6-K 1 r6k111114.txt 2ND QUARTERLY SECURITIES REPORT FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 REPORT OF FOREIGN PRIVATE ISSUER Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of November 2011 Commission File Number 2 - 68279 RICOH COMPANY, LTD. ----------------------------------------------- (Translation of Registrant's name into English) 13-1, Ginza 8-Chome, Chuo-ku, Tokyo 104-8222, Japan --------------------------------------------------- (Address of Principal Executive Offices) (Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.) Form 20-F X Form 40-F __ (Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): __ ) (Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): __ ) (Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.) Yes __ No X (If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-__ ) -------------------------------------------------------------------------------- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Ricoh Company, Ltd. ------------------------------ (Registrant) By: /S/ Zenji Miura ------------------------------ Zenji Miura Director, Chief Financial Officer Corporate Executive Vice President November 14, 2011 RICOH COMPANY, LTD. Consolidated Financial Statements For the Six Months Ended September 30, 2011 This is an English translation of the Quarterly Securities Report (Shihanki Hokokusho) for the six months ended September 30, 2011 pursuant to the Japanese Financial Instrument and Exchange Law. Ricoh Company, Ltd. and Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS March 31, 2011 and September 30, 2011
Millions of Yen ------------------------------ March 31, September 30, ASSETS 2011 2011 ----------------------------------------------------------------------------------------------------------- Current assets: Cash and cash equivalents 179,169 136,311 Time deposits 2,010 2,294 Trade receivables: Notes 46,355 39,161 Accounts 419,351 389,630 Less- Allowance for doubtful receivables (16,560) (14,687) Current maturities of long-term finance receivables, net 208,671 211,319 Inventories: Finished goods 85,800 96,022 Work in process and raw materials 85,233 92,912 Deferred income taxes and other 63,990 60,051 ----------------------------------------------------------------------------------------------------------- Total current assets 1,074,019 1,013,013 ----------------------------------------------------------------------------------------------------------- Property, plant and equipment, at cost: Land 44,444 44,396 Buildings 262,523 265,105 Machinery and equipment 737,270 781,117 Construction in progress 5,230 6,599 ----------------------------------------------------------------------------------------------------------- Total 1,049,467 1,097,217 Less- accumulated depreciation (784,727) (834,708) ----------------------------------------------------------------------------------------------------------- Net property, plant and equipment 264,740 262,509 ----------------------------------------------------------------------------------------------------------- Investments and other assets: Long-term finance receivables, net 445,782 445,068 Investment securities 48,909 44,718 Investments in and advances to affiliates 213 360 Goodwill 221,063 206,296 Other intangible assets 130,648 118,955 Lease deposits and other 77,022 96,001 ----------------------------------------------------------------------------------------------------------- Total investments and other assets 923,637 911,398 ----------------------------------------------------------------------------------------------------------- Total assets 2,262,396 2,186,920 ===========================================================================================================
1
Millions of Yen ------------------------------ March 31, September 30, LIABILITIES AND SHAREHOLDERS' EQUITY 2011 2011 ----------------------------------------------------------------------------------------------------------- Current liabilities: Short-term borrowings 39,927 63,439 Current maturities of long-term indebtedness 111,096 99,349 Trade payables: Notes 12,216 13,290 Accounts 238,267 232,679 Accrued income taxes 13,414 8,851 Accrued expenses and other 199,780 199,615 ----------------------------------------------------------------------------------------------------------- Total current liabilities 614,700 617,223 ----------------------------------------------------------------------------------------------------------- Long-term liabilities: Long-term indebtedness 479,422 480,422 Accrued pension and severance costs 140,975 134,138 Deferred income taxes and other 44,535 39,011 ----------------------------------------------------------------------------------------------------------- Total long-term liabilities 664,932 653,571 ----------------------------------------------------------------------------------------------------------- Equity: Ricoh Company, Ltd. shareholders' equity: Common stock 135,364 135,364 Additional paid-in capital 186,083 186,083 Retained earnings 815,970 796,625 Accumulated other comprehensive loss (170,702) (219,506) Treasury stock at cost (36,838) (36,830) ----------------------------------------------------------------------------------------------------------- Total Ricoh Company, Ltd. shareholders' equity 929,877 861,736 ----------------------------------------------------------------------------------------------------------- Noncontrolling interests 52,887 54,390 ----------------------------------------------------------------------------------------------------------- Total equity 982,764 916,126 ----------------------------------------------------------------------------------------------------------- Total liabilities and equity 2,262,396 2,186,920 ===========================================================================================================
The accompanying notes are an integral part of consolidated financial statements. 2 Ricoh Company, Ltd. and Consolidated Subsidiaries CONSOLIDATED STATEMENT OF INCOME For the Six Months Ended September 30, 2010 and 2011
Millions of Yen ---------------------------------------- Six months ended Six months ended September 30, 2010 September 30, 2011 ----------------------------------------------------------------------------------------------------------------- Net Sales: Products 467,109 434,789 Post sales and rentals 452,456 451,911 Other revenue 51,291 52,185 ----------------------------------------------------------------------------------------------------------------- Total 970,856 938,885 ----------------------------------------------------------------------------------------------------------------- Cost of sales: Products 314,987 301,559 Post sales and rentals 212,667 212,312 Other revenue 40,284 38,752 ----------------------------------------------------------------------------------------------------------------- Total 567,938 552,623 ----------------------------------------------------------------------------------------------------------------- Gross profit 402,918 386,262 Selling, general and administrative expenses 364,906 388,038 ----------------------------------------------------------------------------------------------------------------- Operating income (loss) 38,012 (1,776) ----------------------------------------------------------------------------------------------------------------- Other (income) expenses: Interest and dividend income (1,375) (1,502) Interest expense 3,911 3,418 Foreign currency exchange (gain) loss, net 7,430 4,330 Other, net (19) (268) ----------------------------------------------------------------------------------------------------------------- Total 9,947 5,978 ----------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes and equity in earnings of affiliates 28,065 (7,754) Provision for income taxes: Current 12,773 11,438 Deferred 821 (13,980) ----------------------------------------------------------------------------------------------------------------- Total 13,594 (2,542) ----------------------------------------------------------------------------------------------------------------- Equity in earnings of affiliates (7) (1) Consolidated net income (loss) 14,464 (5,213) ----------------------------------------------------------------------------------------------------------------- Net income attributable to noncontrolling interests 1,952 2,150 ----------------------------------------------------------------------------------------------------------------- Net income (loss) attributable to Ricoh Company, Ltd. 12,512 (7,363) ================================================================================================================= Yen Yen ---------------------------------------- Per share of common stock: Net income (loss) attributable to Ricoh Company, Ltd. ----------------------------------------------------------------------------------------------------------------- Basic 17.24 (10.15) Diluted 16.77 (10.15) ----------------------------------------------------------------------------------------------------------------- Cash dividends paid per share 16.50 16.50 ================================================================================================================= Per American Depositary Share, each representing 5 shares of common stock: Net income (loss) attributable to Ricoh Company, Ltd. ----------------------------------------------------------------------------------------------------------------- Basic 86.20 (50.75) Diluted 83.85 (50.75) ----------------------------------------------------------------------------------------------------------------- Cash dividends paid per share 82.50 82.50 =================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 3 For the Three Months Ended September 30, 2010 and 2011
Millions of Yen ---------------------------------------- Three months ended Three months ended September 30, 2010 September 30, 2011 ----------------------------------------------------------------------------------------------------------------- Net Sales: Products 248,437 223,224 Post sales and rentals 213,513 223,153 Other revenue 25,952 26,360 ----------------------------------------------------------------------------------------------------------------- Total 487,902 472,737 ----------------------------------------------------------------------------------------------------------------- Cost of sales: Products 167,730 154,433 Post sales and rentals 100,977 106,694 Other revenue 20,595 19,444 ----------------------------------------------------------------------------------------------------------------- Total 289,302 280,571 ----------------------------------------------------------------------------------------------------------------- Gross profit 198,600 192,166 Selling, general and administrative expenses 182,435 203,949 ----------------------------------------------------------------------------------------------------------------- Operating income (loss) 16,165 (11,783) ----------------------------------------------------------------------------------------------------------------- Other (income) expenses: Interest and dividend income (778) (894) Interest expense 2,057 1,958 Foreign currency exchange (gain) loss, net 2,154 3,823 Other, net 159 (393) ----------------------------------------------------------------------------------------------------------------- Total 3,592 4,494 ----------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes and equity in earnings of affiliates 12,573 (16,277) Provision for income taxes: Current 3,747 4,603 Deferred 2,551 (11,039) ----------------------------------------------------------------------------------------------------------------- Total 6,298 (6,436) ----------------------------------------------------------------------------------------------------------------- Equity in earnings of affiliates 0 7 Consolidated net income (loss) 6,275 (9,834) ----------------------------------------------------------------------------------------------------------------- Net income attributable to noncontrolling interest 1,096 975 ----------------------------------------------------------------------------------------------------------------- Net income (loss) attributable to Ricoh Company, Ltd. 5,179 (10,809) ================================================================================================================= Yen Yen ---------------------------------------- Per share of common stock: Net income (loss) attributable to Ricoh Company, Ltd. ----------------------------------------------------------------------------------------------------------------- Basic 7.13 (14.90) Diluted 6.94 (14.90) ----------------------------------------------------------------------------------------------------------------- Cash dividends paid per share -- -- ================================================================================================================= Per American Depositary Share, each representing 5 shares of common stock: Net income (loss) attributable to Ricoh Company, Ltd. ----------------------------------------------------------------------------------------------------------------- Basic 35.65 (74.50) Diluted 34.70 (74.50) ----------------------------------------------------------------------------------------------------------------- Cash dividends paid per share -- -- =================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 4 Ricoh Company, Ltd. and Consolidated Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS For the Six Months Ended September 30, 2010 and 2011
Millions of Yen ---------------------------------------- Six months ended Six months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net income (loss) 14,464 (5,213) Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities Depreciation and amortization 46,718 43,956 Equity in earnings of affiliates, net of dividends received 7 1 Deferred income taxes 821 (13,980) Losses on disposals and sales of property, plant and equipment 661 330 Loss on impairment of securities 5 73 Pension and severance costs, less payment 978 (8,479) Changes in assets and liabilities, net of effects from acquisition- Decrease in trade receivables 21,391 14,296 Increase in inventories (24,231) (29,161) Decrease (Increase) in finance receivables 4,263 (10,596) Decrease in trade payables (20,612) (1,089) Increase in accrued income taxes and accrued expenses and other 13,044 8,040 Other, net 9,999 13,126 ------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 67,508 11,304 ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment 429 523 Expenditures for property, plant and equipment, including interest capitalized (39,541) (36,710) Expenditures for intangible asset (7,886) (8,371) Payments for purchases of available-for-sale securities (85) (122) Proceeds from sales of available-for-sale securities 5 10 Increase in time deposits, net (57) (400) Other, net (2,507) (7,754) ------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (49,642) (52,824) ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term indebtedness 28,615 23,386 Repayment of long-term indebtedness (61,958) (29,671) (Decrease) Increase in short-term borrowings, net (10,783) 24,725 Proceeds from issuance of long-term debt securities 79,741 -- Repayment of long-term debt securities -- (231) Dividends paid (11,972) (11,971) Payment for purchase of treasury stock (72) (14) Other, net (264) (294) ------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 23,307 5,930 ------------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (9,279) (7,268) ------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31,894 (42,858) ------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 242,165 179,169 ------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD 274,059 136,311 ===================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 5 Ricoh Company, Ltd. and Consolidated Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES According to the article 95 of the "Regulations Regarding Terms, Forms and Preparation of Interim Consolidated Financial Statements" (Cabinet office Ordinance No.64, 2007), the accompanying consolidated financial statements of Ricoh (Ricoh Company, Ltd. and its consolidated subsidiaries) have been prepared in conformity with U.S. generally accepted accounting principles. Significant accounting and reporting policies are summarized below: The accompanying consolidated financial statements for the six months ended September 30, 2011 are presented in Japanese yen, the functional currency of the Company and its domestic subsidiaries. The books of the Company and its domestic subsidiaries are maintained in conformity with Japanese accounting principles and practices, while foreign subsidiaries maintain their books in conformity with the standards of their country of domicile. The accompanying consolidated financial statements reflect necessary adjustments, not recorded in the books, to present them in conformity with U.S. generally accepted accounting principles. (A) PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. The accounts of variable interest entity are included in the consolidated financial statements, if applicable. Investments in entities in which Ricoh has the ability to exercise significant influence over the entities' operating and financial policies (generally 20% to 50% ownership) are accounted for on an equity basis. All significant inter-company balances and transactions have been eliminated in consolidation. The accounts of certain consolidated subsidiaries have been included on the basis of fiscal periods ended within three months prior to September 30. (B) REVENUE RECOGNITION Ricoh generates revenue principally through the sale of equipment, supplies and related services under separate contractual arrangements for each. Ricoh recognizes revenue when (1) it has a firm contract, (2) the product has been shipped to and accepted by the customer or the service has been provided, (3) the sales price is fixed or determinable and (4) amounts are reasonably assured of collection. Products sales are recognized at the time of delivery and installation at the customer location. Service revenues are recognized in accordance with the contract period of each service contract. Revenue from the sale of equipment under sales-type leases is recognized as product sales at the inception of the lease. Other revenue consists primarily of interest income on sales-type leases and direct-financing leases, which are recognized as other revenue over the life of each respective lease using the interest method. Leases not qualifying as sales-type leases or direct financing leases are accounted for as operating leases and related revenue is recognized over the lease term. 6 (C) FOREIGN CURRENCY TRANSLATION For foreign operations with functional currencies other than the Japanese yen, assets and liabilities are translated at the exchange rates in effect at each fiscal year-end, and income and expenses are translated at the average rates of exchange prevailing during each fiscal year. The resulting translation adjustments are included as a part of accumulated other comprehensive income (loss) in equity. All foreign currency transaction gains and losses are included in other income and expenses in the period incurred. (D) CASH EQUIVALENTS Cash and cash equivalents include highly liquid investments with maturities of three months or less at the date of purchase such as time deposits and short-term investment securities which are available-for-sale at any time, present insignificant risk of changes in value due to being readily convertible into cash and have an original maturity of three months or less, such as money management funds and free financial funds. (E) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES As discussed further in Note 8, Ricoh manages its exposure to certain market risks, primarily foreign currency and interest rate risks, through the use of derivative instruments. As a matter of policy, Ricoh does not enter into derivative contracts for trading or speculative purposes. Ricoh recognizes all derivative instruments as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. When Ricoh enters into a derivative contract, it makes a determination as to whether or not for accounting purposes the derivative is part of a hedging relationship. In general, a derivative may be designated as either (1) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"), (2) a hedge of the variability of the expected cash flows associated with an existing asset or liability or a forecasted transaction ("cash flow hedge"), or (3) a foreign currency fair value or cash flow hedge ("foreign currency hedge"). Ricoh formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value, cash flow, or foreign currency hedges to specific assets and liabilities on the consolidated balance sheets or to specific firm commitments or forecasted transactions. For derivative contracts that are designated and qualify as fair value hedges including foreign currency fair value hedges, the derivative instrument is marked-to-market with gains and losses recognized in current period earnings to offset the respective losses and gains recognized on the change in fair value of the hedged item. For derivative contracts that are designated and qualify as cash flow hedges including foreign currency cash flow hedges, the effective portion of gains and losses on these contracts is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period the hedged item or transaction affects earnings. Any hedge ineffectiveness on cash flow hedges is immediately recognized in earnings. For all derivative instruments that are not designated as part of a hedging relationship and for designated derivative instruments that do not qualify for hedge accounting, the contracts are recorded at fair value with the gain or loss recognized in current period earnings. (F) ALLOWANCE FOR DOUBTFUL TRADE RECEIVABLES AND FINANCE RECEIVABLES Ricoh records allowances for doubtful receivables that are based upon historical experience and specific customer collection issues. The estimated amount of probable credit losses in its existing receivables is 7 determined from write-off history adjusted to reflect current economic conditions and specific allowances for receivables including nonperforming leases, impaired loans or other accounts for which Ricoh has concluded it will be unable to collect all amounts due according to original terms of the lease or loan agreement. Account balances net of expected recovery from available collateral are charged-off against the allowances when collection is considered remote. (G) SECURITIES Ricoh's investments in debt and marketable equity securities are classified as available-for-sale securities. Available-for-sale securities are reported at fair value with unrealized gains and losses, net of related taxes, reported in accumulated other comprehensive income (loss). 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: financial condition and near term prospects of issuer and intent and ability of Ricoh to retain its investments for a period of time sufficient to allow for any anticipated recovery in market value. The cost of the securities sold is computed based on the average cost of each security held at the time of sale. Investments in affiliated companies over which Ricoh has the ability to exercise significant influence, but does not hold a controlling financial interest, are accounted for by the equity method. Non-marketable equity securities owned by Ricoh primarily relate to less than 20% owned companies and funds are stated at cost unless indication of impairment exist, which require the investment to be written down to its estimated fair value. (H) INVENTORIES Inventories are mainly stated at the lower of average cost or net realizable values. Inventory costs include raw materials, labor and manufacturing overheads. (I) PROPERTY, PLANT AND EQUIPMENT For the Company and its domestic subsidiaries, depreciation of property, plant and equipment is computed principally by using the declining-balance method over the estimated useful lives. Most of the foreign subsidiaries have adopted the straight-line method for computing depreciation. The depreciation period generally ranges from 5 years to 50 years for buildings and 2 years to 12 years for machinery and equipment. Ordinary maintenance and repairs are charged to expense as incurred. Major replacements and improvements are capitalized. When properties are retired or otherwise disposed of, the property and related accumulated depreciation accounts are relieved of the applicable amounts, and any differences are included in earnings. (J) CAPITALIZED SOFTWARE COSTS Ricoh capitalizes certain internal and external costs incurred to acquire or create internal use software during the application development stage as well as upgrades and enhancements that result in additional 8 functionality. The capitalized software is amortized on a straight line basis generally from 3 years to 5 years. (K) GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is not amortized and is required to be tested at least annually for impairment. Acquired intangible assets with a definite useful life are amortized over their respective estimated useful lives and reviewed for impairment when an indication of impairment is identified. Other intangible assets with definite useful lives, consisting primarily of software, customer relationships and trademarks are amortized on a straight line basis over 1 year to 20 years. Any acquired intangible assets determined to have an indefinite useful life are not amortized, but instead are tested annually for impairment based on its fair value until its life would be determined to no longer be indefinite. In performing the test, Ricoh utilizes the two-step approach prescribed. The first step requires a comparison of the carrying amount of the reporting units to the fair value of these units. If the carrying amount of a reporting unit exceeds its fair value, Ricoh will perform the second step of the goodwill impairment test to measure the amount of impairment loss, if any. (L) PENSION AND RETIREMENT ALLOWANCES PLANS Ricoh recognizes the overfunded or underfunded status of the defined benefit plans as an asset or liability in the consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax. The expected long-term rate of return on plan assets used for pension accounting is determined based on the historical long-term rate of return on plan assets. The discount rate is determined based on the rates of return of high-quality fixed-income investments currently available and expected to be available during the period to maturity of the pension benefits. (M) INCOME TAXES Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Ricoh recognizes interest and penalties related to unrecognized tax benefits in provision for income taxes in the consolidated statements of income. (N) RESEARCH AND DEVELOPMENT EXPENSES AND ADVERTISING COSTS Research and development expenses and advertising costs are expensed as incurred. (O) SHIPPING AND HANDLING COSTS Shipping and handling costs, which mainly include transportation to customers, are included in selling, general and administrative expenses in the consolidated statements of income. (P) IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS Long-lived assets and acquired intangible assets with a definite life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be 9 recoverable. Recoverability of assets to be held and used is assessed by comparing the carrying amount of an asset or asset group to the expected future undiscounted net cash flows of the asset or asset group. If an asset or asset group is considered to be impaired, the impairment charge to be recognized is measured as the amount by which the carrying amount of the asset or asset group exceeds fair value. Long-lived assets meeting the criteria to be considered as held for sale are reported at the lower of their carrying amount or fair value less costs to sell. (Q) NET INCOME ATTRIBUTABLE TO RICOH COMPANY, LTD. PER SHARE Basic net income attributable to Ricoh Company, Ltd. per share of common stock is calculated by dividing net income attributable to Ricoh Company, Ltd. by the weighted-average number of shares of common stock outstanding during the period. The calculation of diluted net income attributable to Ricoh Company, Ltd. per share of common stock is similar to the calculation of basic net income attributable to Ricoh Company, Ltd. per share, except that the weighted-average number of shares outstanding includes the additional dilution from potential common stock equivalents such as convertible bonds. (R) USE OF ESTIMATES Management of Ricoh has made a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of fair value of financial instruments and contingent assets and liabilities, to prepare these financial statements in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates. Ricoh has identified seven areas where it believes assumptions and estimates are particularly critical to the consolidated financial statements. These are determination of the allowance for doubtful receivables, impairment of securities, impairment of long-lived assets including goodwill, uncertain tax positions, realizability of deferred tax assets, the valuation of assets and liabilities in business combinations and pension accounting. (S) NEW ACCOUNTING STANDARDS NOT YET ADOPTED In June 2011, the FASB issued Accounting Standards Update ("ASU") 2011-05. This ASU requires entities to present comprehensive income in either: (i) one continuous financial statement or (ii) two separate but consecutive statements that display net income and the components of other comprehensive income. Totals and individual components of both net income and other comprehensive income must be included in either presentation. It is effective for fiscal years beginning on or after December 16, 2011 and early adoption is permitted. This adoption of ASU 2011-05 will not have any effect on Ricoh's consolidated financial position and results of operations. (T) RECLASSIFICATIONS Certain reclassifications have been made to the prior years' financial statements to conform with the current year's presentation. Expenditures for intangible asset was included in other, net of cash flows from investing activities in the consolidated statement of cash flows for the six months ended September 30, 2010, has been reclassified to conform with the current year's presentation. 10 2. SECURITIES Investment securities as of March 31, 2011 and September 30, 2011 consist of the following: Millions of Yen ---------------------------------- March 31, 2011 September 30, 2011 -------------------------------------------------------------------------------- Investment securities: Available-for-sale securities 46,938 42,696 Non-marketable equity securities 1,971 2,022 -------------------------------------------------------------------------------- 48,909 44,718 ================================================================================ The noncurrent security types of available-for-sale securities, and the respective cost, gross unrealized holding gains, gross unrealized holding losses and fair value as of March 31, 2011 and September 30, 2011 are as follows:
Millions of Yen ----------------------------------------------------------------------------------- March 31, 2011 September 30, 2011 ----------------------------------------- ----------------------------------------- Gross Gross Gross Gross unrealized unrealized unrealized unrealized holding holding Fair holding holding Fair Cost gains losses value Cost gains losses value ---------------------------------------------------------------------------------------------------------- Noncurrent: Equity securities 40,765 4,655 327 45,093 40,847 3,180 3,041 40,986 Corporate debt securities 1,802 43 -- 1,845 1,627 83 -- 1,710 ---------------------------------------------------------------------------------------------------------- 42,567 4,698 327 46,938 42,474 3,263 3,041 42,696 ==========================================================================================================
Gross unrealized holding losses and the fair value of available-for-sale securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2011 and September 30, 2011 are as follows:
Millions of Yen ---------------------------------------------------------------------------------- March 31, 2011 ---------------------------------------------------------------------------------- Less than 12 months 12 months or longer Total --------------------------- ---------------------------- ------------------------- Gross Gross Gross unrealized unrealized unrealized holding holding holding Fair value losses Fair value losses Fair value losses -------------------------------------------------------------------------------------------------------------- Noncurrent: Available-for-sale: Equity securities 1,341 261 238 66 1,579 327 ==============================================================================================================
Millions of Yen ---------------------------------------------------------------------------------- September 30, 2011 ---------------------------------------------------------------------------------- Less than 12 months 12 months or longer Total --------------------------- ---------------------------- ------------------------- Gross Gross Gross unrealized unrealized unrealized holding holding holding Fair value losses Fair value losses Fair value losses -------------------------------------------------------------------------------------------------------------- Noncurrent: Available-for-sale: Equity securities 31,987 2,711 1,021 330 33,008 3,041 ===============================================================================================================
11 Gross unrealized holding losses of available-for-sale securities as of March 31, 2011 and September 30, 2011 consist of 39 and 37 kinds of securities. Ricoh judged the decline in fair value of investment securities at period end to be temporary, with considering such factors as financial and operating conditions of issuer, the industry in which the issuer operates and other relevant factors. The contractual maturities of debt securities classified as available-for-sale as of September 30, 2011 are as follows: Millions of Yen --------------------- Cost Fair value ------------------------------------------------------------------------------ Due after one year through five years 532 530 Over five years 1,095 1,180 ------------------------------------------------------------------------------ 1,627 1,710 ============================================================================== There were no significant proceeds from the sales of available-for-sale securities for the six months ended September 30, 2010 and 2011. There were no significant realized gains or losses on sales of available-for-sale securities for the six months ended September 30, 2010 and 2011. There were no significant realized gains or losses on valuation of available-for-sale securities for the six months ended September 30, 2010 and 2011. 3. INCOME TAXES The effective tax rate for fiscal year ending March 31, 2012 was approximately 33 percent as of September 30, 2011. The effective tax rate differed from the approximately 41 percent statutory tax rate due primarily to the net increase in valuation allowance for deferred tax assets. 4. PENSION AND RETIREMENT ALLOWANCE PLANS The net periodic benefit costs of the pension plans consist of the following components:
Millions of Yen ---------------------------------------- Six months ended Six months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------------------------- Service cost 6,343 6,141 Interest cost 7,396 7,121 Expected return on plan assets (4,293) (4,456) Net amortization 1,530 1,092 ------------------------------------------------------------------------------------------------------------- Total net periodic pension cost 10,976 9,898 =============================================================================================================
12
Millions of Yen ---------------------------------------- Three months ended Three months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------------------------- Service cost 3,159 3,102 Interest cost 3,632 3,553 Expected return on plan assets (2,087) (2,218) Net amortization 755 542 ------------------------------------------------------------------------------------------------------------- Total net periodic pension cost 5,459 4,979 =============================================================================================================
5. EQUITY The change in Ricoh shareholders' equity, noncontrolling interests and total equity for the six months ended September 30, 2010 and 2011 are as follow: Ricoh adopted ASU 2009-17 on April 1, 2010. The adoption of this ASU resulted in adjustments to change in Ricoh shareholders' equity, noncontrolling interests and total equity as of April 1, 2010.
Millions of Yen ----------------------------------------------------------------------------------- Six months ended September 30, 2010 Six months ended September 30, 2011 ---------------------------------------- ---------------------------------------- Ricoh Ricoh Shareholders' Noncontrolling Total Shareholders' Noncontrolling Total Equity Interests Equity Equity Interests Equity ---------------------------------------------------------------------------------------------------------------------- Equity, Beginning of Period 973,341 50,533 1,023,874 929,877 52,887 982,764 ---------------------------------------------------------------------------------------------------------------------- Cumulative effect of a change in accounting principle - adoption of accounting guidance for a variable interest entity, net of tax (410) (392) (802) -- -- -- ---------------------------------------------------------------------------------------------------------------------- Equity, Beginning of Period as adjusted 972,931 50,141 1,023,072 929,877 52,887 982,764 ---------------------------------------------------------------------------------------------------------------------- Net income (loss) 12,512 1,952 14,464 (7,363) 2,150 (5,213) Unrealized losses on securities (2,376) (8) (2,384) (2,426) (9) (2,435) Pension liability adjustments 458 0 458 (501) 4 (497) Unrealized gains (losses) on derivatives (446) (30) (476) (29) 2 (27) Foreign currency translation adjustments (43,215) 331 (42,884) (45,848) (141) (45,989) ---------------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) (33,067) 2,245 (30,822) (56,167) 2,006 (54,161) ---------------------------------------------------------------------------------------------------------------------- Cash dividends on Common stock (11,972) -- (11,972) (11,971) -- (11,971) Distributions to Noncontrolling interests -- (341) (341) -- (305) (305) Net changes in treasury stock (6) -- (6) 8 -- 8 Wholly owned subsidiaries -- -- -- -- (198) (198) Other -- -- -- (11) -- (11) ---------------------------------------------------------------------------------------------------------------------- Equity, End of Period 927,886 52,045 979,931 861,736 54,390 916,126 ----------------------------------------------------------------------------------------------------------------------
Comprehensive incomes were Yen 3,082 million (gains) and Yen 50,478 million (losses) for the three months ended September 30, 2010 and 2011, respectively. Comprehensive incomes attributable to Ricoh Company, Ltd. were Yen 2,005 million (gains) and Yen 51,369 million (losses), and comprehensive incomes attributable to noncontrolling interests were Yen 1,077 million (gains) and Yen 891 million (gains) for the three months ended September 30, 2010 and 2011, respectively. 13 6. DIVIDENDS Cash dividends paid during the six months ended September 30, 2010 is as follows: Resolved at the General meetings of Shareholders on June 25, 2010 ----------------------------------------------------------------------------- Total amount of dividends (million of yen) 11,972 Dividend per share of common stock (yen) 16.50 Record date March 31, 2010 Effective date June 28, 2010 Resource for dividend Retained earnings ============================================================================= Cash dividends to be paid for the six months ended September 30, 2010, of which effective date is after September 30, 2010. Resolved at the Board meeting on October 28, 2010 ----------------------------------------------------------------------------- Total amount of dividends (millions of yen) 11,971 Dividend per share of common stock (yen) 16.50 Record date September 30, 2010 Effective date December 1, 2010 Resource for dividend Retained earnings ============================================================================= Cash dividends paid during the six months ended September 30, 2011 is as follows: Resolved at the General meetings of Shareholders on June 24, 2011 ----------------------------------------------------------------------------- Total amount of dividends (million of yen) 11,971 Dividend per share of common stock (yen) 16.50 Record date March 31, 2011 Effective date June 27, 2011 Resource for dividend Retained earnings ============================================================================= Cash dividends to be paid for the six months ended September 30, 2011, of which effective date is after September 30, 2011. Resolved at the Board meeting on October 28, 2011 ----------------------------------------------------------------------------- Total amount of dividends (millions of yen) 11,970 Dividend per share of common stock (yen) 16.50 Record date September 30, 2011 Effective date December 1, 2011 Resource for dividend Retained earnings ============================================================================= 7. PER SHARE DATA Ricoh shareholders' equity per share was Yen 1,281.70 and Yen 1,187.78 as of March 31, 2011 and September 30, 2011, respectively. Dividends per share shown in the consolidated statement of income are computed based on dividends paid for the year ended March 31, 2011 and the six months ended September 30, 2011. A reconciliation of the numerator and the denominators of the basic and diluted per share computations for net income attributable to Ricoh Company, Ltd. are as follows: 14
Thousands of shares --------------------------------------- Six months ended Six months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------------------ Weighted average number of shares of common stock outstanding 725,578 725,501 Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 19,741 -- ------------------------------------------------------------------------------------------------------ Diluted shares of common stock outstanding 745,319 725,501 ======================================================================================================
Millions of Yen --------------------------------------- Six months ended Six months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------------------ Net income (loss) attributable to Ricoh Company, Ltd. 12,512 (7,363) Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 (13) -- ------------------------------------------------------------------------------------------------------ Diluted net income (loss) attributable to Ricoh Company, Ltd. 12,499 (7,363) ======================================================================================================
Yen --------------------------------------- Six months ended Six months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------------------ Net income (loss) attributable to Ricoh Company, Ltd. per share: Basic: Basic: Net income (loss) attributable to Ricoh Company, Ltd. 17.24 (10.15) Diluted: Diluted: Net income (loss) attributable to Ricoh Company, Ltd. 16.77 (10.15) ======================================================================================================
Thousands of shares --------------------------------------- Three months ended Three months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------------------ Weighted average number of shares of common stock outstanding 725,576 725,499 Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 19,741 -- ------------------------------------------------------------------------------------------------------ Diluted shares of common stock outstanding 745,317 725,499 ======================================================================================================
15
Millions of Yen ----------------------------------------- Three months ended Three months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------------------ Net income (loss) attributable to Ricoh Company, Ltd. 5,179 (10,809) Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 (6) -- ------------------------------------------------------------------------------------------------------ Diluted net income (loss) attributable to Ricoh Company, Ltd. 5,173 (10,809) ======================================================================================================
Yen ----------------------------------------- Three months ended Three months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------------------ Net income (loss) attributable to Ricoh Company, Ltd. per share: Basic: Basic: Net income (loss) attributable to Ricoh Company, Ltd. 7.13 (14.90) Diluted: Diluted: Net income (loss) attributable to Ricoh Company, Ltd. 6.94 (14.90) ======================================================================================================
Euro Yen Zero Coupon Convertible Bonds was excluded as anti-dilutive for the six months and three months ended September 30, 2011 due to Ricoh incurring a net loss attributable to Ricoh Company, Ltd. 8. DERIVATIVE FINANCIAL INSTRUMENTS Risk Management Policy Ricoh enters into various derivative financial instrument contracts in the normal course of business in connection with the management of its assets and liabilities. Ricoh uses derivative instruments to reduce risk and protect market value of assets and liabilities in conformity with the Ricoh's policy. Ricoh does not use derivative financial instruments for trading or speculative purposes, nor is it a party to leveraged derivatives. All derivative instruments are exposed to credit risk arising from the inability of counterparties to meet the terms of the derivative contracts. However, Ricoh does not expect any counterparties to fail to meet their obligations because these counterparties are financial institutions with satisfactory credit ratings. Ricoh utilizes a number of counterparties to minimize the concentration of credit risk. Foreign Exchange Risk Management Ricoh conducts business on a global basis and holds assets and liabilities denominated in foreign currencies. Ricoh enters into foreign exchange contracts and foreign currency options to hedge against the potentially adverse impacts of foreign currency fluctuations on these assets and liabilities denominated in foreign currencies. 16 Interest Rate Risk Management Ricoh enters into interest rate swap agreements to hedge against the potential adverse impacts of changes in fair value or cash flow fluctuations on interest of its outstanding debt. Fair Value Hedges Changes in the fair value of derivative instruments and the related hedged items designated and qualifying as fair value hedges are included in other (income) expenses in the consolidated statements of income. There are no Fair Value Hedges derivative instruments effective at September 30, 2011 due to the maturity of hedged instruments or contract. Cash Flow Hedges Changes in the fair value of derivative instruments designated and qualifying as cash flow hedges are included in accumulated other comprehensive income (loss) on the consolidated balance sheets. These amounts are reclassified into earnings as interest on the hedged loans is paid. There is no hedging ineffectiveness nor are net gains or losses excluded from the assessment of hedge effectiveness for the six months ended September 30, 2011 as the critical terms of the interest rate swap match the terms of the hedged debt obligations. Ricoh expects that it will reclassify into earnings through other (income) expenses during the next 12 months approximately Yen 29 million of the balance of accumulated other comprehensive income as of September 30, 2011. Undesignated Derivative Instruments Derivative instruments not designated as hedging instruments are held mainly to reduce the risk relating to the variability in exchange rates on assets and liabilities denominated in foreign currencies. Changes in the fair value of these instruments are included in other (income) expenses in the consolidated statement of income. Contract amounts of derivative instruments at March 31, 2011 and September 30, 2011 are shown in the following tables:
Millions of Yen ------------------------------------------ March 31, 2011 September 30, 2011 -------------------------------------------------------------------------------- Interest rate swap agreements 284,444 288,177 Foreign currency contracts 211,249 141,409 Foreign currency options 3,555 41,241 ================================================================================
The location and fair value amounts of derivatives in consolidated balance sheet are shown in the following tables: 17 Derivatives designated as hedging instruments
Current Long-term ----------------------------------------- ---------------------------------------- Fair value Fair value ----------------------------------------- ---------------------------------------- Balance sheet Balance sheet Location Millions of Yen Location Millions of Yen ----------------------------------------------------------------------------- ---------------------------------------- March 31, September 30, March 31, September 30, Asset Derivatives 2011 2011 2011 2011 ---------------------------------------------------------------------------------------------------------------------- Interest rate swap agreements Deferred income Lease deposits taxes and other 4 -- and other -- -- ====================================================================================================================== March 31, September 30, March 31, September 30, Liability Derivatives 2011 2011 2011 2011 ---------------------------------------------------------------------------------------------------------------------- Interest rate swap agreements Accrued expenses Deferred income and other 73 40 taxes and other 2,766 2,748 ======================================================================================================================
Derivatives not designated as hedging instruments
Current Long-term ----------------------------------------- ---------------------------------------- Fair value Fair value ----------------------------------------- ---------------------------------------- Balance sheet Balance sheet Location Millions of Yen Location Millions of Yen ---------------------------------------------------------------------------------------------------------------------- March 31, September 30, March 31, September 30, Asset Derivatives 2011 2011 2011 2011 ---------------------------------------------------------------------------------------------------------------------- Foreign currency contracts Deferred income Lease deposits taxes and other 1,497 2,012 and other -- 1,761 Foreign currency options 20 500 -- -- ---------------------------------------------------------------------------------------------------------------------- Total 1,517 2,512 -- 1,761 ======================================================================================================================
March 31, September 30, March 31, September 30, Liability Derivatives 2011 2011 2011 2011 ---------------------------------------------------------------------------------------------------------------------- Interest rate swap agreements 72 28 24 200 Foreign currency contracts Accrued expenses Deferred income and other 3,087 2,358 taxes and other 477 21 Foreign currency options 64 118 -- -- ---------------------------------------------------------------------------------------------------------------------- Total 3,223 2,504 501 221 ======================================================================================================================
Total fair value amounts of derivatives Millions of Yen ----------------------- Fair value ------------------------------------------------------------------------------- March 31, September 30, 2011 2011 ------------------------------------------------------------------------------- Total Asset Derivatives 1,521 4,273 Total Liability Derivatives 6,563 5,513 ------------------------------------------------------------------------------- 18 The location and amount of gains and losses related to derivatives reported in the consolidated statement of income for the six months ended September 30, 2010 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen -------------------------------------------------------------------------------------------- Gain or (Loss) Recognized in OCI Gain or (Loss) Reclassified from on Derivative Accumulated OCI Into Income Gain or (Loss) Recognized in Income on (Effective Portion) (Effective Portion) Derivative (Ineffective Portion) -------------------------------------------------------------------------------------------- Amount Location Amount Location Amount --------------------------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements (594) Interest expense (133) -- -- ===========================================================================================================================
Millions of Yen ------------------------------------------------------------------ Gain or (Loss) Recognized Gain or (Loss) on Hedged Item in Income on Derivative Recognized in Income ------------------------------------ ----------------------------- Location Amount Location Amount ------------------------------------------------------------------------------------------------------ Fair value hedge Interest rate swap agreements Interest and dividend income 55 Interest expense (72) ======================================================================================================
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative -------------------------------------------------------------- Location Millions of Yen ------------------ September 30, 2010 --------------------------------------------------------------------------------------------- Interest rate swap agreements Other, net (93) Foreign currency contracts Foreign currency exchange (gain) loss, net 2,266 Foreign currency options Foreign currency exchange (gain) loss, net (314) --------------------------------------------------------------------------------------------- Total 1,859 =============================================================================================
The location and amount of gains and losses related to derivatives reported in the consolidated statement of for the three months ended September 30, 2010 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen -------------------------------------------------------------------------------------------- Gain or (Loss) Recognized in OCI Gain or (Loss) Reclassified from on Derivative Accumulated OCI Into Income Gain or (Loss) Recognized in Income on (Effective Portion) (Effective Portion) Derivative (Ineffective Portion) -------------------------------------------------------------------------------------------- Amount Location Amount Location Amount --------------------------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements (51) Interest expense (98) -- -- ===========================================================================================================================
19
Millions of Yen ------------------------------------------------------------------ Gain or (Loss) Recognized Gain or (Loss) on Hedged Item in Income on Derivative Recognized in Income ------------------------------------ ----------------------------- Location Amount Location Amount ------------------------------------------------------------------------------------------------------ Fair value hedge Interest rate swap agreements Interest and dividend income 25 Interest expense (33) ======================================================================================================
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative -------------------------------------------------------------- Location Millions of Yen ------------------ September 30, 2010 --------------------------------------------------------------------------------------------- Interest rate swap agreements Other, net (185) Foreign currency contracts Foreign currency exchange (gain) loss, net (2,169) Foreign currency options Foreign currency exchange (gain) loss, net (1,044) --------------------------------------------------------------------------------------------- Total (3,398) =============================================================================================
The location and amount of gains and losses related to derivatives reported in the consolidated statement of income for the Six months ended September 30, 2011 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen -------------------------------------------------------------------------------------------- Gain or (Loss) Recognized in OCI Gain or (Loss) Reclassified from on Derivative Accumulated OCI Into Income Gain or (Loss) Recognized in Income on (Effective Portion) (Effective Portion) Derivative (Ineffective Portion) -------------------------------------------------------------------------------------------- Amount Location Amount Location Amount --------------------------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements (121) Interest expense (92) -- -- ===========================================================================================================================
Millions of Yen ------------------------------------------------------------------ Gain or (Loss) Recognized Gain or (Loss) on Hedged Item in Income on Derivative Recognized in Income ------------------------------------ ----------------------------- Location Amount Location Amount ------------------------------------------------------------------------------------------------------ Fair value hedge Interest rate swap agreements Interest and dividend income -- Interest expense -- ======================================================================================================
20 Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative -------------------------------------------------------------- Location Millions of Yen ------------------ September 30, 2011 --------------------------------------------------------------------------------------------- Interest rate swap agreements Other, net (132) Foreign currency contracts Foreign currency exchange (gain) loss, net 3,461 Foreign currency options Foreign currency exchange (gain) loss, net 426 --------------------------------------------------------------------------------------------- Total 3,755 =============================================================================================
The location and amount of gains and losses related to derivatives reported in the consolidated statement of income for the three months ended September 30, 2011 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen -------------------------------------------------------------------------------------------- Gain or (Loss) Recognized in OCI Gain or (Loss) Reclassified from on Derivative Accumulated OCI Into Income Gain or (Loss) Recognized in Income on (Effective Portion) (Effective Portion) Derivative (Ineffective Portion) -------------------------------------------------------------------------------------------- Amount Location Amount Location Amount --------------------------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements 466 Interest expense (27) -- -- ===========================================================================================================================
Millions of Yen ------------------------------------------------------------------ Gain or (Loss) Recognized Gain or (Loss) on Hedged Item in Income on Derivative Recognized in Income ------------------------------------ ----------------------------- Location Amount Location Amount ------------------------------------------------------------------------------------------------------ Fair value hedge Interest rate swap agreements Interest and dividend income -- Interest expense -- ======================================================================================================
21 Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative -------------------------------------------------------------- Location Millions of Yen ------------------ September 30, 2011 --------------------------------------------------------------------------------------------- Interest rate swap agreements Other, net (82) Foreign currency contracts Foreign currency exchange (gain) loss, net (1,330) Foreign currency options Foreign currency exchange (gain) loss, net 350 --------------------------------------------------------------------------------------------- Total (1,062) =============================================================================================
9. COMMITMENTS AND CONTINGENT LIABILITIES Ricoh was contingently liable for certain guarantees including employees housing loans of Yen 48 million as of September 30, 2011. As of September 30, 2011 the Company and certain of its subsidiaries were parties to litigation involving routine matters, such as patent rights. In the opinion of management, the ultimate liability, if any, resulting from such litigation will not materially affect the consolidated financial position or the results of operations of Ricoh. 10. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (A) CASH AND CASH EQUIVALENTS, TIME DEPOSITS, TRADE RECEIVABLES, SHORT-TERM BORROWINGS, CURRENT MATURITIES OF LONG-TERM INDEBTEDNESS, TRADE PAYABLES AND ACCRUED EXPENSES The carrying amounts approximate fair values because of the short maturities of these instruments. (B) INVESTMENT SECURITIES The fair value of the investment securities is principally based on quoted market price. Ricoh have not estimated the fair value of non-marketable equity securities, as it is not practicable. Because there were no quoted market prices for non-marketable equity securities and each security had different nature and characteristics, reasonable estimates of fair values could not be made without incurring excessive costs. The carrying amounts of non-marketable equity securities were Yen 1,971 million and Yen 2,022 million as of March 31, 2011 and September 30, 2011, respectively. (C) INSTALLMENT LOANS The fair value of installment loans is based on the present value of future cash flows using the current interest rate for similar instruments of comparable maturity. 22 (D) LONG-TERM INDEBTEDNESS The fair value of each of the long-term indebtedness instruments is based on the present value of future cash flows associated with each instrument discounted using the current borrowing rate for similar instruments of comparable maturity. (E) INTEREST RATE SWAP AGREEMENTS, FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY OPTIONS The fair value of interest rate swap agreements, foreign currency contracts and foreign currency options is estimated by obtaining quotes from brokers or suitable valuation method based on available data. The estimated fair value of the financial instruments as of March 31, 2011 and September 30, 2011 are summarized as follows:
Millions of Yen ------------------------------------------------- March 31, 2011 September 30, 2011 ----------------------- ----------------------- Carrying Estimated Carrying Estimated amount fair value amount fair value ------------------------------------------------------------------------------------- Investment securities 48,909 48,909 44,718 44,718 Installment loans 72,634 73,769 77,026 78,229 Long-term indebtedness (479,422) (475,116) (480,422) (478,063) Interest rate swap agreements, net (2,931) (2,931) (3,016) (3,016) Foreign currency contracts, net (2,067) (2,067) 1,394 1,394 Foreign currency options, net (44) (44) 382 382 =====================================================================================
Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. 11. FAIR VALUE MEASUREMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels fair value hierarchy that prioritizes the inputs used to measure fair value is established. The three levels of inputs used to measure fair value are as follows: Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3 - Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. The following tables present the fair-value hierarchy levels of Ricoh's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2011 and September 30, 2011. 23
Millions of Yen ------------------------------ March 31, 2011 ------------------------------ Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------- Assets: Available-for-sale securities: Domestic equity securities 38,243 -- -- 38,243 Foreign equity securities 6,850 -- -- 6,850 Foreign corporate bonds 1,845 -- -- 1,845 Derivative instruments Interest rate swap agreements -- 4 -- 4 Foreign currency contracts -- 1,497 -- 1,497 Foreign currency options -- 20 -- 20 ------------------------------------------------------------------------- Total assets 46,938 1,521 -- 48,459 ========================================================================= Liabilities: Derivatives instruments Interest rate swap agreements -- 2,935 -- 2,935 Foreign currency contracts -- 3,564 -- 3,564 Foreign currency options -- 64 -- 64 ------------------------------------------------------------------------- Total liabilities -- 6,563 -- 6,563 =========================================================================
Millions of Yen ------------------------------ September 30, 2011 ------------------------------ Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------- Assets: Available-for-sale securities: Domestic equity securities 35,429 -- -- 35,429 Foreign equity securities 5,557 -- -- 5,557 Foreign corporate bonds 1,710 -- -- 1,710 Derivative instruments Interest rate swap agreements -- -- -- -- Foreign currency contracts -- 3,773 -- 3,773 Foreign currency options -- 500 -- 500 ------------------------------------------------------------------------- Total assets 42,696 4,273 -- 46,969 ========================================================================= Liabilities: Derivatives instruments Interest rate swap agreements -- 3,016 -- 3,016 Foreign currency contracts -- 2,379 -- 2,379 Foreign currency options -- 118 -- 118 ------------------------------------------------------------------------- Total liabilities -- 5,513 -- 5,513 =========================================================================
Available-for-sale securities Available-for-sale securities classified Level 1 in the fair value hierarchy contains marketable securities and bonds. Marketable securities and bonds are valued using a market approach based on the quoted market prices of identical instruments in active markets. Derivative instruments Ricoh uses foreign exchange contracts, foreign currency options and interest rate swap agreements to manage exposure to the variability of cash flow. These derivative instruments are classified as Level 2 24 in the fair value hierarchy, since they are valued using observable market data such as LIBOR-based yield curves. 12. VARIABLE INTEREST ENTITY Ricoh sold certain finance lease receivables in prior years through revolving securitization transactions, which were structured as special purpose entities ("SPE"). The value assigned to undivided interests retained in these transactions was based on the fair value of retained interests as of a transfer of these receivables. Ricoh's retained interests were considered as variable interest, because Ricoh's retained interests were subordinate to the investors' interests and had the liability with received the potential losses. And, Ricoh was considered as primary beneficiary, because Ricoh was special servicer for the program. As a result, Ricoh consolidated the interests as VIE and recorded the assets and liabilities. Adoption of the new accounting standards did not have a material effect on Ricoh's results of operation. The main impact of adopting the new accounting standards on Ricoh's consolidated financial position is as follows:
Millions of Yen ---------------------------------- March 31, 2011 September 30, 2011 -------------------------------------------------------------------------------------------- Current maturities of long-term finance receivables, net 8,460 8,488 Long-term finance receivables, net 15,849 15,904 Current maturities of long-term indebtedness 7,044 7,048 Long-term indebtedness 13,197 13,206 ============================================================================================
13. CREDIT QUALITY OF FINANCING RECEIVABLES AND THE ALLOWANCE FOR DOUBTFUL RECEIVABLES (A) FINANCING RECEIVABLES AND ALLOWANCE FOR DOUBTFUL RECEIVABLES The financial subsidiaries of the Company have financing receivables and Ricoh classifies them into three categories; "lease receivables", "installment loans" and "installment receivables and other". These receivables consist of a large number of smaller-balance homogenous loans, lease receivables and installment receivables. Financing receivables classified as "lease receivables" and "installment receivables and other" are resulting from sale and lease transactions of mainly office equipment. Financing receivables classified as "installment loans" are resulting from financial services. Ricoh continuously monitors overdue financing receivables, which Ricoh considers as uncollectible risk receivables. For financing receivables with specific customer collection issues, Ricoh individually evaluates their collectability in order to determine the amount of allowance for doubtful receivables. For other financing receivables, Ricoh categorizes these receivables into groups by their nature and characteristics. Ricoh collectively evaluates the collectability by each group, using its historical experience of write-off and determines the amount of allowance for doubtful receivables. 25 Financing receivables and allowance for doubtful receivables as of September 30, 2011 are as follows:
Millions of Yen --------------------------------------------------- September 30, 2011 --------------------------------------------------- Installment Lease Installment receivables receivables loans and other Total ------------------------------------------------------------------------------------------------- Allowance for doubtful receivables: Beginning balance 10,527 1,772 2,485 14,784 ------------------------------------------------------------------------------------------------- Charge-offs (1,114) (28) (38) (1,180) Recoveries -- -- -- -- Provision 1,570 298 73 1,941 Translation adjustment (304) -- (50) (354) Ending balance 10,679 2,042 2,470 15,191 ------------------------------------------------------------------------------------------------- Allowance for doubtful receivables: Individually evaluated 4,452 805 1,251 6,508 Collectively evaluated 6,227 1,237 1,219 8,683 ------------------------------------------------------------------------------------------------- Financing receivables: Individually evaluated 67,237 1,061 3,803 72,101 Collectively evaluated 522,803 78,007 47,030 647,840 ------------------------------------------------------------------------------------------------- Total: Financing receivables 590,040 79,068 50,833 719,941 =================================================================================================
(B) AGE ANALYSIS Ricoh ascribes the fact of past due to credit quality indicators and classifies financing receivables into Overdue and Current. Analysis of the age of the recorded financing receivables as of March 31, 2011 and September 30, 2011 are as follows:
Millions of Yen --------------------------------------------------- March 31, 2011 --------------------------------------------------- Installment Lease Installment receivables receivables loans and other Total ------------------------------------------------------------------------------------------------- Current 584,913 74,373 48,544 707,830 Overdue 7,433 33 1,661 9,127 ------------------------------------------------------------------------------------------------- Total: Financing receivables 592,346 74,406 50,205 716,957 =================================================================================================
Millions of Yen --------------------------------------------------- September 30, 2011 --------------------------------------------------- Installment Lease Installment receivables receivables loans and other Total ------------------------------------------------------------------------------------------------- Current 584,669 79,058 49,064 712,791 Overdue 5,371 10 1,769 7,150 ------------------------------------------------------------------------------------------------- Total: Financing receivables 590,040 79,068 50,833 719,941 =================================================================================================
26 14. SEGMENT INFORMATION Ricoh's operating segments are comprised of Imaging & Solutions, including copiers and related supplies, communications and information systems, Industrial Products, including thermal media and semiconductors, and Other, including digital cameras. Segment Profit (loss) is determined by subtracting cost of sales and selling, general and administrative expenses from sales, and is used by Ricoh's management in deciding how to allocate resources and in assessing performance. Segment Profit (loss) excludes certain corporate expenses, such as costs related to human resources, legal relations, investor relations, public relations, corporate planning and environmental activities. The following tables present certain information regarding Ricoh's operating segments and by geographic areas for the six and three months ended September 30, 2010 and 2011, respectively. (A) OPERATING SEGMENT INFORMATION
Millions of Yen ---------------------------------------- Six months ended Six months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------ Segment Sales: Imaging & Solutions 850,983 829,105 Industrial Products 58,334 52,714 Other 64,130 59,330 Intersegment transaction (2,591) (2,264) ------------------------------------------------------------------------------------------ Total Segment Sales 970,856 938,885 ========================================================================================== Segment Profit (loss): Imaging & Solutions 73,001 37,680 Industrial Products 1,046 (2,166) Other (464) (2,844) ------------------------------------------------------------------------------------------ Total Segment Profit (loss) 73,583 32,670 ========================================================================================== Reconciling Items: Corporate expenses and Elimination (35,571) (34,446) Interest and dividend income 1,375 1,502 Interest expense (3,911) (3,418) Foreign currency exchange loss, net (7,430) (4,330) Other, net 19 268 ------------------------------------------------------------------------------------------ Income (loss) before Income Taxes and Equity in Earnings of Affiliates 28,065 (7,754) ==========================================================================================
27
Millions of Yen ----------------------------------------- Three months ended Three months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------- Segment Sales: Imaging & Solutions 426,294 417,000 Industrial Products 29,244 26,504 Other 33,770 30,431 Intersegment transaction (1,406) (1,198) ------------------------------------------------------------------------------------------- Total Segment Sales 487,902 472,737 =========================================================================================== Segment Profit (loss): Imaging & Solutions 35,083 10,820 Industrial Products 562 (1,684) Other (336) (2,329) ------------------------------------------------------------------------------------------- Total Segment Profit (loss) 35,309 6,807 =========================================================================================== Reconciling Items: Corporate expenses and Elimination (19,144) (18,590) Interest and dividend income 778 894 Interest expense (2,057) (1,958) Foreign currency exchange loss, net (2,154) (3,823) Other, net (159) 393 ------------------------------------------------------------------------------------------- Income (loss) before Income Taxes and Equity in Earnings of Affiliates 12,573 (16,277) ===========================================================================================
Intersegment sales represent sales of Industrial Products segment to Imaging & Solutions segment. (B) GEOGRAPHIC INFORMATION Sales which are attributed to countries based on location of customers are as follows:
Millions of Yen ----------------------------------------- Six months ended Six months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------- Sales- Japan 439,065 434,501 The Americas 264,857 234,240 Europe 201,051 201,940 Other 65,883 68,204 ------------------------------------------------------------------------------------------- Consolidated 970,856 938,885 ===========================================================================================
Millions of Yen ----------------------------------------- Three months ended Three months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------- Sales- Japan 226,149 219,354 The Americas 131,447 118,671 Europe 97,934 99,446 Other 32,372 35,266 ------------------------------------------------------------------------------------------- Consolidated 487,902 472,737 ===========================================================================================
28 15. SUPPLEMENTARY INFORMATION TO THE STATEMENT OF INCOME The following amounts were charged to selling, general and administrative expenses for the six months and three months ended September 30, 2010 and 2011:
Millions of Yen ----------------------------------------- Six months ended Six months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------- Research and development costs 53,997 59,507 Advertising costs 5,191 5,483 Shipping and handling costs 8,909 11,211 ===========================================================================================
Millions of Yen ----------------------------------------- Three months ended Three months ended September 30, 2010 September 30, 2011 ------------------------------------------------------------------------------------------- Research and development costs 28,327 31,825 Advertising costs 2,994 3,110 Shipping and handling costs 4,706 6,275 ===========================================================================================
29