Transfer pursuant to Specific Procedures under Laws and Ordinances) Article 6. In the event that a specific procedure is required by laws and ordinances for the Registration of Transfer of shares, an application together with the share certificates on which applicant name is appeared and a document certifying the completion of such procedure shall be submitted. (Registration in Register of Beneficial Shareholders) Article 7. Registration or recording in the register of beneficial shareholders shall be made based upon the notice from the Center relating to the beneficial shareholders and the beneficial ownership card. (Beneficial Ownership Card) Article 8. Beneficial shareholders shall submit a beneficial ownership card through a participant. (Aggregation) Article 9. In the event that a shareholder registered or recorded in the register of shareholders is recognized to be identical to a beneficial shareholder registered or recorded in the register of beneficial shareholders based on the address and the name of such shareholder, the number of shares held by such shareholder shall be aggregated for the purpose of exercising shareholder's rights. 3 CHAPTER III. REGISTRATION OF PLEDGE AND INDICATION OF TRUST PROPERTY (Registration or Cancellation of Pledge) Article 10. In the case of an application for registration, alteration or cancellation of a pledge on shares, an application therefore shall be requested under the joint signatures of the pledgor and the pledgee together with the share certificates on which the pledgee's name is appeared. (Indication or Cancellation of Trust Property) Article 11. In the case of an application for indication or cancellation of trust property on shares, the trustor or the trustee shall request an application together with the share certificates. CHAPTER IV. NON-POSSESSION OF SHARE CERTIFICATES (Submission of Non-Possession of Share Certificates) Article 12. In the case of a submission for the non-possession of share certificates, such request shall be submitted with the share certificates; provided, however, that in the case that the share certificates have not been issued, submission of the share certificates shall not be required. (Request for Delivery of Non-Possessed Share Certificates) Article 13. In the case that a shareholder, who has made a submission for non-possession of share certificates, requests for issuance of the share certificates, such shareholder shall be required to submit an application to that effect. CHAPTER V. VARIOUS NOTIFICATIONS (Notification of Name, Address and Seal Impression of Shareholder, etc.) Article 14. Shareholders, beneficial shareholders and registered share pledgees or their statutory representatives shall provide a notification of their names, address and seal impressions; provided, however, that foreigners who have the custom of signature may 4 substitute the seal impression with a specimen of their signature. 2. The same procedures shall apply when there are any changes in the items notified under the preceding Paragraph. (Notification of Addresses where Shareholders Residing Abroad, etc. Receive Notices) Article 15. In addition to the requirements provided for in the preceding Article, shareholders, beneficial shareholders and registered share pledgees or their statutory representatives residing abroad shall appoint resident standing proxies in Japan or provide notification of the addresses in Japan where they shall receive notices. 2. The provisions in the preceding Article shall apply MUTATIS MUTANDIS to resident standing proxies. (Representative of Corporation Shareholder) Article 16. In the case that a shareholder or beneficial shareholder is a corporation, notification of one (1) representative of such corporation shall be provided to the Company. 2. When the representative has been changed, a notification together with a certified copy of the commercial register shall be submitted. (Representative of Joint-owners of Shares) Article 17. Shareholders or beneficial shareholders who own shares jointly shall appoint one (1) representative and submit notification thereof. 2. The same procedure shall apply in the case of a change in such representative. (Change in Entries of Register of Shareholders, Register of Beneficial Shareholders and Share Certificates) Article 18. When a change is to be made in the entries in the register of shareholders, the register of beneficial shareholders or on share certificates for any of the following reasons, a notification thereof shall be submitted together with the share certificates and a document 5 evidencing such fact; provided, however, that submission of the share certificates shall not be required if such share certificates have not been issued or in the case of a change in the entries in the register of beneficial shareholders: 1. Change in the surname or given name; 2. Appointment, change or discharge of statutory representatives such as a person with parental authority or a guardian, etc.; 3. Change in the trade name or corporate name; and 4. Change in the organization of a legal entity. (Exception for Various Notifications by Beneficial Shareholders) Article 19. In the case of a notification by a beneficial shareholders set forth in this Chapter, such notification shall be made through a participant; provided, however, that in the case of only a change in the seal impression of the beneficial shareholders, such notification need not be made through a participant. CHAPTER VI. RE-ISSUANCE OF SHARE CERTIFICATES (Re-issuance of Share Certificates due to Split or Consolidation) Article 20. In the case of a request for the issuance of new share certificates due to a split or a consolidation of share certificates, an application thereof shall be submitted together with the share certificates. 2. Issuance of Less-Than-One-Unit Share Certificates due to a split or a consolidation of share certificates may not be made. (Re-issuance due to Defacement or Mutilation) Article 21. In the case of a request for the issuance of new share certificates due to defacement or mutilation, an application thereof shall be submitted together with the share certificates; provided, however, that when it is difficult to ascertain whether such share certificates are genuine, the provisions set forth in Chapter 7 shall apply. 6 (Re-issuance due to Filled Columns) Article 22. In the case that the columns for recording the names of ownership on the share certificates are completely filled out, the Company shall collect such share certificates and issue new share certificates. (Automatic Consolidation of Less-Than-One-Unit Share Certificates) Article 23. When Less-Than-One-Unit Share Certificates are submitted for the Registration of Transfer and such share certificates can be consolidated to constitute one (1) unit, the Company shall so consolidate the same, unless otherwise specifically requested by the applicant who has requested the Registration of Transfer. CHAPTER VII. REGISTRATION OF LOST SHARE CERTIFICATES, ETC. (Request for Registration of Lost Share Certificates) Article 24. An applicant who requests the registration of lost share certificates shall submit an application together with a document evidencing the acquisition of the share certificates, the loss of such share certificates and an identification of the applicant; provided, however, that in the case that the applicant who requests the registration of lost share certificates is a shareholder or a registered share pledgee pertaining to the lost share certificates, only a document evidencing the loss of share certificates shall be submitted, in addition to the application. (Application for Deregistration by a Registrant of Lost Share Certificates) Article 25. In the case that a registrant of the lost share certificates applies to deregister a registration stated in the preceding Article, an application shall be submitted. (Request for Deregistration by a Holder of Share Certificates) Article 26. In the case that an applicant, who requests to deregister the registration of lost share certificates, is a holder of such share certificates, an application together with such share certificates and an identification of the applicant shall be submitted; provided, however, that in the case that a shareholder or a registered share pledgee requests the deregistration, submission 7 of the identification of the applicant is not required. (Applicable Notifications) Article 27. In the case an applicant who requests the registration of lost share certificates is not a shareholder or a registered share pledgee and changes are to be made the entries or records in the register of lost share certificates, the provisions set forth in Articles 14 through 18 shall apply MUTATIS MUTANDIS. CHAPTER VIII. PURCHASE OF LESS-THAN-ONE-UNIT SHARES (Application for Request of Purchase) Article 28. In the case that a shareholder or beneficial shareholder who owns Less-Than-One-Unit Shares requests to the Company for the purchase of Less-Than-One-Unit Shares, an application shall be submitted together with the share certificates to the handling office or forwarding offices of the administrator of register of shareholders set forth in Article 2; provided, however, that in the case that the share certificates have not been issued, submission thereof shall not be required. 2. In the case that beneficial shareholders request an application set forth in the preceding Paragraph, the procedure shall be carried out through a participant and the Center. (Determination of Purchase Price) Article 29. The purchase price per share of Less-Than-One-Unit Share shall be the closing price of the stock of the Company at the market operated by the Tokyo Stock Exchange on the day on which the application and the share certificates are received at the handling office or a forwarding office of the administrator of register of shareholders set forth in Article 2; provided, however, that in the case that no trading is effected on that day or stock exchange is closed on that day, the purchase price shall be the price at which the shares of the Company are first traded thereafter. 2. The total purchase price for request of purchase pursuant to preceding Paragraph shall be the amount obtained by multiplying the purchase price by the number of shares requested to be purchased. 8 (Payment of Purchase Price) Article 30. Unless otherwise provided by the Company, the Company shall pay the amount obtained by deducting any fees stipulated in Article 41 from the purchase price calculated pursuant to the preceding Article to the applicant at the place where the request for purchase was filed on the date the Company designated within six (6) business days counting from the day following the day on which the purchase price in the preceding Article was determined; provided, however, that when such purchase price includes a premium due to dividends of surplus stock splits, etc., the purchase price shall be paid prior to the relevant record date. 2. The applicant requesting the purchase may request that payment of the purchase price be made by remittance/wire transfer to a bank account or post office account designated by such applicant. (Transfer of Shares Purchased) Article 31. Less-Than-One-Unit Shares for which a request for purchase has been made shall be transferred to the Company on the day on which the purchase price has been paid or the procedure for payment has been completed pursuant to the preceding Article. CHAPTER IX. SALE OF LESS-THAN-ONE-UNIT SHARES UPON A REQUEST FOR ADDITIONAL PURCHASE (Procedure for Request for Additional Purchase) Article 32. In the case that a request for the sale of additional shares is made to the Company by a shareholder or a beneficial shareholder who owns Less-Than-One-Unit Shares that, when added to the number of such shareholder's shares, would constitute for one unit of shares (hereinafter referred to as the "request for additional purchase"), a request for additional purchase shall be submitted together with the share certificates and the approximate amount for additional purchase set forth in the following Article to the handling office or forwarding offices of the administrator of the register of shareholders set forth in Article 2; provided, however, that in the case that the share certificates for such shares have not been issued, submission thereof shall not be required. 2. In the case that beneficial shareholders request for additional purchase set forth in 9 the preceding Paragraph, the procedure shall be carried out through a participant and the Center. (Approximate Amount for Additional Purchase) Article 33. The approximate amount for additional purchase shall be calculated by multiplying the closing price of the stock of the Company at the market operated by the Tokyo Stock Exchange on the business day (if there is no trading on such day, the closing price at which the shares of the Company are last traded prior to such day) immediate preceding the day on which the request for additional purchase and the share certificates set forth in the preceding Article are received at the handling office or a forwarding office of the administrator of register of shareholders set forth in Article 2 by the number of share requested to be additionally purchased and by 1.3; and any amount less than 1,000 yen arising out of such calculation shall be rounded up; provided, however, that in the case that beneficial shareholders request for additional purchase, such request shall be subject to the rules provided by the Center. 2. In the case that a request for additional purchase set forth in the preceding Article has been made, if the approximate amount for additional purchase actually received is less than the amount set forth in the preceding Paragraph, the Company shall not proceed with such request for additional purchase. (Requests for Additional Purchases which Exceed the Balance of the Shares of the Company Owned by Itself) Article 34. When the total number of shares for which requests for additional purchase are made in one day exceeds the number of the shares of the Company owned by itself that is transferable (excluding such shares owned for a specific purpose), none of the requests for additional purchase made on that day shall have any effect. (Effective Date of the Request for Additional Purchase) Article 35. The request for additional purchase shall become effective as of the day on which the request for additional purchase and the share certificates set forth in Article 32 and the approximate amount for additional purchase set forth in Article 33 are received at the handling office or a forwarding office of the administrator of register of shareholders set forth in Article 2 10 (Suspension Period for Acceptance of Requests for Additional Purchase) Article 36. The Company shall suspend to accept requests for additional purchase for the period from the day twelve (12) business days preceding March 31 to March 31 and the period from the day twelve (12) business days preceding September 30 to September 30 of each year. 2. Notwithstanding the preceding Paragraph, the Company may set an additional suspension period for acceptance of requests for additional purchase, if the Company deems it necessary. (Determination of the Price for Additional Purchase) Article 37. The purchase price per share for additional purchase of Less-Than-One-Unit Shares shall be the closing price of the stock of the Company at the market operated by the Tokyo Stock Exchange on the effective date of the request for additional purchase; provided, however, that in the case that no trading is effected on that day or such stock exchange is closed on that day, the purchase price per share shall be the price at which the shares of the Company are first traded thereafter. 2. The total purchase price for additional purchase of Less-Than-One-Unit Shares shall be the amount obtained by multiplying the purchase price per share for additional purchase of Less-Than-One-Unit Shares by the number of shares requested to be additionally purchased. 3. In the event that the approximate amount for additional purchase set forth in Article 33 is less than the sum of the total purchase price set forth in the preceding Paragraph and the fees for additional purchase set forth in Article 41 (hereinafter referred to as "Definitive Purchase Price for Additional Shares"), the shortfall shall be charged to the shareholder who made such request for additional purchase. In this case, such request for additional purchase shall be cancelled if such shortfall is not paid within five (5) business days following the day on which the shortfall was charged. (Receipt of Definitive Purchase Price for Additional Shares) Article 38. The Company shall receive the Definitive Purchase Price for Additional Shares out of the approximate amount for additional purchase on the day designated by the Company within six (6) business days either from the date on which the Definitive Purchase Price for 11 Additional Shares is determined or from the date immediate following the day on which the shortfall is paid in accordance with Paragraph 3 of the preceding Article; provided, however, that when such purchase price includes a premium due to dividends, stock splits, etc., the purchase price shall be received prior to the relevant record date. 2. The balance of the approximate amount for additional purchase and the Definitive Purchase Price for Additional Shares set forth in the preceding Paragraph shall be returned to the shareholder who made the request for additional purchase, by remittance/wire transfer to a bank account or post office account designated by such shareholder. (Transfer of Additionally Purchased Shares) Article 39. The Less-Than-One-Unit Shares for which a request for additional purchase has been made shall be transferred to the shareholder or a beneficial shareholder who made the request for additional purchase on the day which the Definitive Purchase Price for Additional Shares was received pursuant to the preceding Article. (Delivery of Share Certificate) Article 40. The Company shall issue a share certificate for shares that constitute one unit as a result of the request for an additional purchase without delay and deliver the same to the shareholder who made the request for the additional purchase; provided, however, that in the case that a request for additional purchase is made by a beneficial shareholder, this Article is not applied. CHAPTER X. FEES (Fees) Article 41. Fees for handling of the shares of the Company are as follows: (1) Delivery of share certificates pursuant to Article 13 (Request for Delivery of Non-Possessed Share Certificates) and Article 21 (Re-issuance due to Defacement of Mutilation) Yen 200 per share certificate 12 (2) Request for the registration of lost share certificates as set forth in Article 24 (Request for the Registration of Lost Share Certificates): Yen 8,600 per registration Yen 500 per share certificate (3) In the case of purchasing Less-Than-One-Unit Shares pursuant to Article 28 (Application for Request of Purchase) and additional purchase by the shareholders pursuant to Article 32 (Procedure for Request for Additional Purchase), an amount per unit calculated pursuant to the following formula, as equivalent to the brokerage commission for the sale and purchase of shares, which shall be proportionally dividend by the number of Less-Than-One-Unit Shares purchased. Formula: In respect of the total amount obtained by multiplying the purchase price per share specified in Article 29 (Determination of Purchase Price) and Article 37 (Determination of the Price for Additional Purchase) by the number of shares constituting one unit of shares: Amount equal to or less than 1 million yen: 1.150% Amount exceeding 1 million yen and equal to or less than 5 million yen: 0.900% Amount exceeding 5 million yen and equal to or less than 10 million yen: 0.700% Amount exceeding 10 million yen and equal to or less than 30 million yen: 0.575% Amount exceeding 30 million yen and equal to or less than 50 million yen: 0.375% (Any amounts less than Yen 1 are rounded down.) Provided, however, that if the amount so calculated for one unit of share is less than Yen 2,500, the amount for one unit shall be Yen 2,500. SUPPLEMENTARY PROVISION 1. Date of Enactment: June 28, 2006 2. Date of Amendment: June 28, 2006 3. Approved by: The Board of Directors 13 4. Established by: Head Office of the Department of Human Resources. Administrative Manager 5. Section in charge: Head Office of the Department of Human Resources. Department of General Affairs 14 EX-1 4 rex013.txt EX-1.3 REGULATIONS OF THE BOARD OF DIRECTORS (ENGLISH TRANSLATION) Exhibit 1.3 (Translation) REGULATIONS OF THE BOARD OF DIRECTORS (Purpose) Article 1. These Regulations shall set forth matters concerning the role and function of the Board of Directors of the Company, the management of the meeting of the Board of Directors of the Company and matters to be resolved thereof. (Application) Article 2. Any matters with regards to the Board of Directors shall be governed by these Regulations in addition to the applicable laws and ordinances and the Articles of Incorporation. (Role and Function) Article 3. The Board of Directors of the Company shall conduct decision-making activities as to important matters set forth in the applicable laws and ordinances, the Articles of Incorporation and these Regulations relating to the Company and the Ricoh group companies, as well as supervise the management of all Ricoh group companies. The Board of Directors shall allocate management resources through deliberation and approval of management policy and the decision-making activities of other important matters. The Board of Directors shall motivate senior management by supervising and evaluating the state of execution of management policy, and by making appointment and removal decisions as well as determining the compensation levels of senior management based on the state of execution of management policy. With respect to the deliberations of the Board of Directors, the Board of Directors shall place importance on social responsibility, compliance and increasing transparency in their deliberations. (Organization) Article 4. The Board of Directors shall consist of all Directors. (Attendance by Corporate Auditors) Article 5. Corporate Auditors shall attend the meetings of the Board of Directors and, when necessary, express their opinions at the meeting. (Types of Meetings of the Board of Directors) Article 6. Meetings of the Board of Directors shall consist of ordinary meetings of the Board of Directors and extraordinary meetings of the Board of Directors. Ordinary meetings of the Board of Directors shall be held periodically at least once every three (3) months, and extraordinary meetings of the Board of Directors shall be held whenever necessary. 1 (Committee) Article 7. The Company shall establish a Nomination and Compensation Committee as a committee within the Board of Directors. The composition, function, management, etc. of the Nomination and Compensation Committee shall be set forth separately. (Chairman) Article 8. The Chairman of the Board of Directors shall be appointed from the Directors by a resolution of the Board of Directors. If the Chairman of the Board of Directors is unable to act, another Director shall be appointed as the Chairman of the Board of Directors, in accordance with the order determined in advance by the Board of Directors. (Person Convening Meetings) Article 9. A meeting of the Board of Directors shall be convened by the Chairman of the Board of Directors. In case the Chairman is unable to act, one of the other Directors shall convene the meeting of the Board of Directors in accordance with the order determined in advance by resolution of the Board of Directors. Each Director and Corporate Auditor may request convocation of a meeting of the Board of Directors by submitting a document that includes an agenda and sets forth the reason for such meeting to the person with the right to convene such meeting. If a notice of convocation of a meeting of the Board of Directors to be held within two (2) weeks from the date of such request is not dispatched within five (5) days of such request, the Director or Corporate Auditor who requested such meeting may convene a meeting of the Board of Directors. (Convocation Notice) Article 10. Notice of a meeting of the Board of Directors shall be dispatched to each Director and each Corporate Auditor three (3) days before the date of meeting; provided, however, that such period may be shortened in case of emergency. A meeting of the Board of Directors may be held without going through the procedure for calling, if so agreed by all the Directors and the Corporate Auditors. (Resolution) Article 11. Resolutions of the Board of Directors shall be adopted by the affirmative vote of a majority of the Directors present at the meeting, whereby a majority of all Directors shall constitute a quorum. A Director who has a special interest in any proposal that is deliberated by the Board of Directors shall not be entitled to vote on such matter. (Omission of Resolution) Article 12. The Company shall deem that the resolution of the Board of Directors has been adopted if the requirements under Article 370 of the Corporation Law are satisfied 2 (Attendance by Third Parties) Article 13. The Board of Directors may request any person other than Directors and Corporate Auditors to attend a meeting of the Board of Directors and to provide reports or opinions whenever necessary. (Matters to be Resolved) Article 14. The following matters shall be resolved at a meeting of the Board of Directors: 1. Statutory matters 1-1 Establishment, relocation and closure of a branch and other important organizations; 1-2 Transfer and acquisition of business and disposal and acquisition of important assets; 1-3 A significant amount of borrowing, donation, capital contribution, loan, guarantee, furnishing of collateral and waiver of indebtedness; 1-4 Appointment and removal of a Representative Director, manager and other important employees; 1-5 Approval of transactions in competition with the Company by a Director, transactions between a Director and the Company, and transactions in which there is a conflict of interest between a Director and the Company; 1-6 Approval before any full-time Director of the Company assumes a senior officer or director position of any other company; 1-7 Invitation of parties to underwrite new shares; 1-8 Stock splits; 1-9 Increase of the total number of shares to be issued by the Company at the ratio in accordance with a stock split and amendments to the Articles of Incorporation pursuant to such increase; 1-10 Interim dividends; 1-11 Issuance of corporate bonds and bonds with stock purchase warrants; 1-12 Approval of the financial documents and business reports, and other annexed specifications; 1-13 Determination regarding the convocation of a meeting of the shareholders and its agenda; 1-14 Determination regarding matters delegated by a resolution of the meeting of the shareholders; 1-15 Acquisition of its own stock by the Company based on a resolution adopted at the meeting of the shareholders; 3 1-16 Acquisition of its own stock owned by a subsidiary of the Company; 1-17 Elimination of the treasury stock by the Company; 1-18 Amendments to the Articles of Incorporation as a result of a decrease in the number of shares per unit or abolishment of the unit system; 1-19 Invitation of parties to underwrite new stock purchase warrants; 1-20 Computerization of exercising voting rights at a shareholders' meeting; 1-21 Development of a system tht ensures that the performance of their duties by Directors is in compliance with the law and ordinances and the Articles of Incorporation, and other systems as provided for by a Ministerial Ordinance of the Ministry of Justice as necessary to ensure the adequacy of the Company's operations; and 1-22 Other matters stipulated by the applicable laws and ordinances. 2. Matters authorized by the Articles of Incorporation 2-1 Acquisition of its own stock by the Company; 2-2 Designation of an administrator of the register of shareholders and its handling offices; and 2-3 Establishment, amendment or abolishment of the Share Handling Regulations. 3. Other important matters relating to the execution of business of the Company. (Business Affairs of Company) Article 15. Pursuant to the applicable laws and ordinances, the Articles of Incorporation and these Regulations, a Representative Director shall execute the business of the Company and act as a representative of the Company to third parties as part of his duties. In the event that there are more than one (1) Representative Directors, a Representative Director who is also the President shall be the chief executive officer of the Company. (Matters to be reported to the Board of Directors and the Board of Corporate Auditors) Article 16. The Board of Directors shall receive reports concerning the following matters: 1-1 The President shall report on the conditions of the execution of the business of the Company to the Board of Directors at least once every three (3) months. The President may cause any other person to provide a report on his/her behalf. 1-2 The Board of Directors shall receive reports on the following matters from the relevant Directors: (i) Transactions in competition with the Company by a Director, transactions between a Director and the Company, and transactions in which there is a 4 conflict of interest between a Director and the Company (Paragraph 1, Article 356 of the Corporation Law); and (ii) Reports on important matters (1) When any part-time Director of the Company assumes a senior officer or director position of another company (2) Other important matters. 1-3 The Board of Directors shall receive reports on the summary of the deliberations of a meeting of the Nomination and Compensation Committee and the results thereof. 2. The Board of Directors shall receive reports on matters set forth by the appicabe laws and ordinances (Article 382 of the Corporate Law) from the Corporaion Auditors. (Minutes) Article 17. The summary and results of the proceedings of a meeting of the Board of Directors and other matters set forth by the laws and ordinances shall be recorded in the minutes of the meeting of the Board of Directors, to which each Director and Corporate Auditor shall print his/her name and affix his/her seal, and which minutes shall be kept in safe-keeping by the Company, pursuant to the laws and ordinances. Such minutes shall be kept for ten (10) years at the principal office of the Company. (Board of Directors Clerical Office) Article 18. The Chief Secretary shall handle any administrative matters concerning the Board of Directors. (Other Matters) Article 19. Any matters relating to the administration of the meetings of the Board of Directors which are not provided for by the applicable laws and ordinances, the Articles of Incorporation or these Regulations shall be determined by the Chairman. (Amendment to or Abolition of These Regulations) Article 20. The amendment to or abolishment of these Regulations shall be subject to the resolution by the Board of Directors. SUPPLEMENTARY PROVISIONS Date of Establishment and October 1, 1982 Enactment: Date of Enactment of Amendment: July 1, 1977 February 7, 1978 September 21, 1982 October 1, 1987 Date of Confirmation: October 1, 1997 5 Date of Enactment of Amendment: June 26, 1998 June 29, 2000 October 1, 2001 May 1, 2002 June 25, 2004 June 28, 2005 November 1, 2005 May 1, 2006 June 28, 2006 March 13, 2008 Approved by: The Board of Directors Section in Charge: Secretariat Office 6 EX-1 5 rex014.txt EX-1.4 REGULATIONS OF THE BOARD OF CORPORATE AUDITORS (ENGLISH TRANSLATION) Exhibit 1.4 (Translation) REGULATIONS OF THE BOARD OF CORPORATE AUDITORS OF RICOH COMPANY, LTD. (Purpose) Article 1. These Regulations of the Board of Corporate Auditors (the "Regulations") shall govern the matters concerning the Board of Corporate Auditors of Ricoh Company, Ltd. (the "Company") pursuant to the applicable laws and ordinances and the Articles of Incorporation of the Company. (Composition) Article 2. (1) The Board of Corporate Auditors shall be composed entirely of Corporate Auditors of the Company. (2) The Board of Corporate Auditors shall have a full-time Corporate Auditor. (3) In addition to the requirement of the preceding paragraph, the Board of Corporate Auditors shall have a Chairman (a "Chairman") and a Specified Corporate Auditor as defined in Article 7 hereof. (Objectives of the Board of Corporate Auditors) Article 3. The objective of the Board of Corporate Auditors shall be to receive reports, discuss and resolve on matters of importance relating to audits; provided, however, nothing provided for in this article shall preclude a Corporate Auditor from exercising his or her powers as a Corporate Auditor. (Duties of the Corporate Auditors) Article 4. The Board of Corporate Auditors shall perform the following duties; provided, however, nothing in Item 3 below shall preclude a Corporate Auditor from exercising his or her powers as a Corporate Auditor. 1. Prepare audit reports; 2. Appoint and remove full-time Corporate Auditors; and 3. Determine audit policies, investigation methods as to the state of the Company's business and assets and other matters relating to the exercise of Corporate Auditors' duties. 1 (Appointment and Removal of Full-Time Corporate Auditors) Article 5. The Board of Corporate Auditors shall, by resolution, appoint full-time Corporate Auditors from among Corporate Auditors or remove full-time Corporate Auditors. (Chairman) Article 6. (1) The Board of Corporate Auditors shall, by resolution, determine a Chairman from among Corporate Auditors. (2) The Chairman shall, in addition to the duties set forth in Article 9, Paragraph 1 below, carry out duties that are delegated to him or her by the Board of Corporate Auditors; provided, however, the Chairman shall not preclude a Corporate Auditor from exercising his or her powers as a Corporate Auditor. (3) The term of the Chairman shall be for one year from the meeting of the Board of Corporate Auditors held after completion of the ordinary general meeting of shareholders. (Specified Corporate Auditor) Article 7. (1) The Board of Corporate Auditors shall, by resolution, determine an individual (the "Specified Corporate Auditor") who shall carry out the following duties: 1. Receive from Directors business reports and supplementary statements attached thereto as well as accounts-related documents, which shall be received by each Corporate Auditor, and distribute such documents to other Corporate Auditors; 2. Provide notice of the contents of the audit report prepared by the Board of Corporate Auditors concerning business reports and supplementary statements attached thereto to a Director designated as the recipient of such notice (the "Specified Director"); 3. Agree with the Specified Director as to the date on which notice set forth in the previous paragraph shall be provided; 4. Receive notice on the contents of accounting audit reports from the accounting auditors and notify the contents of such accounting audit reports to other Corporate Auditors; 5. Notify the Specified Director and accounting auditors of the contents of the audit report prepared by the Board of Corporate Auditors relating to the accounts-related documents; and 2 6. Agree with the Specified Director and accounting auditor as to the date on which notice of the contents of the accounting audit report from the accounting auditor shall be received. (2) The Specified Corporate Auditor shall be a full-time Corporate Auditor. (Holding of Meetings) Article 8. As a general rule, meetings of the Board of Corporate Auditors shall be held at least once every three (3) months; provided, however, meetings may be held from time to time whenever necessary. (Convener of Meetings) Article 9. (1) The Chairman shall convene and conduct the meetings of the Board of Corporate Auditors. (2) A Corporate Auditor may request that the Chairman convene a meeting of the Board of Corporate Auditors. (3) In the event that the Chairman does not convene a meeting of the Board of Corporate Auditors, despite a request made pursuant to the preceding paragraph, the Corporate Auditor who made the request may convene and conduct the meeting himself or herself. (Convocation Procedures) Article 10. (1) To convene a meeting of the Board of Corporate Auditors, a notice of convocation shall be dispatched to each Corporate Auditor at least three (3) days prior to the date of such meeting. (2) A meeting of the Board of Corporate Auditors may be held without following the convocation procedures, with the unanimous consent of all of the Corporate Auditors. (Method of Resolution) Article 11. (1) A resolution of the Board of Corporate Auditors shall be adopted by a majority vote of all Corporate Auditors; provided, however, resolution of matters set forth in Article 19, Paragraph 2 (removal of accounting auditors), Article 24, Paragraph 1 (partial exemption from liability for Officers, etc.) and Article 25, Paragraph 1 (auxiliary intervention in a derivative action by shareholders) shall be adopted unanimously. (2) Prior to adopting a resolution, Corporate Auditors shall deliberate upon matters based on sufficient information and materials. 3 (Resolutions Relating to Audit Policies, etc.) Article 12. (1) The Board of Corporate Auditors shall, by resolution, establish matters such as the audit policy, audit plan, audit method and sharing of audit services. (2) In addition to the matters provided in the preceding paragraph, the Board of Corporate Auditors shall resolve such other matters it deems necessary for performing its duties, such as the budget for audit expenses and expenses relating to independent outside advisors. (3) The Board of Corporate Auditors shall adopt resolutions concerning the contents of the structures listed below and, as it deems necessary, request Directors of the Company to develop these structures. 1. Matters relating to employees who shall assist the Corporate Auditors in performing their duties; 2. Matters relating to the independence of the employees provided in the preceding item from Directors; 3. A structure under which Directors and employees shall report to Corporate Auditors and other structures relating to reports to Corporate Auditors; and 4. Other structures to ensure the effective audit by the Corporate Auditors. (Regular Meetings, etc. with Representative Director(s)) Article 13. (1) The Board of Corporate Auditors shall regularly meet with the Representative Director(s) in an effort to foster mutual awareness by exchanging opinions on such matters as those that the Company shall address, improvements to the environment in which audits are conducted by the Corporate Auditors and issues of importance in conducting audits, and requesting modifications that it deems necessary. (2) The Board of Corporate Auditors shall explain to the Representative Director(s) and, when necessary, to the Board of Directors the audit policies and audit plans as well as results of the audit. (3) In addition to the matters as required by law, the Board of Corporate Auditors shall, upon consultation with Directors, determine the matters on which the Board of Directors and employees shall report to the Board of Corporate Auditors in accordance with the structures provided in Paragraph 3, Item 3 of the preceding article, and shall receive reports on such matters. (Reports to the Board of Corporate Auditors) Article 14. (1) A Corporate Auditor shall regularly and from time to time, or when requested by the Board of Corporate Auditors, report to the Board of Corporate Auditors on the status of performance of his or her duties. 4 (2) A Corporate Auditor who has received a report from an accounting auditor, Director, employee of the Audit Office or any other person shall report thereon to the Board of Corporate Auditors. (3) The Board of Corporate Auditors shall request reports from accounting auditors, Directors, employees of the Audit Office and such other persons as it deems necessary. (4) In connection with the preceding three (3) paragraphs, in the event a Corporate Auditor, accounting auditor, Director, an employee of the Audit Office or any other person notifies all Corporate Auditors of matters that should be reported to the Board of Corporate Auditors, such matters shall not be required to be reported to the Board of Corporate Auditors. (Measures to be Taken upon the Receipt of Reports) Article 15. If the Board of Corporate Auditors receives a report as to the matters listed below, it shall conduct the necessary investigation and take measures appropriate to the circumstance: 1. A report from a Director regarding a discovery of a fact that may cause significant damage to the Company; 2. A report from an accounting auditor regarding a discovery of an improper action by a Director in carrying out his or her duties or a discovery of a material fact such that it may result in a breach of the laws and ordinances or the Articles of Incorporation; or 3. A report from a Director or an employee on matters that have previously been discussed and decided upon with the Directors. (Measures to be Taken against Internal and External Claims and Accusations) Article 16. (1) The Board of Corporate Auditors shall delegate part of its duties to accept, retain and handle claims or accusations relating to inadequacies in accounting, internal accounting controls or auditing to the Corporate Social Responsibility ("CSR") Enhancement Section. (2) In the event that the Board of Corporate Auditors receives from the CSR Enhancement Section or others a report on claims and accusations set forth in the previous paragraph concerning the matters listed below, provisions set forth in the previous article shall apply MUTATIS MUTANDIS: 1. Violations of Article 356 of the Companies Act of Japan (Restrictions on Competition and Conflicting Interest Transactions); 2. Derivative actions by shareholders; 3. Important matters affecting the business performance of the Company; and 4. Other material violations relating to compliance or material inadequacies relating to accounting, internal accounting controls or auditing. 5 (Preparation of Audit Reports) Article 17. (1) The Board of Corporate Auditors shall, based upon audit reports prepared by each Corporate Auditor, deliberate upon and prepare the audit report of the Board of Corporate Auditors. (2) In the event that the contents of the Board of Corporate Auditors' audit report differ from the contents of audit reports prepared by each Corporate Auditor and a Corporate Auditor requests that the contents of his or her audit report be quoted in the audit report of the Board of Corporate Auditors, such contents shall be so quoted. (3) Each Corporate Auditor shall sign or affix his or her seal (including electronic signature) on the Board of Corporate Auditors' audit report. Full-time Corporate Auditors and outside Corporate Auditors shall note or record in the audit report that they are a full-time Corporate Auditor or an outside Corporate Auditor, as appropriate. (4) In the event that the Company prepares extraordinary accounting documents or consolidated accounting documents, the provisions of the preceding three (3) paragraphs shall apply MUTATIS MUTANDIS to the preparation of such documents. (Consent etc., Concerning the Appointment of Corporate Auditors) Article 18. (1) The following matters concerning the appointment of Corporate Auditors shall be resolved at a meeting of the Board of Corporate Auditors: 1. Consent to the submission of a proposal concerning the appointment of Corporate Auditors to a general meeting of shareholders; 2. Request the inclusion of the appointment of a Corporate Auditor in the agenda of a general meeting of shareholders; and 3. Request the submission of a proposal concerning the appointment of a Corporate Auditor to a general meeting of shareholders. (2) The preceding paragraph shall also apply MUTATIS MUTANDIS to the appointment of an alternate Corporate Auditor to fill vacancies of Corporate Auditors. (Consent etc. Concerning the Appointment of Accounting Auditors) Article 19. (1) The following matters concerning the appointment, removal or non-reappointment of accounting auditors shall be resolved at a meeting of the Board of Corporate Auditors: 1. Consent to the submission of a proposal concerning the appointment of accounting auditors to a general meeting of shareholders; 6 2. Consent to the inclusion of the removal or non-reappointment of an accounting auditor in the agenda of a general meeting of shareholders; 3. Request the submission of a proposal concerning the appointment of an accounting auditor to a general meeting of shareholders; 4. Request the inclusion of the appointment, removal or non-reappointment of an accounting auditor in the agenda of a general meeting of shareholders; and 5. Appointment of a person who shall temporarily perform the duties of an accounting auditor in the case of its absence. (2) In the event that the Board of Corporate Auditors is to remove an accounting auditor based upon reasons provided for by statute, the Board of Corporate Auditors shall do so by unanimous resolution. In such case, the Corporate Auditor appointed by the Board of Corporate Auditors must report on the removal and the reasons therefor at the first general meeting of shareholders held after such removal. (3) The consent contemplated in the preceding paragraph may be obtained in writing or by electronic record when there is an urgent need to do so. (Resolutions Concerning the Appointment and Removal of Independent Outside Advisors) Article 20. The appointment and removal of independent outside advisors shall be by a resolution of the Board of Corporate Auditors. (Consent to Remuneration, etc. of the Accounting Auditor) Article 21. Consent to the remuneration, etc. of the accounting auditor or any person who shall temporarily perform the duties of an accounting auditor payable by the Company or its subsidiaries shall be obtained by a resolution of the Board of Corporate Auditors. (Report and Confirmation of the Contents of the Annual Securities Report and Annual Report) Article 22. The Board of Corporate Auditors shall receive reports from the Disclosure Committee as to the Annual Securities Report prepared pursuant to the Securities and Exchange Law of Japan, as amended, and the Annual Report on Form 20-F prepared pursuant to the United States Securities Exchange Act of 1934, as amended, and confirm its contents. 7 (Pre-Approval Relating to the Independence of Accounting Auditors) Article 23. (1) The Board of Corporate Auditors shall pre-approve the audit services and non-audit services to be provided to the Company and its subsidiaries by accounting auditors. (2) The Board of Corporate Auditors shall establish the "Audit and Non-Audit Services Pre-Approval Policy" as its policies and procedures for pre-approval. (3) The Board of Corporate Auditors may, by resolution, delegate the power to pre-approve non-audit services to an outside Corporate Auditor. (Consent Relating to the Partial Exemption from Liability for Officers, etc.*) Article 24. (1) The consent of the Board of Corporate Auditors as to matters listed below shall be obtained by a unanimous resolution adopted by all Corporate Auditors: 1. Submission of proposals concerning the partial exemption from liability for Officers, etc. to a general meeting of shareholders; 2. Submission of proposals concerning an amendment to the Articles of Incorporation, which shall empower the Board of Directors to partially exempt Officer, etc. from liability by a resolution at a meeting of the Board of Directors, to a general meeting of shareholders; 3. Submission of proposals concerning the partial exemption from liability of Officers, etc. to the Board of Directors meeting, in accordance with the Articles of Incorporation; and 4. Submission of proposals concerning an amendment to the Articles of Incorporation, which enables the Company to enter into an agreement with outside Officers, etc. to partially exempt him or her from liability, to a general meeting of shareholders. (2) The consent contemplated in the preceding paragraph may be obtained in writing or by electronic record when there is an urgent need to do so. (Consent to Auxiliary Intervention) Article 25. (1) The consent of the Board of Corporate Auditors concerning the Company's auxiliary intervention for a Director who is a defendant in a derivative action by shareholders shall be obtained by a unanimous resolution at a meeting of the Board of Corporate Auditors, as provided in the previous article. - -------- [*The term "Officers, etc." used herein means Directors, accounting advisors and Corporate Auditors as provided in Article 329, Paragraph 1 of the Corporation Act of Japan.] 8 (2) The consent contemplated in the preceding paragraph may be obtained in writing or by electronic record when there is an urgent need to do so. (Deliberation Regarding the Exercise of Powers by Corporate Auditors) Article 26. Corporate Auditors may deliberate at a meeting of the Board of Corporate Auditors before they exercise their powers or fulfill their obligations with respect to the following matters: 1. Responses to inquiries to a Corporate Auditor received from a shareholder in advance of a general meeting of shareholders; 2. Matters such as reports to the Board of Directors and requests to convene a meeting of the Board of Directors; 3. Items and documents to be submitted to a general meeting of shareholders and results of research relating to other matters; 4. Request for suspension of the acts of Directors that are outside the scope of the Company's purpose or that are in violation of laws and ordinances or the Company's Articles of Incorporation; 5. Statements of opinion regarding the appointment, removal, resignation and remuneration, etc. of Corporate Auditors at a general meeting of shareholders; 6. Matters concerning lawsuits between the Company and Directors; and 7. Any other matters concerning the filing of lawsuits, etc. (Deliberation on Remuneration) Article 27. Deliberation of the remuneration, etc. of Corporate Auditors may, if all Corporate Auditors have so consented, be conducted at a meeting of the Board of Corporate Auditors. (Mutual Vote for Full-Time Corporate Auditors) Article 28. The Corporate Auditors may elect full-time Corporate Auditors from among themselves. (Minutes) Article 29. (1) The Board of Corporate Auditors shall prepare minutes for its meetings, which shall contain the matters listed below, and each Corporate Auditor who attends the meeting shall sign or affix his or her seal (including electronic signature) on the minutes. 9 1. Date, time and location of the meeting (including the method of attendance of any Corporate Auditor, Director or accounting auditor who was not at the location of the meeting but attended the meeting of the Board of Corporate Auditors); 2. Outline of the proceedings and the results thereof; 3. If an opinion or statement was made at the Board of Corporate Auditors meeting on any of the following matters, a summary of such opinion or statement: (a) A report from a Director regarding a discovery of a fact that may cause significant damage to the Company; and (b) A report from an accounting auditor regarding a discovery of an improper action by a Director in carrying out his or her duties or a discovery of a material fact such that it may result in a breach of the laws and ordinances or the Articles of Incorporation. 4. The name or trade name of the Directors and the accounting auditors who were present at the meeting. (2) If a report to the Board of Corporate Auditors is not required pursuant to the provisions of Article 14, Paragraph 4, the Board of Corporate Auditors shall prepare minutes setting forth the following items: 1. The content of matters that are determined to be unnecessary to be reported to the Board of Corporate Auditors; 2. The date on which the matters were determined to be unnecessary to be reported to the Board of Corporate Auditors; and 3. The name of the Corporate Auditor who prepared the minutes. (3) The Company shall maintain the minutes of the Board of Corporate Auditors provided in the preceding two (2) paragraphs at its head office for the period of ten (10) years. (Secretariat of the Board of Corporate Auditors) Article 30. The convocation of meetings of the Board of Corporate Auditors, drafting of the minutes and other matters concerning the administration of the meeting of the Board of Corporate Auditors shall be handled by employees that have the duty to support the Corporate Auditors, such as the staff of the Corporate Auditors. (Auditing Standards of Corporate Auditors) Article 31. Matters relating to the meetings of the Board of Corporate Auditors and audits by the Corporate Auditors shall comply with the laws and ordinances, the 10 Articles of Incorporation and these Regulations, as well as the audit standards of the Corporate Auditors determined by the Board of Corporate Auditors. (Amendment to and Abolition of These Regulations) Article 32. Any amendment to or abolition of these Regulations shall be made by the Board of Corporate Auditors. 11 SUPPLEMENTARY PROVISIONS 1. Date of Enactment: June 28, 2006 2. Approved by: The Board of Corporate Auditors 3. Established by: Chief of Audit Section 4. Section in Charge: Audit Section 5. History of Establishment and Amendments Date of Establishment and Enactment: November 1, 1978 (Chief of Audit Section) Date of Enactment of Amendments: June 29, 1982 (Chief of Audit Section) Date of Enactment of Amendments: June 29, 1994 (Chief of Audit Section) Date of Enactment of Amendments: May 1, 2002 (Chief of Audit Section) Date of Enactment of Amendments: May 1, 2003 (Chief of Audit Section) Date of Enactment of Amendments: October 17, 2003 (Chief of Audit Section) Date of Enactment of Amendments: February 25, 2005 (Chief of Audit Section) Date of Enactment of Amendments: June 28, 2006 (Chief of Audit Section)
12 EX-11 6 rex110.txt EX-11 CODE OF ETHICS (ENGLISH TRANSLATION) Exhibit 11 RICOH THE RICOH GROUP CODE OF CONDUCT 1 Ricoh Group Corporate Social Responsibility (CSR) Charter To grow as a respected enterprise, the Ricoh Group must fully discharge its corporate social responsibility (CSR) from a consistent global perspective and throughout every aspect of its operations. To ensure this, the following principles are to be observed, with the proper social awareness and understanding, compliant with both the letter and the spirit of national laws and the rules of international conduct. Integrity in Corporate Activities 1. Every company in the Ricoh Group will develop and provide useful products and services, with high quality, safety, reliability and ease of use, while maintaining security of information and giving proper consideration to the environment. 2. Every company in the Ricoh Group will compete fairly, openly and freely, maintaining normal and healthy relationships with political institutions, government administration, citizens and organizations. 3. Every company in the Ricoh Group will take responsibility for managing and safeguarding its own information and that of its customers. Harmony with the Environment 4. Every company in the Ricoh Group will take responsibility, as a citizen of the world, working voluntarily and actively to preserve the environment. 5. Every company in the Ricoh Group, and all employees of each company, will seek to implement technological innovations that reflect environmental concerns and will participate in ongoing activities to preserve the environment. Respect for People 6. Every company in the Ricoh Group will, quite apart from corporate group activities, maintain a working environment that is safe and that makes it easier for its staff to do perform their duties, respecting their richly individual characteristics and encouraging their autonomy and creativity. 7. Every company in the Ricoh Group will respect the rights of all those connected with it, and will seek to create a cheerful working environment, free of discrimination. 8. No company in the Ricoh Group will permit forced labor or child labor, and none will tolerate the infringement of human rights. Harmony with Society 9. Every company in the Ricoh Group will, as a good corporate citizen, actively 2 engage in activities that contribute to society. 10. Every company in the Ricoh Group will respect the culture and customs of its country or region, and will operate so as to contribute to their development. 11. Every company in the Ricoh Group will engage in the fullest possible communications with society, seeking actively to provide the proper and unbiased disclosure of corporate information. 3 Message from the CEO Ricoh, aiming at harmonizing with society and earning its trust, established the Ricoh Business Code of Conduct in April, 1993 as the standard for corporate behavior as well as individual behavior by each and every officer and employee of the Group. Furthermore, each group company also created a Code of Conduct based on the Ricoh model which helped to enhance the reputation of the entire Group. However, in recent years the company has stepped up its role and influence as a committed environmentalist and global citizen. With these new roles coming to the fore, it has now become essential for companies to step up their activity level from mere social contribution to one of responsibility to society, with a management oriented toward corporate social responsibility. Thus it behooves companies to carry out their corporate activities with a keener sense of ethics, morals and responsibility over and above compliance with regulations. Along with the globalization of our corporate activity and group management, the Ricoh Group has been increasingly composed of people with different sets of values in a variety of countries around the world and therefore the need to unite our thinking around common values and standard of behavior has become more and more urgent. I therefore decided that it was time to review the original Ricoh Business Code of Conduct from the viewpoint of " a corporation which has responsibility to harmonize with society and with the environment ". Then, we established " the Ricoh Group CSR Charter " to be shared globally by the Ricoh group and " the Ricoh Group Code of Conduct " that Ricoh group members should adopt as a mind set and behavior guide. This Code ensures that we will continue into the future to be " a good global corporate citizen with reliability and appeal ". I firmly believe that serious adherence to this Code and Charter will help us to be even more appreciated by customers and society alike. I expect every member of the Ricoh Group family to take these principles to heart. January 1, 2004 Masamitsu SAKURAI President and CEO, Ricoh Group 4 CONTENTS Page - ------------------------------------------------------------------------------ General Principles....................................................... 6 Integrity in Corporate Activities 1 Providing customer-centric products................................. 9 2 Free competition and fair trading................................... 10 3 Banning insider trading............................................. 11 4 Managing corporate secrets.......................................... 12 5 Limits on entertainment and gifts................................... 13 6 Doing business with public bodies and making political contributions 14 7 Strict control of exports and imports............................... 15 8 Protection and use of intellectual properties....................... 17 9 Participation in anti-social actions................................ 18 10 Individual actions against the interests of the company............. 19 11 Protection of corporate assets...................................... 20 Harmony with the Environment 12 Respecting the global environment................................... 21 Respect for People 13 Respect for human rights............................................ 23 Harmony with Society 14 Practical contributions to society.................................. 24 15 Harmonizing with society............................................ 25 Implementation........................................................... 26 5 General Principles OBJECTIVES The Ricoh Group Code of Conduct (abbrev. to "the Code" below) is intended to establish the basic standards to ensure that Officers and Employees of the company, when engaging in corporate activities to advance the Ricoh Group, shall act in accordance with social ethics and in full compliance with the law. DEFINITIONS The definitions of the terms used in this Code are as follows: 1. "Ricoh" means Ricoh Company, Ltd. 2. "Related Companies" means those whose accounts are consolidated with Ricoh's and those whose management is actually under Ricoh control. 3. "Ricoh Group" means Ricoh and Related Companies. 4. "Officers and Employees" means the directors, auditors, executive officers, board members, all those coming under the regulations governing employment and all others employed in any capacity (whether in part time or irregular employment). APPLICABILITY 1. This Code and its standards apply to Officers and Employees. 2. Related Companies shall appoint a responsible person to implement these standards, who must make every effort to ensure that they are observed. However, under the following circumstances, the board of directors of Related Companies are permitted to enact supplementary standards provided they are consistent with the Code. Related Companies shall report such standards to the central authority of this Code. (1) When changes are necessary in view of national or regional laws, commercial customs, employment practices, or systems of value. (2) When changes are necessary because of the nature of the company's business, type of products, or those with whom it does business. 6 THE BASIC ATTITUDES TO BE ADOPTED BY OFFICERS AND EMPLOYEES It is important that all Officers and Employees, as individuals, citizens, and business persons, shall understand the following basic concepts and seek to implement them in their daily activities. 1. Activities shall always be based on national and regional laws, properly understand, and strictly obeyed. 2. Activities shall be those that can be performed with a clear conscience as good citizens, aware of their social responsibilities, and maintaining high ethical and moral standards. 3. As business persons, they must act in a disciplined way, while at the same time respecting the individual differences and value systems of others, observing all basic rules and regulations established by the Ricoh Group, never confusing public and private interests, and acting with a full sense of their responsibility as representatives of the Ricoh Group. 4. Realizing that all corporate activities, not only those that involve direct contact with the customer such as sales and maintenance, are evaluated by our customers, every effort must be made to ensure the maximum possible customer satisfaction. 5. In order to stay keenly aware of the various changes and problems we face, we must act autonomously. Always seeking to maintain the creativity to freely generate a full range of ideas, we must think independently and create new values. 6. We must always put ourselves in the other person's place, whether they are fellow employees, customers, those with whom we do business, or cooperating companies, and make ourselves useful to them. 7. We must make every effort to ensure that the progress of the company is fully consistent with the personal happiness of its people, seeking to bring about a richly satisfying life for all. 7 THE BASIC ATTITUDE OF THE RICOH GROUP TO ITS EMPLOYEES The Ricoh Group is committed, as follows, to ensuring that all employees maintain the required basic attitudes in all their activities, making the fullest use of their abilities, and so making the best of themselves: 1. For all individual employees, the Ricoh Group seeks to create and provide a work place that caters for their broadest possible self-actualization, desiring their growth as human beings not only in work but also in making the best of themselves. For all individual employees, it seeks to create a free and generous corporate ethos in which they can feel that they are worthy, growing and fulfilled, and giving free reign to their creativity. 2. The specialized abilities of all individual employees are prized by the Ricoh Group, which seeks to make the fullest use of them while at the same time providing a systematic support structure that encourages them to hone existing skills and develop new ones. 3. A fair and impartial system of evaluating the degree to which all individual employees use their skills is a source of vitality within the group. All individual employees' success in meeting their targets are to be assessed fairly by clearly established standards when evaluating their abilities and contributions, and they are to be recognized accordingly. 4. Concern for the safety and health of all individual employees is to be reflected in a pleasant and functional working environment and equipment. And in order that employees may enjoy a wide variety of lifestyles, the Ricoh Group will provide a variety of working conditions, terms of employment, and working hours, etc. 8 Integrity in Corporate Activities 1 PROVIDING CUSTOMER-CENTRIC PRODUCTS .. Basic Policy The Ricoh Group's basic approach to developing the products and services it provides to its customers is that of adopting the customer's viewpoint. .. Actions (1) WE SOLVE THE CUSTOMER'S PROBLEMS. Officers and Employees shall actively seek to understand the customer's problems, and must devote themselves to solving or ameliorating those problems. (2) WE EARN THE CUSTOMER'S TRUST. Officers and Employees, in developing the products and services they provide to the customer, shall consider quality, safety, the security of information, reliability, environmental preservation and ease of use. (3) WE SEEK EVER HIGHER CUSTOMER SATISFACTION. Officers and Employees shall regularly assess the degree of customer satisfaction, and shall work to improve products and services so as to achieve higher satisfaction. .. Related Standards: Ricoh Group Quality Assurance Regulation (RGS-AQAA0001) Ricoh Group Product Safety Regulation (RGS-AQAA0002) 9 2 FREE COMPETITION AND FAIR TRADING .. Basic Policy The Ricoh Group will remain in strict compliance with the laws and regulations governing the banning of monopolies, fair competition, and fair trading, and will take no action seeking to evade them. .. Actions (1) WE WILL ENTER NO AGREEMENTS OR DISCUSSIONS FOR THE RECIPROCAL LIMITATION OF CORPORATE ACTIVITIES. Officers and Employees will not participate in discussions or agreements with competitors in the same industry to impose reciprocal limits on corporate freedom of action in connection with the conditions of competitive bids, product pricing, conditions of sale, profits, market share, sales areas, etc. (2) WE WILL NOT EXPLOIT OUR TRADING POSITION. Officers and Employees will not exploit our trading position to impose unprofitable transactions upon our trading partners, not will we impose limitations on trading between our trading partners and third parties. (3) WE WILL NOT MAKE INAPPROPRIATE DISPLAYS NOT OFFER INAPPROPRIATELY LARGE PREMIUMS OR PRIZES. Officers and Employees shall not provide displays nor offer inappropriately large premiums or prizes that might lead customers to a mistaken choice of product. .. Related Standards: "Manual for Compliance with Antimonopoly Law" 10 3 BANNING INSIDER TRADING .. Basic Policy The Ricoh Group shall not take advantage of insider information to which it gains access in the course of business to make profits nor do anything else that would undermine fair and healthy trading in securities. .. Actions (1) NO DISCLOSURES TO THIRD PARTIES Officers and Employees shall not, unless it is necessary in the ordinary course of business, obtain insider information concerning the Ricoh Group or other companies. Again, if officers or employees have come to know insider information in the ordinary course of business, they shall not disclose it to third parties who do not have a need to know it in the performance of their duties. (2) NO USE FOR PERSONAL GAIN Officers and Employees who have come to know insider information concerning the Ricoh Group or other companies either in the course of business or as a result of it, shall not trade the securities of the Ricoh Group nor or the other companies nor engage in any other related trades. * "Insider information" is unpublished information on increases (or reductions) in capitalization, agreements for business cooperation, sales figures, profits or other important internal information. 11 4 MANAGING CORPORATE SECRETS .. Basic Policy Information that the Ricoh Group has acquired or created in the course of business must, depending on its importance, be treated as a corporate secret and managed with all proper care. .. Actions (1) OBEY MANAGEMENT RULES. Officers and Employees, when they have received information, materials, or documents in the course of business, should notify their supervisor, and manage them in accordance with the applicable rules of the company concerned. Again, they must continue to obey these rules even after their employment has terminated. (2) ONLY THOSE AUTHORIZED SHOULD REVEAL CORPORATE SECRETS. Officers and Employees, when they are requested to answer questions or to provide materials, whether by someone inside or outside the company, unless they clearly have the required authority to reply to the question or to provide the materials, they should refer the request to a superior for instructions. (3) NO PRIVATE USE SHALL BE MADE OF SUCH SECRETS. Officers and Employees shall only use corporate secrets in the course of the company's business, and neither during their employment nor after it has terminated, shall they make any use of it for themselves or for others. (4) NO ACQUISITION OF COMPETITIVE SECRETS BY DISHONEST MEANS. Officers and Employees shall not acquire the secrets of other companies by dishonest means. Again, when Officers and Employees acquire the secrets of other companies in accordance with a contract, they must only use the secret information as specified in the contract. 12 5 LIMITS ON ENTERTAINMENT AND GIFTS .. Basic Policy The Ricoh Group, in giving entertainment or gifts shall not give bribes nor depart in any other way from general good business practice. .. Actions (1) GOVERNMENT EMPLOYEES (AND EX-EMPLOYEES) SHALL NOT BE ENTERTAINED NOR GIVEN GIFTS. Officers and Employees shall neither entertain nor give gifts to the employees (or former employees) of government departments nor of regional (local) authorities or other public bodies. (2) FOLLOW GENERAL GOOD BUSINESS PRACTICE Officers and Employees, when giving entertainment or gifts, shall not exceed the bounds of general good business practice. Again, Officers and Employees shall make every effort to inform those with whom they do business that they do not accept entertainment nor gifts, and if they find themselves unable to avoid being entertained, they shall immediately inform their superior and follow instructions. .. Related Standards: "Employment regulations" 13 6 DOING BUSINESS WITH PUBLIC BODIES AND MAKING POLITICAL CONTRIBUTIONS .. Basic Policy The Ricoh Group, in doing business with public bodies and making political contributions, shall be in compliance with the relevant laws. .. Actions (1) STRICT IMPARTIALITY Officers and Employees, when doing business with government departments or regional (local) authorities, shall comply strictly and impartially with the relevant legal requirements and regulations, always taking care to avoid legal problems. (2) NO IMPROPER POLITICAL CONTRIBUTIONS Officers and Employees, except where otherwise permitted by law, shall not in the course of business make contributions to politicians or candidates for political office, nor to political organizations, nor shall they cooperate directly or indirectly in political campaigning. 14 7 STRICT CONTROL OF EXPORTS AND IMPORTS .. Basic Policy The Ricoh Group shall not infringe laws intended to preserve international peace and safety, including those on foreign exchange transactions, those on overseas trading and export-related laws, and those on the countries with which to trade. .. Actions (1) PERFORM ASSESSMENT OF APPLICABILITY Officers and Employees shall follow the internal procedures in accordance with company regulations, carefully checking beforehand whether any restrictions apply to the import or export of products being planned, developed or designed, and on products, equipment and materials being purchased or sold. (2) CHECK THE RESULT OF THE ASSESSMENT OF THE APPLICABILITY OF IMPORT/EXPORT RESTRICTIONS Officers and Employees, when importing or exporting goods (products, components, equipment, materials, etc.) or technology (technical documentation, programs, engineering consultancy or other services), shall check beforehand in the light of the assessment of the applicability of restrictions whether such export or import would infringe the relevant laws and regulations. When restrictions are found to be applicable, transactions must conform with the restrictions. (3) PREVENTING CONVERSION FOR MILITARY USE When importing or exporting goods or technology, whether or not restrictions are found to be applicable, Officers and Employees shall voluntarily apply controls in the spirit of export restrictions for non-proliferation. When there is fear that the customer may convert items for military use, or when the destination country itself has inadequate implementation of import/export restrictions, or the country is one that is subject to international criticism on the grounds of offences against the maintenance of world order, or when the destination country or region is experiencing conflict or the threat of conflict, Officers and Employees shall check documents (contracts, memoranda, confirmations, etc.) to ascertain the ultimate user and the ultimate purpose for which the goods or technology will be used and shall submit to the ruling of the Ricoh Group Export Import Control Committee as to whether or not the transaction should proceed. 15 .. Related standards: Regulations requiring compliance with export-import laws (RGS-ATRA0001) Export-import controls and assessment of applicability, screening of customers and trading (RGS-ATRC0001) "Guidebook for Export & Import Control" (published by the Ricoh Group Export-Import Control Committee) 16 8 PROTECTION AND USE OF INTELLECTUAL PROPERTIES .. Basic Policy The Ricoh Group will encourage activities that create intellectual properties of value to the Ricoh Group and will seek to protect and utilize them appropriately. .. Actions (1) RAPID NOTIFICATION Intellectual properties created at work all belong to the company. Officers and Employees shall notify the company immediately of all intellectual properties created at work (with patents, this includes free patents). (2) RESPECT THE RIGHTS OF OUTSIDE PARTIES. Officers and Employees shall respect the rights of outside parties and ensure that, as they perform their duties, such rights are not infringed. (3) FOLLOW PROCEDURES FOR THEIR DISCLOSURE AND PROVISION. Officers and Employees, when announcing intellectual properties to academic conferences or disclosing and licensing intellectual properties to outside parties when implementing a new business model, shall follow both Ricoh Group policy and standard procedures before doing so. * The intellectual properties referred to here are patents, utility models, designs, registered trademarks, copyrights on programs, rights to use specific circuit configurations, etc. .. Related Standards: Ricoh Group Regulations on Intellectual Properties (RGS-ALAA2001) 17 9 PARTICIPATION IN ANTI-SOCIAL ACTIONS .. Basic Policy The Ricoh Group takes a firm attitude to anti-social activities and elements and will have nothing to do with them. .. Actions (1) HAVE NO DEALINGS WITH ANTI-SOCIAL ACTIVITIES AND ELEMENTS. Officers and Employees must have absolutely nothing to do with anti-social activities and elements that pose threats to the safety and good order of society and the lives of its citizens. (2) DO NOT COMPROMISE IN THE FACE OF EXTORTION FROM ANTI-SOCIAL ELEMENTS. Officers and Employees, if presented with extortion demands by anti-social elements, shall not compromise with them by paying money or in any other way. Officers and Employees shall immediately report such demands to their superior and the superior must contact the general administration of each company affected. (3) HAVE NO DEALINGS WITH ANTI-SOCIAL ELEMENTS. Officers and Employees must no have any dealings with anti-social elements. 18 10 INDIVIDUAL ACTIONS AGAINST THE INTERESTS OF THE COMPANY .. Basic Policy The Ricoh Group does not approve any actions by its officers or employees that would cause, or might threaten to cause, any disadvantage to the Ricoh Group in the performance of its normal business activities. .. Actions (1) INFORM THE COMPANY. Officers and Employees shall not take any actions that would conflict with the interests of the company, or that might lead to such a conflict of interest. When such a situation arises, the Officers and Employees shall immediately inform their superior of the fact. (2) OBTAIN PRIOR COMPANY APPROVAL. Officers and Employees must obtain prior company permission before accepting appointment as officers of other companies or organizations, and before entering into employment contacts. (3) NO COMPETITION WITHOUT PERMISSION. Officers and Employees shall not, without first obtaining company permission, engage in any personal activities that would constitute competition with the Ricoh Group, nor shall they accept appointment in the management of a competitive company. 19 11 PROTECTION OF CORPORATE ASSETS .. Basic Policy The Ricoh Group has established rules for the control of corporate assets (products, fixtures, information, and all other assets both tangible and intangible) and these must be rigorously implemented. .. Actions (1) APPROPRIATE CONTROLS Officers and Employees must control corporate assets appropriately in strict conformity with the rules. (2) NO IMPROPER USE Officers and Employees must make no private use of any of the company's assets outside the requirements of their normal duties. .. Related Regulations: "Employment regulations" 20 Harmony with the Environment 12 RESPECTING THE GLOBAL ENVIRONMENT .. Basic Policy The Ricoh Group, aware that environmental preservation is the solemn duty of every citizen of the world, will align corporate activities with environmental preservation activities, taking responsibility for ensuring that the entire group participates in them. .. Actions (1) SET HIGHER TARGETS FOR ENVIRONMENTAL ACTIVITIES AND MEET THEM. Officers and Employees will not only be in full compliance with all laws, but will take personal responsibility for establishing targets that reflect the concerns of society to reduce environmental impacts, and seek to create economic value in achieving these targets. (2) IMPLEMENT TECHNOLOGICAL REFORMS. Officers and Employees will make every effort to implement technological reforms that can reduce the impact on the environment, and make active use of such technologies. (3) OPERATE BUSINESSES IN HARMONY WITH THE ENVIRONMENT. Officers and Employees, in managing business operations, will always be aware of their environmental impact, and will participate responsibly in efforts to prevent pollution, to ensure the effective use of energy and other resources, and to reduce the volume of waste materials. They will also engage in ongoing efforts to maintain and improve the systems of environmental preservation. (4) PROVIDE PRODUCTS AND SERVICES THAT REFLECT ENVIRONMENTAL CONCERNS. Officers and Employees will provide products and services that have minimal impact on the environment at all stages of the product cycle, from procurement of materials, through production, sales, distribution, recycling and disposal. (5) ACT RESPONSIBLY TO ENHANCE ENVIRONMENTAL AWARENESS. Officers and Employees will keep their eyes on the wider society around them, and work actively through education and other means to enhance their awareness and personally shoulder their responsibility to work for environmental preservation. (6) MAKE SOCIAL CONTRIBUTIONS FOR THE ENVIRONMENT. Officers and Employees will ensure that the company works closely 21 with society in all countries and regions, actively disclosing information, and helping and supporting environmental preservation so as to contribute largely to society. .. Related Standards: "Ricoh General Principles on the Environment" Ricoh Group Environmental Conservation Regulation (RGS-AEP A0001) 22 Respect for People 13 RESPECT FOR HUMAN RIGHTS .. Basic Policy The Ricoh Group seeks always to respect fundamental human rights on the basis of mutual understanding. The Ricoh Group does not discriminate on the basis of race, religious faith, gender, social position, citizenship, sickness, handicaps, etc. .. Actions (1) ELIMINATE ALL DISCRIMINATION. Officers and Employees must respect all fundamental human rights, and must not engage in any actions that ignore human rights such as discriminatory language, violence, sexual harassment, power harassment, etc. (2) PROTECT PERSONAL PRIVACY When Officers and Employees acquire personal information in the performance of their duties, they must take full care in their handling of this information to protect the privacy of those concerned, and must exercise the proper management control over it. (3) DO AWAY WITH IMPROPER LABOR PRACTICES. Officers and Employees must not make improper demands for labor. Again, they must not employ children under the legal working age of the country or region concerned. Officers and Employees must also impose these same conditions on the Ricoh Group's sales outlets and cooperating companies. .. Related Standards: "Employment regulations" Basic regulations for the protection of personal information (RGS-AITA0004) Rules on internal group usage of personal information (RGS-AITA0003) 23 Harmony with Society 14 PRACTICAL CONTRIBUTIONS TO SOCIETY .. Basic Policy The Ricoh Group, aware of its role as a corporate citizen, joins in active partnership with like-minded people to make contributions to society. .. Actions (1) ENGAGE IN ACTIVITIES THAT CONTRIBUTE TO THE LOCAL COMMUNITY. Corporate activities take place in close contact with the local community. Officers and Employees, because they want the Ricoh Group to be welcome, familiar and trusted in local society, should strive to work closely with that community, making contributions to it that will further the local culture and economy. (2) FOSTER A CORPORATE ETHOS THAT PLACES IMPORTANCE ON CONTRIBUTIONS TO SOCIETY As well as making corporate contributions to society, each individual officer and employee should consider how to contribute to society, and take practical part in such activities in their immediate vicinity. Officers and Employees should, by voluntary participation in activities, strive foster a corporate ethos that puts the proper value on social contributions. 24 15 HARMONIZING WITH SOCIETY .. Basic Policy The Ricoh Group seeks to coexist harmoniously with society, and its business will be managed so as to contribute to the regions within which it operates, while working to deepen mutual understanding and build relationships of trust. .. Actions (1) RESPECT THE WORLD'S CULTURES AND CUSTOMS. There are many things that, although they may be perfectly acceptable in one country or region, are quite unacceptable in another. Officers and Employees must therefore act with the necessary respect for the history, culture and customs of the various nations and regions within which they operate. (2) ACTIVELY DISCLOSE INFORMATION. Accurately publicizing the Ricoh Group's corporate attitudes is the first prerequisite for deeper mutual understanding between the group and society. In order to ensure that as many people as possible have a proper understanding of the Ricoh Group, Officers and Employees must follow the normal procedures and actively provide fair and timely information. (3) KEEP ACCURATE RECORDS AND MAKE ACCURATE REPORTS. Officers and Employees must keep accounting and financial records in compliance with the relevant laws and company regulations. Again, such records must be prepared so that their content is complete, fair, accurate, timely and readily understandable. 25 Implementation ENACTMENT AND AMENDMENT These standards shall be enacted and if necessary, amended, by decision of the board of directors after full deliberation with the CSR Committee. ENSURING GENERAL AWARENESS The Ricoh Group section(s) responsible for CSR shall engage in an ongoing program of educational and leadership activities to ensure general awareness of these standards. Officers and Employees are required to affirm their strict adherence to these standards by signing a statement to that effect annually and submitting it to the company. PENALTIES Acts in contravention of these standards shall, in accordance with the employment regulations of the company concerned, be subject to the penalties prescribed therein. TREATMENT OF TEMPORARY AND OTHER EMPLOYEES (1) For employees on contracts from temporary employment agencies, the member of staff responsible for employing them in the section in which they work must explain the standards and require the employees to strictly adhere to these standards by signing a statement. (2) For those who are in the company on out-sourcing contracts or consultancy contracts, the member of staff responsible in each section must explain to that person the standards to the work being performed under the contract which incorporating a provision for their strict adherence into the contract itself. RELATED STANDARDS Regulations, group standards and manuals, etc., that supplement the various sections of these standards are itemized under "Related Standards." OTHERS Officers and Employees who become aware of contraventions of these standards, or the danger that they will be contravened, are required to contact the responsible CSR section either directly or via a superior, or to contact it via the "hotline (AVAILABLE ONLY IN JAPAN)." No person so making such contact shall suffer any disadvantage as a result of it. 26 "HOTLINE" INFORMATION (AVAILABLE ONLY IN JAPAN) Open: 10:00am to 5:00pm (closed on weekends and holidays) Apply to: Ricoh: CSR Office, CSR Division Tel: 0120-344-670 E-mail: ZPG_CSR@nts.ricoh.co.jp Letters: CSR Office, CSR Division, Ricoh Company, Ltd. 8-13-1 Ginza, Chuo-ku, Tokyo 104-8222 Law Office: Nakajima Transactional Law Office Tel: 03-3502-8763 (a dedicated Ricoh Group line) E-mail: rigrpcpl@proof.ocn.ne.jp FOR FURTHER INFORMATION Corporate activities are both vast in scale and complex in nature. It will not always be clear how these standards apply in individual cases. In such cases, please contact individual sections responsible or the central authority as listed below. When there is an organization change, please contact the new section or authority informed of the standards. INDIVIDUAL SECTIONS RESPONSIBLE 1 Providing customer-centric products .... Ricoh Quality Division ---------------------- 2 Free competition and fair trading .... Ricoh Legal Division -------------------- 3 Banning insider trading .... Ricoh Corporate Planning Division --------------------------------- 4 Managing corporate secrets .... Ricoh Personnel Division ------------------------ 5 Limits on entertainment and gifts .... Ricoh Personnel Division ------------------------ 6 Doing business with public bodies .... Ricoh Personnel Division ------------------------ Making political contributions .... Ricoh Secretary Office ---------------------- 7 Strict control of exports and imports .... Ricoh International Marketing Group ----------------------------------- 8 Protection and use of intellectual properties .... Ricoh Legal Division -------------------- 9 Participation in anti-social actions .... Ricoh Personnel Division ------------------------ 10 Individual actions against the interests of the company .... Ricoh Personnel Division ------------------------ 11 Protection of corporate assets .... Ricoh Personnel Division ------------------------ 12 Respecting the global environment .... Ricoh Corporate Environment Division ------------------------------------ 27 13 Respect for human rights .... Ricoh Personnel Division ------------------------ 14 Practical contributions to society.... CSR Office ---------- 15 Harmonizing with society .... Ricoh Corporate Planning Division --------------------------------- CENTRAL AUTHORITY Ricoh Group Code of Conduct .... Ricoh CSR Office ---------------- 28 The Ricoh Group Code of Conduct Approved by the Board on November 4, 2003 Effective January 1, 2004 Ricoh Company, Ltd. CSR Office 8-13-1 Ginza, Chuo-ku, Tokyo 104-8222 Tel: 03-6278-5202 Copyright 2003 RICOH COMPANY, LTD. All rights reserved 29 EX-12 7 rex121.txt EX-12.1 CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) Exhibit 12.1 CERTIFICATION I, Shiro Kondo, President and Chief Executive Officer of Ricoh Company, Ltd., certify that: 1. I have reviewed this annual report on Form 20-F of Ricoh Company, Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the presentation of financial statements for external purposes in accordance with generally accepted accounting principles;Evaluated the effectiveness of the company's disclosure controls; (c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and 5. The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. Date: June 27, 2008 By: /s/ Shiro Kondo ---------------------------------- Shiro Kondo President and Chief Executive Officer EX-12 8 rex122.txt EX-12.2 CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) Exhibit 12.2 CERTIFICATION I, Zenji Miura, Director, Corporate Executive Vice President and Chief Financial Officer of Ricoh Company, Ltd., certify that: 1. I have reviewed this annual report on Form 20-F of Ricoh Company, Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the presentation of financial statements for external purposes in accordance with generally accepted accounting principles;Evaluated the effectiveness of the company's disclosure controls; (c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and 5. The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. Date: June 27, 2008 By: /s/ Zenji Miura ---------------------------------- Zenji Miura Director, Corporate Executive Vice President and Chief Financial Officer EX-13 9 rex13a1.txt EX-13.A.1 CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF USC Exhibit 13.(a)(1) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report on Form 20-F of Ricoh Company, Ltd. (the "Company") for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Shiro Kondo, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: June 27, 2008 By: /s/ Shiro Kondo ------------------------------------ Shiro Kondo President and Chief Executive Officer EX-13 10 rex13a2.txt EX-13.A.2 CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF USC Exhibit 13.(a)(2) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report on Form 20-F of Ricoh Company, Ltd. (the "Company") for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Zenji Miura, Director, Corporate Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. (s) 1350, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: June 27, 2008 By: /s/ Zenji Miura ------------------------------------------- Zenji Miura Director, Corporate Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----