20-F 1 d20f.htm FORM 20-F Form 20-F
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 20-F

 

 

(Mark One)

 

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended March 31, 2010

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 Date of event requiring this shell company report            

 For the transition period from              to             

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)

Kunihito Minakawa, (T)+81-3-6278-5241, (F)+81-3-3543-9086

13-1, Ginza 8-chome, Chuo-ku, Tokyo 104-8222, Japan

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

  

Name of each exchange on 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)

 

* 1,218,859 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, 2010: 725,591,355 shares (excluding 19,320,723 shares of Treasury Stock)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  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 basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP  x

    

International Financial Reporting Standards as issued

by the International Accounting Standards Board  ¨

   Other  ¨.

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  ¨.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

 

 

 


Table of Contents

Defined Terms, Conventions and Presentation of Financial Information

On June 25, 2010 the noon buying rate for cable transfers in New York City as certified for customs purposes by the Federal Reserve Board for the Japanese Yen to the U.S. Dollar was ¥89.35 = 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 2010” refers to Ricoh’s fiscal year ended March 31, 2010, and other fiscal years of Ricoh are referred to in a corresponding manner.

As used in this annual report, “U.S. GAAP” means U.S. generally accepted accounting principles.

Cautionary Statement With Respect to Forward-Looking Statements

Statements made in this annual report with respect to Ricoh’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are or may be deemed to be forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, about the future performance of Ricoh. These forward-looking statements are made in reliance upon the protections provided by such acts for forward-looking statements. Forward-looking statements include but are not limited to those using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “may” or “might” and words of similar meaning in connection with a discussion of future operations or financial performance. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. Ricoh cautions you that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. You also should not rely on any obligation of Ricoh to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Ricoh disclaims any such obligation. Risks and uncertainties that might affect Ricoh include, but are not limited to (i) general economic conditions in Ricoh’s markets, particularly levels of consumer spending; (ii) exchange rates, particularly between the Japanese Yen and the U.S. Dollar, the Euro, and other currencies in which Ricoh makes significant sales or in which Ricoh’s assets and liabilities are denominated; (iii) Ricoh’s ability to continue to design and develop products and services, and win acceptance of its products and services which are offered in highly competitive markets characterized by continual introduction of new products, rapid development in new technology, and consumer preferences that are subjective and likely to change; (iv) Ricoh’s ability to successfully implement strategies for its office equipment business, such as further globalization of its operations to increase account sales to corporate clients, reinforcement of the color printer line-up to meet growing demand for color products among its office users, implementation of optimal printing solutions for customers’ digitally networked offices and enhancement of printing capabilities centered on multi-functional printers (“MFPs”), and implementation of optimal localization of manufacturing operations so that such operations are closer to the customer; (v) Ricoh’s ability to continuously devote sufficient resources to research and development, and capital expenditures for digital and networking equipment, such as digital plain paper copiers (“PPCs”), MFPs, laser printers, GELJET printers and production printing products; (vi) the success of Ricoh’s alliances with various computer manufacturers which Ricoh may engage in alliances with in the future; and (vii) the outcome of contingencies.

Important information regarding risks and uncertainties is also set forth elsewhere in this annual report, including in “Risk Factors” included in “Item 3. Key Information,” “Item 4. Information on the Company,” “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”


Table of Contents

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

   7

Item 4A. Unresolved Staff Comments

   21

Item 5. Operating and Financial Review and Prospects

   22

Item 6. Directors, Senior Management and Employees

   51

Item 7. Major Shareholders and Related Party Transactions

   65

Item 8. Financial Information

   66

Item 9. The Offer and Listing

   66

Item 10. Additional Information

   67

Item 11. Quantitative and Qualitative Disclosures About Market Risk

   76

Item 12. Description of Securities Other Than Equity Securities

   79

PART II

  

Item 13. Defaults, Dividend Arrearages and Delinquencies

   80

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

   80

Item 15. Controls and Procedures

   80

Item 16. [RESERVED]

   81

Item 16A. Audit Committee Financial Expert

   81

Item 16B. Code of Ethics

   81

Item 16C. Principal Accountant Fees and Services

   81

Item 16D. Exemptions from the Listing Standards for Audit Committees

   82

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

   82

Item 16F. Change in Registrant’s Certifying Accountant

   82

Item 16G. Corporate Governance

   82

PART III

  

Item 17. Financial Statements

   83

Item 18. Financial Statements

   83

Item 19. Exhibits

   83


Table of Contents

PART I

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, 2009 and 2010, the related consolidated statements of income, shareholders’ investment and cash flows for the three years ended March 31, 2008, 2009 and 2010 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,
     2006    2007    2008    2009    2010

Income Statement Data:

              

Net sales:

   ¥ 1,909,238    ¥ 2,068,925    ¥ 2,219,989    ¥ 2,091,696    ¥ 2,016,337

Operating income

     148,584      174,380      181,506      74,536      65,997

Income before income taxes and equity in earnings of affiliates

     152,766      174,519      174,669      30,939      57,524

Net income attributable to Ricoh Company, Ltd.

     97,057      111,724      106,463      6,530      27,873

Per American Depositary Share:(1)

              

Net income (basic)

     661.65      765.50      730.20      45.10      192.05

Net income (diluted)

     661.65      759.45      710.75      43.75      186.80

Balance Sheet Data:

              

Total assets

     2,041,183      2,243,406      2,214,368      2,513,495      2,383,943

Ricoh Company, Ltd. shareholders’ equity

     960,245      1,070,913      1,080,196      975,373      973,341

Total equity

     1,013,135      1,127,782      1,138,479      1,024,350      1,023,874

Common stock

     135,364      135,364      135,364      135,364      135,364

Weighted average number of shares outstanding

     733,434,414      729,744,656      729,010,475      723,924,525      725,613,259

 

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    Millions of Yen except per share amounts and number of  shares
Year ended March 31,
 
          2006                 2007                 2008                 2009                 2010        

Cash dividends declared Per American Depositary Share:(1),(2)

         

Interim

  60.00      65.00      80.00      90.00      82.50   
  ($0.50   ($0.56   ($0.72   ($0.96   ($0.95

Year-end

  60.00      75.00      85.00      75.00      82.50   
  ($0.52   ($0.61   ($0.80   ($0.78   ($0.92

Cash and cash equivalents

  187,055      255,737      170,607      258,484      242,165   

Capital investments

  102,049      85,800      85,215      96,958      66,979   

Long-term indebtedness, excluding current installment

  195,626      236,801      225,930      509,403      514,718   

 

Notes:

(1) Each American Depositary Share represents five shares of Ricoh Common Stock.
(2) Cash dividends declared per American Depositary Share for any given fiscal year consist of interim dividends paid during the fiscal year and year-end dividends to be paid after the fiscal year-end for such fiscal year, which are not equal to the dividends paid during such fiscal year, set forth under “Per American Depositary Share, each representing 5 shares of common stock – Cash dividends paid per share” in the Consolidated Statements of Income appearing elsewhere in this annual report.

In the preceding table, cash dividends declared in U.S. Dollars are based on the exchange rates at each respective payment date, using the noon buying rates for cable transfer in Japanese Yen in New York City as certified for customs purposes by the Federal Reserve Board.

On June 25, 2010, the noon buying rate for cable transfers in New York City as certified for customs purposes by the Federal Reserve Board for the Japanese Yen to the U.S. Dollar was ¥89.35 = U.S.$1.00.

The following table sets forth the exchange rates for the Japanese Yen and the U.S. Dollar based on the noon buying rate for cable transfers in Japanese Yen in New York City as certified for customs purposes by the Federal Reserve Board during the previous six months and prior five fiscal years:

 

     December
2009
   January
2010
   February
2010
   March
2010
   April
2010
   May
2010

High

   86.62    89.41    88.84    88.43    92.03    89.89

Low

   93.08    93.31    91.94    93.40    94.51    94.68

 

     Year ended March 31,
     2006    2007    2008    2009    2010

Year-end

   117.48    117.56    99.85    99.15    93.40

Average*

   104.64    116.55    113.61    100.85    92.49

High

   104.41    110.07    96.88    87.80    86.12

Low

   120.93    121.81    124.09    110.48    100.71

 

* The average Japanese Yen exchange rates represent average noon buying rate on the last business day of each month during the respective period.

 

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B. Capitalization and Indebtedness.

Not applicable.

C. Reasons for the Offer and Use of Proceeds.

Not applicable.

D. Risk Factors.

Ricoh is a global manufacturer of office equipment and conducts business on a global scale. As such, Ricoh is exposed to various risks which include the risks listed below. Although certain risks that may affect Ricoh’s businesses are listed in this section, this list is not exhaustive. Ricoh’s business may in the future also be affected by other risks that are currently unknown or that are not currently considered significant or material. In addition, this section contains forward-looking statements that are subject to the “Cautionary Statement with Respect to Forward-Looking Statements” appearing elsewhere in this annual report.

Ricoh’s Success Will Depend on Its Ability to Respond to Rapid Technological Changes in the Document Imaging and Management Industry

The document imaging and management industry includes products such as copiers, printers, facsimile machines and scanners. The technology used in this industry changes rapidly and products in this industry will often require frequent and timely product enhancements or have a short product life cycle. Most of Ricoh’s products are a part of this industry and as such Ricoh’s success will depend on its ability to respond to such technological changes in the industry. To remain competitive in this industry, Ricoh invests a significant amount of resources and capital every year in research and development activities. Despite this investment, the process of developing new products or technologies is inherently complex and uncertain and there are a number of risks that Ricoh is subject to, including the following:

 

   

No assurances can be made that Ricoh will successfully anticipate whether its products or technologies will satisfy its customers’ needs or gain market acceptance;

 

   

No assurances can be made that the introduction of more advanced products that also possess the capabilities of existing products will not adversely affect the sales performance of each such product;

 

   

No assurances can be made that Ricoh will be able to procure raw materials and parts necessary for new products or technologies from its suppliers at competitive prices;

 

   

No assurances can be made that Ricoh will be able to successfully manage the distribution system for its new products to eliminate the risk of loss resulting from a failure to take advantage of market opportunities;

 

   

No assurances can be made that Ricoh will succeed in marketing any newly developed product or technology; and

 

   

No assurances can be given that Ricoh will be able to respond adequately to changes in the industry.

Ricoh’s failure to respond to any risks associated with this industry, including those described above, may reduce Ricoh’s future growth and profitability and may adversely affect Ricoh’s financial results and condition.

In addition to the above general risks, Ricoh is exposed to the following specific risks relating to the document imaging and management industry:

Digital Technology

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.

 

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Ricoh Must Successfully Operate in Highly Competitive Markets

The document imaging and management industry, including the copier industry, is intensely competitive. Ricoh expects to face increased competition in the various markets in which it operates. Currently, Ricoh’s competitors include other large manufacturers and distributors of office equipment. In addition, as digital and other new technology develops and as new office equipment products using these newly developed technologies gain increased market acceptance, Ricoh may find itself competing with new competitors that develop such new technologies, including computer software and hardware manufacturers and distributors. Accordingly, it is possible that new competitors or alliances among existing and new competitors may emerge and rapidly acquire significant market share. While Ricoh believes it is a leading manufacturer and distributor in the document imaging and management industry and it intends to maintain its position, no assurances can be made that it will continue to compete effectively in the future. Pricing pressures or loss of potential customers resulting from Ricoh’s failure to compete effectively may adversely affect Ricoh’s financial results and condition.

Ricoh Is Subject to the Risks of International Operations and the Risks of Overseas Expansion

A substantial portion of Ricoh’s manufacturing and marketing activity is conducted outside of Japan, including in the United States, Europe, and in developing and emerging markets such as China. There are a number of risks inherent in doing business in such overseas markets, including the following:

 

   

unfavorable political or economical factors;

 

   

fluctuations in foreign currency exchange rates;

 

   

potentially adverse tax consequences;

 

   

unexpected legal or regulatory changes;

 

   

lack of sufficient protection for intellectual property rights;

 

   

difficulties in recruiting and retaining personnel, and managing international operations; and

 

   

less developed infrastructure.

Ricoh’s inability to manage successfully the risks inherent in its international activities could adversely affect its business, financial condition and operating results. In addition, while Ricoh plans to continue to expand its business worldwide and increase overseas sales, because of the risks associated with conducting an international operation (including the risks listed above), there can be no assurances that Ricoh’s overseas expansion will be successful or have a positive effect on Ricoh’s financial results and condition.

Economic Trends in Ricoh’s Major Markets May Adversely Affect Ricoh’s Sales

Demand for Ricoh’s products is affected by cyclical changes in the economies of Ricoh’s major markets, including Japan, the United States and Europe. Economic downturns and declines in consumption in Ricoh’s major markets may adversely affect Ricoh’s financial results and condition.

Foreign Exchange Fluctuations Affect Ricoh’s Results

Local currency-denominated financial results in each of the Company’s subsidiaries around the world are translated into Japanese Yen by applying the average market rate during each financial period and recorded on Ricoh’s consolidated statements of income. Local currency-denominated assets and liabilities are translated into Japanese Yen by applying the market rate at the end of each financial period and recorded on Ricoh’s consolidated balance sheets. Accordingly, the financial results, assets and liabilities are subject to foreign exchange fluctuations.

In addition, operating profits and losses are highly sensitive to the fluctuations in the value of the Japanese Yen because the high volume of Ricoh’s production and sales activities in the Americas, Europe and Other, such as China, results in a large proportion of revenues and costs denominated in local currencies. Although Ricoh engages in hedging transactions such as forward contracts with several financial institutions having credit ratings satisfactory to Ricoh to minimize the negative effects of short-term fluctuations in foreign exchange rates among major currencies such as the U.S. Dollar, the Euro and Japanese Yen, mid-to-long-term volatile changes in the exchange rate levels make it difficult for Ricoh to execute planned procurement, production, logistics, and sales activities and may adversely affect Ricoh’s financial results and condition.

Crude Oil Price Fluctuations Affect Ricoh’s Results

          Many of the parts or materials used in manufacturing Ricoh’s products are made from oil. If the price of crude oil rises, the purchase price of such product parts or materials may increase as well. Furthermore, a rise in the price of crude oil may lead to an increase in shipping and handling costs due in part to a rise in the cost of fuel and the cost of utilities. Ricoh may not be able to pass these incremental costs onto the sales price of its products. Such fluctuations in crude oil prices may therefore adversely affect Ricoh’s financial position and results of operations.

 

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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 the Sarbanes-Oxley Act of 2002 of the United States and the Financial Instruments and Exchange Act of Japan

The United States Securities and Exchange Commission (the “SEC”), as required by Section 404 of the Sarbanes-Oxley Act of 2002 of the United States, adopted rules requiring every company that files reports with the SEC to include a management report on such company’s internal control over financial reporting in its annual report. In addition, the company’s independent registered public accounting firm must publicly attest to the effectiveness of the company’s internal control over financial reporting. Furthermore, the Financial Instruments and Exchange Act of Japan requires Japanese companies whose shares are listed on the Japanese stock exchanges to submit a report which evaluates internal control over financial reporting to the commissioner of the financial bureau of Japan. Ongoing compliance with these requirements is complex, costly and time-consuming. If Ricoh were to fail to maintain effective internal control over financial reporting, Ricoh’s management were to fail to assess on a timely basis the adequacy of such internal control, or Ricoh’s independent registered public accounting firm were to fail to attest on a timely basis to the effectiveness of such internal control or issue a qualified opinion, Ricoh could be subject to regulatory sanctions or could face adverse reactions in the financial markets due to loss of investor confidence.

Ricoh’s Business Depends on Protecting Its Intellectual Property Rights

Ricoh owns or licenses a number of intellectual property rights in the field of office equipment automation and, when Ricoh believes it is necessary or desirable, obtains additional licenses for the use of other parties’ intellectual property rights. If Ricoh fails to protect, maintain or obtain such rights, its performance and ability to compete may be adversely affected. Ricoh has a program in place under which company employees are compensated for any valuable intellectual property rights arising out of any inventions developed by them during the course of their employment with Ricoh. While unlikely, management believes that there could arise instances in the future where Ricoh may become the subject of legal actions or proceedings where claims alleging inadequate compensation are asserted by company employees.

Ricoh Is Dependent on Securing and Retaining Specially Skilled Personnel

Ricoh believes that it can continue to remain competitive by securing and retaining additional personnel who are highly skilled in the fields of management and information technology. However, the number of skilled personnel is limited and the competition for attracting and retaining such personnel is intense, particularly in the information technology industry. Securing and retaining skilled personnel in the information technology industry is especially important for Ricoh to compete effectively with its competitors as expectations and market standards for office equipment become more technologically advanced. Ricoh cannot assure that it will be able to successfully secure and retain additional skilled personnel.

Ricoh May Be Adversely Affected by Its Employee Benefit Obligations

With respect to its employee benefit obligations and plan assets, Ricoh accrues the cost of such benefits based on applicable accounting policies and funds such benefits in accordance with governmental regulations. Currently, there is no immediate and significant funding requirement; however, if returns from investment assets continue to decrease and/or turn to be negative due to market conditions, such as the fluctuations in the stock or bond markets, additional funding and accruals may be required. Such additional funding and accruals may adversely affect Ricoh’s financial position and results of operations.

Ricoh’s Operations Are Subject to Environmental Laws and Regulations

Ricoh’s operations are subject to many environmental laws and regulations governing, among other things, air emissions, wastewater discharges, the use and handling of hazardous substances, waste disposal, product recycling, and soil and ground-water contamination. Ricoh faces risks of environmental liability in our current and historical manufacturing activities. Costs associated with future additional environmental compliance or remediation obligations could adversely affect Ricoh’s business, operating results, and financial condition.

 

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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.

Ricoh’s Performance Can Be Affected by Alliance with, and Strategic Investments in, Other Entities

Ricoh engages in alliances with other entities to create various products and services to fulfill customer demands. Ricoh believes that an alliance is an effective method for timely development of new technology and products using management resources of both parties. However, if Ricoh’s interest differs from other parties’ interests due to financial or other reasons, Ricoh may be unable to maintain the alliance. Ricoh also makes strategic investments to acquire interests in companies that Ricoh believes would support existing businesses and/or lead to new businesses. Such strategic investments may not necessarily lead to the expected outcome or performance and may result in increased time and expenses being incurred due to the integration of businesses, technologies, products and/or personnel necessitated by such investments. Accordingly, these types of management decisions may have a significant impact on the future performance of Ricoh. Failure to maintain an on-going alliance, establish a necessary alliance or make a strategic investment to acquire an interest in a company may adversely affect Ricoh’s future financial position and results of operations.

Inadvertent or accidental leakage or disclosure of confidential or sensitive information may adversely affect Ricoh’s operations

Ricoh obtains confidential or sensitive information from various sources, including its customers, in the ordinary course of its business. Ricoh also holds trade secrets regarding its technologies and other confidential or sensitive information relating to marketing. To prevent unauthorized access and/or fraudulent leakage or disclosure of such confidential or sensitive information, Ricoh has implemented an internal management system, which includes measures to improve security and access to its internal database, as well as employee training programs to educate its employees with respect to compliance with applicable regulations relating to information security and data access. Despite Ricoh’s efforts, however, confidential or sensitive information may be inadvertently or accidentally leaked or disclosed and any such leakage or disclosure may result in Ricoh incurring damages, which may adversely affect Ricoh’s reputation. In addition, Ricoh may incur significant expenses for defending any lawsuits that may arise from such claims. Furthermore, the leakage or disclosure of Ricoh’s confidential or sensitive marketing and technological information to a third party may adversely affect Ricoh’s financial results and condition.

Ricoh May Suffer Loss as a Result of Catastrophic Disaster, Information Technology Problems or Infectious Diseases

Several of Ricoh’s manufacturing facilities in Japan could be subject to a catastrophic loss caused by earthquakes as such facilities are located in areas with above average seismic activity. If any of these facilities were to experience a catastrophic loss, Ricoh could experience disruptions in its operations and delays in its production and shipments. If such occurred, Ricoh would likely record a decrease in revenue, and require large expenditures to repair or replace the damaged facility, which is likely to affect Ricoh’s financial position and results of operations.

          As Ricoh becomes increasingly dependent on information technology, software and hardware defects, computer viruses, as well as internal database problems (e.g., falsifications or disappearance of information relating to our customers) pose a greater risk to its operations. Although Ricoh has taken various precautionary measures, such as installing firewalls and anti-virus software to detect and eliminate computer viruses, Ricoh may not be able to completely prevent or mitigate the effects of such problems, which may affect Ricoh’s performance.

In addition, the Ricoh is continually expanding its worldwide operations to set in place a global supply chain of its products and services so that we can satisfy our local customer needs faster, more effectively and on a regular basis. As Ricoh expands its operations worldwide, additional risks, such as infectious diseases (e.g., a new strain of influenza) and epidemics, may adversely affect Ricoh’s operations and financial positions.

 

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Item 4. Information on the Company

A. History and Development of the Company

The Company was incorporated as a joint stock corporation (kabushiki kaisha) on February 6, 1936 in accordance with Japanese law under the name Riken Kankoshi Co., Ltd. as a manufacturer and distributor of sensitized paper for use in copiers. Since its incorporation, Ricoh has expanded its business into related businesses in the office equipment field. It now manufactures and markets copiers (such as PPCs), MFPs, laser printers, GELJET printers, production printing products, facsimile machines, personal computers and servers, network related software and other equipment, including semiconductors, measuring equipment and cameras.

Historical Highlights

 

February 1936    Riken Kankoshi Co., Ltd. is formed in Kita-kyushu to manufacture and market sensitized paper.
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 Section of each of the Tokyo and Osaka Stock Exchanges.
June 1962    The Company starts operations of a paper plant in Numazu, Shizuoka, which featured a fully-integrated sensitized paper production system (now known as the Numazu plant).
December 1962    The Company establishes Ricoh of America, Inc. (a subsidiary, later known as Ricoh Corporation and now known as Ricoh Americas Corporation).
April 1963    The Company changes its corporate name to Ricoh Company, Ltd.
July 1967    The Company establishes Tohoku Ricoh Co., Ltd. (a subsidiary) in Shibata-gun, Miyagi.
May 1971    The Company completes its manufacturing facility in Atsugi, Kanagawa (now known as the Atsugi plant), to which it transfers some of its office equipment production from the Ohmori plant.
June 1971    The Company establishes Ricoh Nederland B.V. (a subsidiary, later known as Ricoh Europe B.V. and now known as Ricoh Europe Holdings B.V.) in the Netherlands.
January 1973    The Company establishes Ricoh Electronics, Inc. (a subsidiary) in the United States.
September 1973    The Company lists its securities on the Amsterdam Stock Exchange (now known as Euronext Amsterdam; the Company no longer lists its securities on this exchange).
December 1976    The Company forms Ricoh Credit Co., Ltd. (a subsidiary, now known as Ricoh Leasing Co., Ltd.).
March 1977    The Company relocates its headquarters to Minato-ku, Tokyo.
July 1978    The Company lists its securities on the Frankfurt Stock Exchange (the Company no longer lists its securities on this exchange).
December 1978    The Company establishes Ricoh Business Machines, Ltd. (a subsidiary, now known as Ricoh Hong Kong Ltd.).
March 1981    The Company builds the Ricoh Electronics Development Center at the Ikeda plant to develop and manufacture electronic devices.
October 1981    The Company lists its securities on the Paris Stock Exchange(now known as Euronext Paris).
May 1982    The Company establishes sensitized paper production facilities in Fukui (now known as the Fukui plant), which takes over some of the sensitized paper production from the Osaka plant (now known as the Ikeda plant).
July 1982    The Company launches its information technology equipment facility in Hatano, Kanagawa (now known as the Hatano plant).
December 1983    The Company establishes Ricoh UK Products Ltd. (a subsidiary).
October 1985    The Company builds a copier manufacturing plant in Gotenba, Shizuoka (now known as the Gotenba plant).
April 1986    The Company opens a research and development (“R&D”) facility in Yokohama, Kanagawa (now known as the Ricoh Research and Development Center) in commemoration of the Company’s 50th anniversary, to which it transfers some of its R&D operations from the Ohmori plant.

 

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April 1987    The Company establishes Ricoh Industrie France S.A. (a subsidiary, now known as Ricoh Industrie France S.A.S.).
April 1989    The Company sets up an electronic devices facility in Yashiro-cho, Kato-gun, Hyogo (now known as the Yashiro plant).
January 1991    The Company establishes Ricoh Asia Industry (Shenzhen) Ltd. (a subsidiary) in China.
March 1995    Ricoh Corporation acquires Savin Corporation, an American office equipment sales company.
September 1995    The Company acquires Gestetner Holdings PLC (now known as NRG Group PLC), a British office equipment sales company.
January 1996    Ricoh Leasing Co., Ltd. lists its securities on the Second Section of the Tokyo Stock Exchange (currently listed on the First Section of the Tokyo Stock Exchange).
December 1996    The Company establishes Ricoh Asia Pacific Pte Ltd (a subsidiary) in Singapore.
March 1997    The Company establishes Ricoh Silicon Valley, Inc. (now known as Ricoh Innovations, Inc.) in the United States.
August 1999    Ricoh Hong Kong Ltd. acquires Inchcape NRG Ltd., a Hong Kong-based office equipment sales company.
March 2000    Tohoku Ricoh Co., Ltd. lists its securities on the Second Section of the Tokyo Stock Exchange (now a wholly-owned subsidiary of the Company).
January 2001    Ricoh Corporation acquires Lanier Worldwide, Inc., an American office equipment sales company.
October 2002    The Company establishes Ricoh China Co., Ltd. (a subsidiary).
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 development 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.
May 2008    The Company establishes Ricoh Manufacturing (Thailand) Ltd. (a subsidiary) in Thailand.
August 2008    Ricoh Elemex Corporation becomes a wholly-owned subsidiary of the Company.
October 2008    Ricoh Americas Corporation acquires all of the outstanding shares of IKON Office Solutions, Inc. (“IKON”), an American office equipment sales and service company.

 

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The Company’s registered head office and executive office are as follows:

 

    

Address

  

Telephone number

Registered head office    3-6, Naka Magome 1-chome, Ohta-ku, Tokyo 143-8555, Japan    +81-3-3777-8111
Executive office    13-1, Ginza 8-chome, Chuo-ku, Tokyo 104-8222, Japan    +81-3-6278-2111

Principal Capital Investments

Ricoh’s capital investments for fiscal years 2008, 2009 and 2010 were ¥85.2 billion, ¥96.9 billion and ¥66.9 billion, respectively. Ricoh directed a significant portion of its capital investments for fiscal years 2008, 2009 and 2010 towards digital and networking equipment, such as digital PPCs/MFPs, laser printers and production printing products, and manufacturing facilities to maintain or enhance its competitiveness in the industry. Ricoh projects that for fiscal year 2011, its capital investments will amount to approximately ¥72.0 billion, which will principally be used for investments in manufacturing facilities of digital and networking equipment with new engines, toners, semiconductors and thermal media. In addition, Ricoh expects to use a portion of such amount during fiscal year 2011 to complete the construction of a new building to expand the Ricoh Technology Center located in Kanagawa, Japan, which was established in 2005 as Ricoh’s main development center. The Ricoh Technology Center currently houses the copier and printer development division as well as the manufacturing technology division, and is engaged in elemental technology development, product design, product evaluation and developing manufacturing technology for state-of-the-art color products. With the expansion of the Ricoh Technology Center, Ricoh plans to relocate the software development department, the inkjet technology development department and the supply development department (responsible for developing toners and photoconductors) to improve its flexible cross-functional (inter-departmental) development structure and strengthen human resources development. By relocating and housing all of these development departments in one facility, Ricoh expects to enhance its product engineering capabilities and overall development efficiency. This construction is expected to be financed with internally generated funds.

 

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B. Business Overview

Ricoh is a leading manufacturer of office automation equipment. Ricoh’s principal products include copiers (such as PPCs), printers (MFPs, laser printers and GELJET printers), production printing products and facsimile machines. Ricoh is also a prominent manufacturer of digital and advanced electronic devices such as semiconductor devices. In recent years, Ricoh has been rapidly building a solid presence globally as a comprehensive document solutions provider that helps its customers streamline their businesses and decrease operating costs. More specifically, Ricoh supports its office and production printing equipment businesses by offering customers various “solution” systems that work with personal computers and servers, network systems, application software and related product support and after-sales services to assist customers in fully utilizing the Ricoh products that they purchase. Ricoh’s product support services include assisting customers in setting up their information technology environment or network. Ricoh also offers various supplies and peripheral products to be used with its products and systems.

PRODUCTS

Starting with fiscal year 2009, Ricoh’s operating segments consisted of “Imaging and Solutions,” “Industrial Products” and “Other.”

Ricoh’s management determined that it was appropriate to rename the “Office Solutions” operating segment to “Imaging and Solutions” starting with fiscal year 2009 in light of the fact that InfoPrint Solutions Company’s products, which are distinguishable from office equipment due to the fact that they primarily consist of production printing products that print images in large quantities and are often used in central reproduction departments or data centers, have been incorporated in the Office Solutions operating segment. Management decided to rename the “Office Solutions” operating segment starting with fiscal year 2009 since fiscal year 2009 was the first fiscal year in which InfoPrint Solutions Company’s financial information was consolidated with Ricoh’s financial information for the full fiscal year. This renaming of the operating segment, however, did not result in any reclassification among Ricoh’s other operating segments or adjustments in financial data.

Ricoh’s management analyzes its business operations and performance based on these segments.

The following table sets forth Ricoh’s sales by products for fiscal years 2008, 2009 and 2010.

SALES BY PRODUCT

 

     Millions of Yen (except for percentages)
For the Year Ended March 31,
 
     2008     2009     2010  

Imaging and Solutions

               

Imaging Solutions

   ¥ 1,709,491    77.0   ¥ 1,598,614    76.4   ¥ 1,516,172    75.2

Network System Solutions

     200,082    9.0        234,484    11.2        274,071    13.6   

Industrial Products

     144,340    6.5        115,550    5.5        101,692    5.0   

Other

     166,076    7.5        143,048    6.9        124,402    6.2   
                                       

Total

   ¥ 2,219,989    100.0   ¥ 2,091,696    100.0   ¥ 2,016,337    100.0
                                       

 

Note:

(1) The above consolidated financial data set forth net sales to external customers by product.

 

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Imaging and Solutions

This segment consists of products that are widely used in the office and production printing environments and are categorized as follows:

(1) Imaging Solutions

For fiscal year 2010, the Imaging Solutions product category accounted for 75.2% of Ricoh’s net sales.

The primary functions of products in this category are (1) to produce copies and (2) to print or produce images using a network. Stand-alone PPCs are representative of products in the first group, and MFPs and laser printers are representative of products in the second group.

The principal products in the Imaging Solutions product category include monochrome and color digital PPCs/MFPs, laser printers, GELJET printers and production printing products.

Ricoh continues to be a global leader in PPCs/MFPs and has been a pioneer in the development of digital machines. Ricoh manufactures a wide range of PPCs/MFPs with a variety of copying speeds and functions such as double-sided printing, sorting, reducing and enlarging, and zoom adjustment based on copy sizes. Ricoh continues to strengthen its digital PPC/MFP product lineup with new product offerings that range from low-end models (regular print speed models for low volume copying or printing) to high-end models (high print speed models for large volume copying or printing). PPCs/MFPs use a drum or other medium coated with a photo conductive material on which an image of the original document is projected optically and developed by applying a dry powder-based toner. The application of this printing process enables higher picture quality and is environmentally friendly. Ricoh’s PPCs/MFPs are designed to provide information technology support for all types of office environments by delivering enhanced basic features (i.e., reduction, enlargements), simpler operation, reduced paper consumption through electronic storage, and better connectivity with document distribution and storage systems. Ricoh also manufactures a wide range of laser printers that print in monochrome or color and in a variety of print speeds, are able to connect to a network and are multifunctional in that they have scanning, faxing and copying capabilities as well as advanced finishing capabilities. GELJET printers utilize “GELJET technology” developed by Ricoh, which enables ultra-fine particle pigment dispersion to produce higher image qualities. All GELJET printers are color printers. In addition, Ricoh manufactures production printing products that are high-speed laser printers designed to be used as a central printing device to satisfy customers’ needs to print-on-demand and print large volumes. Production printing products are often used in data processing environments (such as central reproduction departments within companies and data centers) and the commercial professional printing market (i.e., market comprised of businesses offering high-quality printing services).

More specifically, in response to customer demand, Ricoh has been focusing in recent years on designing a wide-range of products that enhance productivity, have improved security features, are user friendly and are environmentally friendly.

For example, during fiscal year 2010, Ricoh released its imagio MP C7501/C6001 Series (also known as Aficio MP C7501/C6001 Series when sold overseas) as part of its color MFP product lineup. This new color MFP series (1) decreases average energy consumption compared to that of earlier models by using energy-efficient “color PxP toners,” which were developed by Ricoh and are tin-free eco-toners that anchor toner particles at low temperatures, and an improved fusing system, which enables stable printing of images on paper by anchoring toner particles, (2) has security features such as a user authentication system to prevent unauthorized access to images and an encryption system that encrypts user names and passwords, (3) is suitable for use not only as the main color MFP in an office but also as one of several pieces of printing equipment in a central reproduction department of a company and (4) has the capacity to respond to high quality printing demands. During fiscal year 2010, Ricoh also introduced imagio MP C3500RC/2500RC (reconditioned color digital MFPs) and imagio MP 7500RC/6000RC (reconditioned monochrome digital MFPs) (1) whose environmental impact has been decreased as compared to non-reconditioned models (i.e., new equipment) at the manufacturing stage, resulting in these models having an average recycled parts mass ratio of 80% or more (where such ratio represents the average percentage of recycled parts used in a particular piece of equipment), (2) that have achieved both user friendliness and energy conservation through the installation on reconditioned machines of the “QSU (Quick Start-Up)” technology, which enable shorter warm-up and recovery times and (3) that have security features such as a user authentication system to prevent unauthorized access to images and a function that prints documents with security watermarks that become visible only when copied. The QSU technology enables these reconditioned MFPs to use less than the maximum recommended power consumption level prescribed by the Law Concerning the Promotion of Eco-friendly Goods and Services by the State and Other Entities (Law on Promoting Green Purchasing) of Japan and the regulations promulgated thereunder. In addition, Ricoh introduced during fiscal year 2010 other MFP products that are environmentally friendly and have security features of the type discussed above, such as the imagio MP C1800 (a low-end color digital MFP with advanced features that is small in size and is ideal for small offices) and the imagio MP 6001GP (a high-end monochrome digital MFP that utilizes the “Biomass Toner” technology; Ricoh was the first office equipment manufacturer to sell a MFP that incorporates this toner technology and sell a toner using this technology as a genuine supply item. The “Biomass Toner” technology is a technology that uses biomass (i.e., organic resources other than fossil resources that are biologically reproducible) as a raw material for resin, which is the primary component used in toners. This technology reduces the environmental impact of toner use as it uses less petroleum-based resins and reduces the amount of CO2 emitted in the used paper recycling process. As a result of its efforts to enhance environmental features, incorporate advanced security functions and maintain the ability to print higher quality images, Ricoh continues to capture a large market share in the MFP market in Japan and overseas. In recognition of its efforts, Ricoh was named first place for customer satisfaction in Japan in the color categories with respect to copier/multifunction products for the third consecutive year in fiscal year 2010 based on a survey conducted by J.D. Power Asia Pacific, Inc.

 

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Ricoh also developed and introduced during fiscal year 2010 low-to high-end laser printers that improve productivity and user friendliness, such as the IPSiO SP 3410/3410SF (also known as Aficio SP 3410DN/3410SF when sold overseas), which is a low-end monochrome laser printer featuring (1) improved productivity due to shorter warm-up times and a print speed of less than eight seconds for the first page and (2) enhanced user friendliness as a result of the use of the all-in-one print cartridge system, which can be easily replaced by the user, thereby saving time and money spent on service calls. Ricoh also released other laser printers that improved productivity and user friendliness, such as the IPSiO SP 6330 Series (also known as Aficio SP 6330DN when sold overseas), which is a high-end monochrome laser printer featuring a high print speed of 35 pages per minute on A4-size paper fed horizontally. Ricoh has also developed and introduced during the last several years color laser printers that enhance productivity, have improved security features, are user friendly and are environmentally friendly. These printers have been favorably received by its customers. In fact, Ricoh was named first place for customer satisfaction in Japan in the color categories with respect to laser printer products in fiscal year 2010 based on a survey conducted by J.D. Power Asia Pacific, Inc.

Furthermore, Ricoh developed and introduced the RICOH Pro C720/C720S for the production printing business in the overseas market during fiscal year 2010. The RICOH Pro C720/C720S is a color laser printer with high print speeds of 72 pages per minute for both monochrome and color printing on A4-size paper fed horizontally and the ability to capture images in high resolutions to reproduce higher quality images.

(2) Network System Solutions

For fiscal year 2010, the Network System Solutions product category accounted for 13.6% 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 product category include personal computers and servers, network systems, application software, and related services and support such as document outsourcing services.

In fiscal year 2008, Ricoh launched its solutions brand “Operius” in Japan, which is focused on providing solutions to customers to optimize their office environment. Operius is comprised of three key components: (1) hardware, (2) software and (3) support and services. By identifying and utilizing the most appropriate hardware and software to address customers’ needs, and supplementing such products with a comprehensive support and service team (such as a 24-hour IT monitoring center, and an expert team of hardware and software engineers), Ricoh is striving to assist its customers in creating a working environment that is more efficient and effective. For example, storage and management solutions can be developed that address the customers’ need to organize and keep track of both paper and digital files, and that provide a secure centralized electronic document storage system that enables easy retrieval. Through the seamless integration of hardware and software, customers can utilize and benefit from streamlined document scanning, indexing and electronic document distribution. As part of Operius, Ricoh delivers total cost of ownership (“TCO”) consulting that begins with analyzing the customers’ document workflow, output devices and document processes. In addition, through its support services, Ricoh has been able to lower the total printing costs of its customers by assisting them in the set up of their information technology or networks in various environments in Japan (where physical space is costly) and thereby increasing the efficiency of their printing process.

In fiscal year 2009, Ricoh entered into a global strategic alliance with IBM through which Ricoh and IBM agreed to develop document security and management services (“DSMS”) in the U.S. DSMS builds upon Ricoh’s experience and expertise in helping customers improve their document workflow, security and compliance frameworks, while reducing their TCO of office equipment and decreasing their use of paper and energy. As an example of DSMS, during fiscal year 2010, Ricoh and IBM developed a printing management system that enables customers to track and monitor on a real-time basis the energy usage and carbon footprint (which represents total greenhouse gas (“GHG”) emissions generated by an organization, event or product and which are often expressed in terms of the amount of carbon dioxide, or its equivalent of other GHGs, emitted) of each equipment, of groups of users (such as a department within a company) and of each individual user. This newly developed system is expected to assist customers in reducing their print-related costs, in improving their operational efficiency and in decreasing their energy consumption as it will enable customers to conduct a comprehensive analysis of their fleet of printers and MFP devices. Ricoh plans to make this new system, which is based on IBM’s Tivoli software, available to its customers during fiscal year 2011.

 

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Industrial Products

The Industrial Products segment consists of products that are used in the industrial sector. For fiscal year 2010, this segment accounted for 5.0% of Ricoh’s net sales. Principal products in this segment include thermal media, optical equipment, semiconductor devices, electronic components and measuring equipment.

Through technological enhancements in its thermal media business, Ricoh has been able to expand its business from the production of thermal paper for use in facsimiles to a variety of business areas, including the production of POS sheets, logistics management sheets (such as dispatch labels), reward cards, identification cards, medical films, food labels, industrial use labels, amusement tags and tickets, pharmaceutical labels and thermal rewritable films that utilize thermo-chromic printing technology that can be used to erase and update text and graphics up to 500 times.

Ricoh’s optical equipment business utilizes technology originally developed by Ricoh for its copiers and cameras. This business supplies optical equipment and optical supply parts, such as lens units, to third parties.

Ricoh also manufactures various types of semiconductor devices. Such devices include application-specific integrated circuits (“ASICs”) and application-specific standard products (“ASSPs”) that are often used in digital copiers, printers, personal computers, PC card, cellular phones and other digital appliances.

The electronic components business consists of components supplied to Ricoh’s manufacturing plants in connection with the production of its own products, such as copiers and printers, as well as components supplied to third parties.

In addition, Ricoh is one of the leading manufacturers of measuring equipment in Japan. Ricoh offers a wide range of measuring equipment, such as gas meters and gas leak detectors. Sales in the measuring equipment category are greatly affected by the cyclical nature of market demand for this equipment.

Other

The Other segment, which accounted for 6.2% of Ricoh’s net sales for fiscal year 2010, includes digital cameras, financing and logistics services.

Ricoh is one of the pioneers in commercializing digital cameras, which have tremendous potential as “image capturing devices.” As digital cameras may be used in a variety of ways to capture and input images, Ricoh expects that the digital camera market will continue to grow in the future. During fiscal year 2010, Ricoh released new digital cameras under the names “GXR” “CX3” and “GR DIGITAL III.” The “GXR” is an interchangeable unit camera system that consists of a body and a camera unit. Each camera unit consists of a lens (with differing focal lengths), an optimal image sensor appropriate for the type and size of the unit, and an image processing engine. By changing the camera units, the user is able to produce sophisticated photo expressions in various settings. The “CX3” is a digital camera featuring a 10.0 mega pixel CCD (Charge Coupled Device) and a 10.7x optical zoom lens. The “CX3” is able to process images at a high speed since it is equipped with a highly evolved image processing engine called “Smooth Imaging Engine IV” and a CMOS sensor. Ricoh also introduced during fiscal year 2010 the “GR DIGITAL III,” a compact digital camera that is made to exacting standards featuring high image quality with a 28 mm/F1.9 lens. “GR DIGITAL III” was introduced as the successor model to “GR DIGITAL II.” The “GR DIGITAL” Series have been well-received by customers since their introduction. In December 2009, the “GR DIGITAL III” was awarded the “iF product design award 2010” gold award for its innovative design along with the “CX1” and the “CX2,” both of which were earlier models of “CX3.”

Ricoh provides certain financing services in Japan 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 medical 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.

 

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GROUP VISION AND MANAGEMENT PLANS

With “Winner in the 21st Century (Build a strong global RICOH brand)” as its group vision, Ricoh strives to continue growing and developing as a global company by gaining the trust of its customers. Ricoh intends to gain the trust of its customers by continuously working towards achieving greater customer productivity and knowledge management. Accordingly, Ricoh plans to conduct its business activities in a way that provides innovative products and services to all of its customers (including those who use information at work and in their lives outside of work) based on Ricoh’s three core values of “harmonizing with the environment (i.e., reducing and minimizing environmental impact),” “simplifying your life and work (i.e., enhancing user friendliness and striving towards simplification)” and “supporting knowledge management (i.e., offering solutions to process information).”

In addition to this overall group vision, management has established medium-term goals. Fiscal year 2010 was the second fiscal year of the 16th Medium-Term Management Plan, which covers the period from fiscal year 2009 through fiscal year 2011. Under the 16th Medium-Term Management Plan, Ricoh’s objectives are to earn an even greater level of trust from its customers by placing greater emphasis on customer viewpoints and continuing to provide products and services which meet and exceed customer expectations. To achieve the objectives of the 16th Medium-Term Management Plan, Ricoh has established the following five basic group management strategies: (1) become the market leader in each of the targeted business areas (such as the production printing business and the solutions business), (2) strengthen and accelerate its environmental management (which encompasses environment-related technological development, such as the development of products like color PxP toners, the management of resources and energy used in the entire lifecycles of Ricoh products, and the delivery to customers of Ricoh’s environmental philosophy and activities), (3) promote “Ricoh Quality” (which means to accelerate the innovation processes to achieve greater customer satisfaction), (4) create new business lines and (5) build a strong global RICOH brand. Using the groundwork it laid in fiscal year 2009, Ricoh worked towards realizing the objectives of the 16th Medium-Term Management Plan in fiscal year 2010 and strived to carry out the above group management strategies.

More specifically, in the Imaging and Solutions segment, Ricoh is utilizing its strengths, such as customer contacts, broad product lines, image processing technologies, ability to propose solutions and ability to conduct business globally, to respond to the increasingly diverse needs of a greater number of customers, and to further solidify its business foundation. Ricoh understands that “work flow,” “security,” “TCO,” “compliance” and the “environment” are important considerations for customers. By focusing on these considerations, Ricoh’s goal is to provide greater value to its customers who use its products. For example, in order to contribute to the overall productivity increase of its customers, Ricoh is working to develop (1) document solutions that construct and manage a file server system that saves, searches and outputs documents, (2) facility management services that operate and manage centralized printing centers or multiple printing equipment at customers’ site and (3) IT consultation services that assist customers in improving their use of IT, enhancing their security systems and building an infrastructure that enables uninterrupted business operations. In addition, Ricoh intends to continue developing its production printing business and providing solutions such as workflow improvements to meet its customers’ needs.

In the Industrial Products segment, Ricoh is working to identify new business areas where large growth can be expected, and to allocate and direct its resources to such business areas. Ricoh is also making an effort to strengthen cooperation among personnel in the technical fields and the other business areas in order to develop new businesses that combine diverse fields.

In addition, Ricoh continues to consider additional steps that it could take to develop business in the emerging markets, such as China and Southeast Asia, in both the Imaging and Solutions segment and the Industrial Products segment.

 

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SALES AND DISTRIBUTION

Ricoh continues to utilize the following three marketing and sales channels for the distribution of its products to end-user customers in Japan: (1) direct sales by Ricoh to end-user customers through 9 domestic subsidiaries and affiliates, (2) sales through independent dealers of office equipment and (3) sales through independent office supply wholesalers and retailers. Ricoh estimates that over one-half of its domestic PPC/MFP and laser printer sales by revenue are derived from its direct sales channels to end-user customers, with the remaining balance being divided between sales through independent dealers of office equipment and independent office supply wholesalers and retailers. During fiscal year 2009, in an effort to consolidate its operations, Ricoh merged 33 sales subsidiaries in Japan into five sales subsidiaries to enhance the efficiency of its domestic sales activities. As a result, as of the end of fiscal year 2009, Ricoh had seven domestic sales subsidiaries, located in the Hokkaido, Tohoku, Kanto, Chubu, Kansai, Chugoku and Kyushu areas, that coordinated its marketing and sales channels in Japan. To further enable a quicker response to customers’ increasingly diversified needs and to efficiently manage its sales operations, Ricoh plans to merge these seven domestic sales subsidiaries and the Marketing Group of the Company into one domestic sales subsidiary during fiscal year 2011, which subsidiary is expected to be known as RICOH JAPAN Corporation.

Outside of Japan, Ricoh has organized its marketing and sales channels to accommodate its four operating regions: (1) the Americas, (2) Europe, Africa, and the Middle East, (3) Asia and Oceania and (4) China. One of Ricoh’s strategies in expanding its overseas marketing and sales channels has been to acquire office equipment sales companies in various locations around the world through which it can sell its products. Accordingly, in addition to selling Ricoh brand name products through its overseas sales subsidiaries, affiliates and independent dealers (similar to the marketing and sales channels used for the distribution of products in Japan), Ricoh also sells its products through the following two marketing and sales channels in the overseas market: (1) sales of products under brand names that Ricoh purchased through acquisitions (i.e., the “Savin” brand, the “Lanier” brand and the “Infotec” brand) and (2) sales of Ricoh’s products by other companies under their brand names where Ricoh is the original equipment manufacturer (“OEM”). Savin and Lanier were originally Ricoh’s OEM distributors prior to their acquisition. During fiscal year 2009, Ricoh acquired the U.S.-based IKON and its subsidiaries, who supply and service a wide range of office equipment in the U.S., Canada and the Western European markets. The purpose of this acquisition was for Ricoh to strengthen and broaden its business opportunities and infrastructure in the U.S., Canada and Europe by capitalizing on IKON’s broad sales and service network and gaining access to IKON’s customer relationships, which includes large private corporations as well as U.S. government and public sector entities/organizations.

Ricoh recognizes revenue for sales upon the delivery and installation of equipment to its end-user customers. Revenue from the sales of equipment under sales-type leases is recognized as product sales at the inception of the lease. Information regarding the methods by which Ricoh recognizes revenue is also set forth in Item 5. Critical Accounting Policies and Note 2 to the Consolidated Financial Statements which are included in this annual report.

AFTER-SALES SERVICE

Ricoh provides repair and maintenance services for its products to end-user customers based on the belief that periodic and timely maintenance services are essential in preserving Ricoh’s market share in the relevant products. These maintenance services are provided to customers pursuant to maintenance service contracts customarily entered into at the time the equipment is originally sold.

In Japan, repair and maintenance services are generally provided by Ricoh’s service specialists. Ricoh’s service network in Japan includes service centers operated by Ricoh and its affiliates and service outlets operated by other companies. Ricoh’s Customer Support System is available on a nationwide basis in Japan in order to enhance customer satisfaction and service efficiency. This system allows Ricoh to remotely monitor copiers that are in operation and provide prompt service to such copiers. The total number of Ricoh’s sales and service personnel in Japan is approximately 22,100. Similar to Japan, Ricoh employees and contracted maintenance providers provide repair and maintenance services to end-user customers in the overseas market who purchase Ricoh products. The total number of Ricoh’s overseas sales and service personnel is approximately 45,900.

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.

 

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PRINCIPAL MARKETS

Ricoh distributes its products and competes in the following four geographic areas: Japan, the Americas, Europe and Other. In the aggregate, Ricoh’s sales decreased in fiscal year 2010. As noted below, for fiscal year 2010, net sales in Japan, the Americas, Europe and Other as a percentage of total net sales were 43.5%, 27.7%, 22.7% and 6.1%, respectively. The table below breaks down for each geographic area the total net sales amount and percentage of such net sales amount as compared against total net sales for each of the last three fiscal years.

SALES BY GEOGRAPHIC AREA

 

     Millions of Yen (except for percentages to net sales)
For the Year Ended March 31,
 
     2008     2009     2010  

Japan

   ¥ 1,016,034    45.8   ¥ 938,331    44.9   ¥ 876,578    43.5

The Americas

     434,799    19.6        502,862    24.0        557,687    27.7   

Europe

     603,219    27.2        523,407    25.0        458,584    22.7   

Other

     165,937    7.4        127,096    6.1        123,488    6.1   
                                       

Total

   ¥ 2,219,989    100.0   ¥ 2,091,696    100.0   ¥ 2,016,337    100.0
                                       

 

Note:

(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.

(1) Japan

Although the Japanese economy showed slight signs of recovery during fiscal year 2010 from one of the worst economic downturns in several decades that started during fiscal year 2009, corporate capital investment and consumer demand remained stagnant due to the sluggish performance of Japanese companies, which was due in part to the appreciation of the Japanese Yen against other currencies. Consistent with such general economic conditions, Ricoh’s customers continued to reduce their capital investments in office equipment and were focused on reducing printing costs by reducing printing volume. Competition in the type of products that Ricoh manufactures and markets also continued to intensify. Despite such environment, Ricoh continued to update its product lineup from analog stand-alone equipment and monochrome products to value-added digital equipment with network capabilities and color products in order to respond to customers’ preferences. To assist customers in managing their Total Document Volume (“TDV”) effectively and efficiently in the office environment, Ricoh also offered various business solutions to create a networked and secured environment that meets customers’ needs.

(2) The Americas

Despite sluggish economic conditions in the Americas and in particular the United States, Ricoh continued to introduce new color MFPs to meet customers’ demands for color and high-speed printing products with networking capabilities.

During fiscal year 2009, Ricoh acquired the U.S.-based IKON and its subsidiaries, who supply and service a wide range of office equipment in the U.S., Canada and the Western European markets. The purpose of this acquisition was for Ricoh to strengthen and broaden its business opportunities and infrastructure in the U.S., Canada and Europe by capitalizing on IKON’s broad sales and service network and gaining access to IKON’s customer relationships, which includes large private corporations as well as U.S. government and public sector entities/organizations.

(3) Europe

In addition to the global economic downturn during fiscal year 2009, the debt crisis in Dubai and Greece during fiscal year 2010 has contributed to prolonging the economic stagnation in Europe, and demand for office equipment in Europe declined during fiscal year 2010. Notwithstanding such economic situation, Ricoh continued to enhance and introduce new products in the Imaging and Solutions segment in Europe so that customers are able to fulfill more of their office equipment needs through Ricoh. Despite such efforts, Ricoh recorded a decline in sales of PPCs/MFPs in Europe for fiscal year 2010 in line with the general economic condition in Europe.

After acquiring IKON to further enhance its sales and service network, Ricoh consolidated the European business operations of IKON into Ricoh Europe PLC’s operations during fiscal year 2009. The purpose of this consolidation was to optimize the operational structure in each country in this geographic region to respond promptly to new customer demands and to enhance the effectiveness of its business by eliminating duplicative functions.

 

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(4) Other

The Other geographic area includes China, Southeast Asia and Oceania. Sales in this geographic area decreased due to slower demand in office products during fiscal year 2010 as a result of the global financial crisis. Despite this decrease in sales in fiscal year 2010, Ricoh still believes that this geographic area will expand in the future. Accordingly, Ricoh continues to view this geographic area as strategically important not only as a production site but also as a potential market within which to increase future sales of its products. Consistent with such view, Ricoh completed the construction of Ricoh Manufacturing (Thailand) Ltd., a 100% owned subsidiary of the Company, during fiscal year 2010 and commenced operations to manufacture laser printers at such plant. Ricoh expects this new manufacturing plant will secure sufficient production capacity and reduce its dependence on its production facilities in China. In addition, Ricoh continues to strengthen its relationships with its customers in this geographic area by working closely with its regional sales network.

COMPETITION

The office equipment industry in which Ricoh primarily competes remains highly competitive and Ricoh continues to encounter intense competition in its Imaging and Solutions segment. Furthermore, competition in each of the product categories in the Imaging and Solutions segment is expected to increase in the future as Ricoh’s competitors enhance and expand their product and service offerings. For example, in response to the trend in the office equipment market towards digital networking systems and the shift in customers’ demands towards color products, Ricoh’s competitors are introducing a range of color products and digital networking systems, thereby increasing the level of competition in these products. This increase in competition may result in price reductions and decreases in profitability as well as market share in these products. Ricoh seeks to prevail over the intense competition in the office equipment market by providing customers with equipment that optimizes the TCO of such equipment and enhancing office productivity and efficiency. However, 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 the intense competition in the office equipment industry, Ricoh’s management believes that Ricoh will be able to maintain and enhance its position in the global market because of its experience, expertise and technical capabilities as a leading provider of office and production printing equipment, and dedication to meet customers’ needs.

SEASONALITY

Sales in the Imaging and Solutions segment generally increase in March of each year, which is the end of the fiscal year for most Japanese companies. This is due to the increase in demand for these products as many Japanese companies and government entities try to expend their allotted capital expenditure budget for the fiscal year. However, the effect of this seasonality on a consolidated basis has customarily been minimal. For example, sales generated during the month of March due to this seasonality accounted for 13.8% of Ricoh’s sales in Japan for fiscal year 2010. However, the effect of this seasonality on a consolidated basis was minimal for fiscal year 2010, as only 5.0% of Ricoh’s total consolidated sales for fiscal year 2010 was generated from sales in Japan during the month of March.

SOURCES OF SUPPLY

Raw materials, parts and components used in the production of Ricoh’s products, such as plastics, rubber and chemicals are procured on a global basis. Prices of some raw materials that Ricoh uses fluctuate according to the market and prices of some parts and components that Ricoh uses fluctuate as well. Generally, Ricoh maintains multiple suppliers for the most significant categories of raw materials, parts and components to address such fluctuations. Because very few of the raw materials required by Ricoh in manufacturing its products can be procured in Japan, most of the raw materials used by Ricoh come from outside of Japan. Ricoh monitors the availability of raw materials on a regular basis to ensure that it will not encounter any shortages. Ricoh has not experienced any significant difficulty in obtaining the raw materials, parts and components necessary for it to manufacture its products and believes that it will be able to continue to obtain necessary raw materials, parts and components in sufficient quantities to meet its manufacturing needs in the future. A rise in crude oil prices may lead to an increase in the overall cost of procuring raw materials, parts and components. This is due to the fact that the cost of oil-based parts and components, the processing costs of raw materials and fuel costs of shipping and distributing such raw materials, parts and components may increase as a result of higher crude oil prices. However, Ricoh believes that it will be able to adequately manage the impact of any such price volatility in connection with the raw materials, parts and components that are required for the manufacturing of its products.

 

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INTELLECTUAL PROPERTY

Ricoh holds a large number of patents and trademark rights. While Ricoh considers such intellectual property rights to be valuable assets and important for its operations, it believes that its business is not dependent to any material extent upon any single patent or trademark right, or any related group of rights it holds.

Ricoh also has many licenses and technical assistance agreements covering a wide variety of products. Such agreements grant Ricoh the right to use certain Japanese and foreign patents or the right to receive certain technical information. However, Ricoh is not materially dependent on any such single license or agreement.

In addition, Ricoh has granted licenses and technical assistance to various companies located in and outside of Japan. In certain instances, Ricoh has entered into cross-licensing agreements with other major international electronics and electrical equipment manufacturers. None of these agreements are likely to materially affect Ricoh’s business or profitability. See Item 5.C. Patents and Licenses.

GOVERNMENT REGULATIONS

Ricoh’s business activities are subject to various government regulations in the various countries in which it operates, including regulations relating to business and investment approvals, export regulations, tariffs, antitrust, intellectual property, consumer and business taxation, exchange controls and 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. These regulations govern, among other things, air emissions, wastewater discharges, the use and handling of hazardous substances, waste disposal, product recycling, and soil and ground-water contamination. These regulations are imposed by the environmental regulatory agencies in the jurisdictions in which Ricoh conducts its operations. For example, in the United States these agencies are the United States Environmental Protection Agency and the State environmental regulatory agencies in the jurisdictions in which Ricoh conducts operations.

The products sold by Ricoh are increasingly subject to a variety of environmentally-related requirements in the markets in which it operates that restrict or prohibit the types of material that are used or present in the products, require manufacturers and distributors to “take back” and either dispose of or recycle products at the end of their useful life, and require or encourage increased energy efficiency. These product-related requirements are frequently accompanied by labeling requirements intended to inform customers about the presence or absence of certain materials in products, or provide information about the recyclability of the products. These requirements affect Ricoh’s global supply chain, since supplied components must meet the applicable requirements in order for Ricoh’s products to be in compliance. For example, environmental regulations which may affect Ricoh’s businesses in the European Union include (but are not limited to) the European Union Directive on Waste Electrical and Electronic Equipment (the “WEEE Directive”), the European Union Directive on the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (the “RoHS Directive”), the European Union Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals (the “REACH Regulation”) and the European Union Directive on Energy-Using Products (the “EuP Directive,” also commonly known as Directive 2005/32/EC). Beginning in August 2005, the WEEE Directive, as enacted by individual European Union countries, made manufacturers or importers of electrical and electronic equipment in the European Union financially responsible for the collection, recycling, treatment, recovery and legitimate disposal of collected waste electrical and electronic equipment. The RoHS Directive prohibits the presence of more than specific concentrations of lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB) or polybrominated diphenyl ethers (PBDE) in electrical and electronic equipment that is to be sold in the European Union market from July 2006. The REACH Regulation entered into force in June 2007 and, among other things, requires the registration of chemical substances manufactured or used in products that are sold in the European Union. This regulation covers almost all forms of chemicals, and also imposes some requirements on “articles” (as defined in the REACH Regulation) manufactured in or imported into the European Union. The EuP Directive sets forth a framework for establishing eco-design requirements for energy-using products by systematically integrating environmental aspects at early stages of the product design. One of the important goals of the EuP Directive is to improve the overall environmental performance of products throughout their life-cycle. A variety of similar product-related environmental requirements have been or are expected to be enacted in other regions where Ricoh operates, including in the United States (including requirements established by individual States) and Asia. The scope of these requirements, including the types of equipment and materials covered and the nature and severity of the restrictions or prohibitions imposed, may expand as legislatures and regulators in the markets in which Ricoh operates review and amend these requirements.

While Ricoh’s businesses may be affected by various government regulations, Ricoh currently operates, and expects to continue operating, its business without significant difficulty in complying with applicable government regulations.

 

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C. Organizational Structure

As of March 31, 2010, the Ricoh group includes the Company, 266 subsidiaries and 6 affiliates located worldwide.

The Company is the parent of the Ricoh group. The Company heads the R&D activities of Ricoh products with assistance from its subsidiaries. The Company and its subsidiaries and affiliates maintain an integrated domestic and international manufacturing and distribution structure.

The following is a list of the principal subsidiaries of the Company. None of the Company’s 6 affiliates are considered material affiliates of Ricoh.

 

Company Name

  

Country of
Formation

  

Proportion of
ownership

interest

  

Main businesses

(Subsidiaries)

        

Ricoh Optical Industries Co., Ltd.

   Japan    100.0   

Manufacturing optical equipment

Tohoku Ricoh Co., Ltd.

   Japan    100.0   

Manufacturing office equipment

Ricoh Unitechno Co., Ltd.

   Japan    100.0   

Manufacturing parts for office equipment

Ricoh Elemex Corporation

   Japan    100.0   

Manufacturing and sales of office equipment and minuteness equipment

Ricoh Microelectronics Co., Ltd.

   Japan    100.0   

Manufacturing parts for office equipment

Ricoh Keiki Co., Ltd.

   Japan    100.0   

Manufacturing parts for office equipment

Ricoh Printing Systems, Ltd.

   Japan    100.0   

Manufacturing and sale of office equipment

Ricoh Tohoku Co., Ltd.

   Japan    100.0   

Sale of office equipment

Ricoh Chubu Co., Ltd.

   Japan    100.0   

Sale of office equipment

Ricoh Kansai Co., Ltd.

   Japan    100.0   

Sale of office equipment

Ricoh Chugoku Co., Ltd.

   Japan    100.0   

Sale of office equipment

Ricoh Kyushu Co., Ltd.

   Japan    100.0   

Sale of office equipment

Hokkaido Ricoh Co., Ltd.

   Japan    100.0   

Sale of office equipment

Ricoh Sales Co., Ltd.

   Japan    100.0   

Sale of office equipment

Ricoh Technosystems Co., Ltd.

   Japan    100.0   

Maintenance, service and sale of office equipment

Ricoh Logistics System Co., Ltd.

   Japan    100.0   

Logistics services and custom clearances

Ricoh Leasing Co., Ltd.

   Japan    51.1   

General leasing

Ricoh Electronics, Inc.

   U.S.A.    100.0   

Manufacturing office equipment and related supplies

Ricoh UK Products Ltd.

   U.K.    100.0   

Manufacturing office equipment

Ricoh Industrie France S.A.S.

   France    100.0   

Manufacturing office equipment and related supplies

Ricoh Asia Industry (Shenzhen) Ltd.

   China    100.0   

Manufacturing office equipment and related supplies

Shanghai Ricoh Digital Equipment Co., Ltd.

   China    100.0   

Manufacturing and sale of office equipment

Ricoh Manufacturing (Thailand) Ltd.

   Thailand    100.0   

Manufacturing office equipment

Ricoh Americas Corporation

   U.S.A.    100.0   

Sale of office equipment

InfoPrint Solutions Company, LLC

   U.S.A.    95.9   

Sale of office equipment

IKON Office Solutions, Inc.

   U.S.A.    100.0   

Sale of office equipment

Ricoh Europe Holdings PLC

   U.K.    100.0   

Sale of office equipment

Ricoh Asia Industry Ltd.

  

Hong Kong,

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 235 other subsidiaries

        
(Affiliates)         

6 affiliates (none of which are material affiliates)

        

 

Notes:

(1) Proportion of ownership interest includes indirect ownership.
(2) Ricoh Leasing Co., Ltd. is the only subsidiary of the Company that is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X.

 

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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. None of Ricoh’s plants are subject to any material environmental issues that may affect the extent to which Ricoh is able to utilize such plants. The following table gives certain information as of March 31, 2010 regarding the Company’s and its subsidiaries’ principal manufacturing and other facilities. With the exceptions of Shanghai Ricoh Digital Equipment Co., Ltd. and GR Advanced Materials Ltd., the manufacturing and other facilities listed below have floor space exceeding 10,000 square meters.

 

Name (Location)

  

Floor space

  

Principal activities and products manufactured

    

(in thousands of

square meters)

    

Japan:

     

Ricoh Company, Ltd.

     

Ohmori Plant (Tokyo)

   54   

Parts relating to copiers

Atsugi Plant (Kanagawa)

   73   

Office equipment and other products

Numazu Plant (Shizuoka)

   122   

Paper and toner

Ikeda Plant (Osaka)

   27   

Electronic devices

Hatano Plant (Kanagawa)

   15   

Printed circuit boards and electronic components

Fukui Plant (Fukui)

   34   

Papers and toner

Gotenba Plant (Shizuoka)

   70   

Office equipment

Yashiro Plant (Hyogo)

   34   

Electronic devices

Ricoh Technology Center (Kanagawa)

   71   

R&D

Head Office (Tokyo)

   21   

Head office and marketing of office equipment

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

Katsuta office (Ibaraki)

   54   

R&D of production printing products

Subsidiaries:

     

Ricoh Optical Industries Co., Ltd. (Iwate)

   23   

Photographic equipment

Tohoku Ricoh Co., Ltd. (Miyagi)

   64   

Office equipment, toner and parts relating to copiers and duplicators

Hasama Ricoh, Inc. (Miyagi)

   14   

Parts relating to copiers and data processing equipment

Ricoh Unitechno Co., Ltd. (Saitama)

   18   

Office equipment

Ricoh Elemex Corporation. (Aichi)

   47   

Office equipment and measuring equipment

Ricoh Microelectronics Co., Ltd. (Tottori)

   12   

Printed circuit boards and electronic components

Ricoh Keiki Co., Ltd. (Saga)

   10   

Printed circuit boards and parts relating to copiers

Ricoh Printing Systems, Ltd. (Ibaraki)

   54   

Printers and production printing products

Overseas:

     

Ricoh Electronics, Inc. (Irvine, Santa Ana and Tustin, California and Lawrenceville, Georgia, U.S.A.)

   81   

Copiers, parts relating to copiers, toner and thermal paper

Ricoh UK Products Ltd. (Telford, United Kingdom)

   34   

Copiers, parts relating to copiers and toner

Ricoh Industries France S.A.S. (Colmar, France)

   42   

Copiers, parts relating to copiers and thermal paper

Ricoh Asia Industry (Shenzhen) Ltd. (Shenzhen, China)

   42   

Copiers, parts relating to copiers, and toner

Ricoh Components Asia (Shenzhen) Co., Ltd. (Shenzhen, China)

   35   

Printed circuit boards and electronic components

Shanghai Ricoh Facsimile Co., Ltd (Shanghai, China)

   27   

Facsimile equipment

Ricoh Thermal Media (Wuxi) Co., Ltd. (Shenzhen, China)

   25   

Direct thermal paper and thermal transfer ribbon

Shanghai Ricoh Digital Equipment Co., Ltd. (Shanghai, China)

   6   

Copiers, facsimile equipment and parts relating to copiers

Ricoh Manufacturing (Thailand) Ltd. (Rayong, Thailand)

   36   

Printers and parts relating to printers

GR Advanced Materials Ltd. (Scotland, United Kingdom)

   7   

Supplies relating to duplicators

 

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As discussed in this Item 4, Ricoh expects to complete during fiscal year 2011 the construction of a new building to expand the Ricoh Technology Center located in Kanagawa, Japan, which was established in 2005 as Ricoh’s main development center. The Ricoh Technology Center currently houses the copier and printer development division as well as the manufacturing technology division, and is engaged in elemental technology development, product design, product evaluation and developing manufacturing technology for state-of-the-art color products. With the expansion of the Ricoh Technology Center, Ricoh plans to relocate the software development department, the inkjet technology development department and the supply development department (responsible for developing toners and photoconductors) to improve its flexible cross-functional (inter-departmental) development structure and strengthen human resources development. By relocating and housing all of these development departments in one facility, Ricoh expects to enhance its product engineering capabilities and overall development efficiency. This construction is expected to be financed with internally generated funds.

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 considered for its long-term success.

Item 4A. Unresolved Staff Comments

Not applicable.

 

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Item 5. Operating and Financial Review and Prospects

OVERVIEW

Ricoh is engaged primarily in the development, manufacturing, sales and servicing of office automation equipment, such as PPCs/MFPs, laser printers, GELJET printers, production printing products and facsimile machines, as well as digital cameras, semiconductor devices and thermal media. Ricoh supports its office automation equipment business by offering customers various “solution” systems that work with personal computers and servers, network systems, application software and related product support and after-sales services to assist customers in fully utilizing the Ricoh products that they purchase. Ricoh’s product 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, Southeast Asia and Oceania. For additional information 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.

Historically, Ricoh’s revenues have been derived mainly from the manufacturing and sale of equipment (such as copiers and printers). In recent years, the key factor to achieve revenue growth has been the expansion of available product lines and areas of services to address the increase in customer demand for digitization, color printing and high volume printing, which became possible upon the introduction of printers with high-speed printing capabilities. Notwithstanding the effect of the current global economic downturn, Ricoh remains focused on achieving sustained growth in the current competitive environment. To achieve such growth, Ricoh has striven to broaden its revenue and earnings base by expanding available product lines and areas of service, and increasing the total copying or printing volume of its customers (which Ricoh refers to as “Building Total Document Volume”) and the amount of revenue per copy or printed page. More specifically, Ricoh’s strategies continue to include (1) introducing new color products at prices comparable to those of monochrome models to replace monochrome products, (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. In support of such strategies, Ricoh continues to place a high priority on creating products that add value for customers in new ways (e.g., faster print speeds, easier network connectivity, enhanced user-friendliness and improved security features). To this end, while Ricoh’s total R&D expenditures decreased in fiscal year 2010 as compared to fiscal year 2009, Ricoh continued to reinforce its technological strengths during fiscal year 2010 by making targeted R&D investments to create new products and deliver new services that provide added value for its customers.

In addition, in order to increase sales of its products, Ricoh has been expanding its sales infrastructure in the Imaging and Solutions segment during the last few fiscal years primarily through various acquisitions, including the acquisition of the European sales and service companies of Danka Business Systems PLC and the acquisition of the U.S.-based IKON and its subsidiaries, who supply and service a wide range of office equipment in the U.S., Canada and the Western European markets.

To further strengthen its printing and copying business, Ricoh and IBM formed a joint venture company, InfoPrint Solutions Company, to enter into the production printing business in fiscal year 2008. At the time this company commenced its operations, Ricoh owned 51 percent of this company. Based on the agreement entered into with IBM, Ricoh’s ownership percentage is expected to gradually increase up to 100 percent by July 2010. As of March 31, 2010, Ricoh owned 95.9 percent of InfoPrint Solutions Company. Ricoh expects that this company will strengthen its capabilities in output solutions, including large volume production printing products.

Furthermore, Ricoh continues to steadily increase its operational efficiency through cost-cutting measures across its business units, which includes 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 continues to analyze the cost structure of its products at the design phase for the purpose of minimizing production costs.

In terms of fiscal year 2010, Ricoh’s consolidated net sales decreased by 3.6% to ¥2,016.3 billion, from ¥2,091.6 billion for fiscal year 2009, due primarily to the decrease in net sales in all of its operating segments. This decrease was due mainly to the global economic downturn stemming from the global financial crisis and the debt crisis in Dubai and Greece, which caused a decrease in customer demand for Ricoh products as customers reduced their capital spending. The decrease in net sales was also attributable to the depreciation of the U.S. Dollar and the Euro against the Japanese Yen. While net sales generated by IKON, which became a consolidated subsidiary in fiscal year 2009 and whose financial figures were reflected for the full fiscal year for the first time in fiscal year 2010, contributed to overall net sales in the Americas for fiscal year 2010, such contribution was not sufficient to fully offset the decrease in net sales of Ricoh’s other businesses and the appreciation of the Japanese Yen. While cost of sales decreased by 3.5% for fiscal year 2010, such percentage decrease was less than the percentage decrease of net sales because Ricoh lowered the sales price for certain products to stimulate sales in the sluggish and competitive market, and Ricoh was not able to fully absorb certain fixed costs as a result of the decrease in production volume. As a result, gross profit decreased by 3.8% for fiscal year 2010 as compared to fiscal year 2009. In terms of selling, general and administrative expenses, the group-wide cost reduction efforts in Ricoh’s R&D, manufacturing and sales operations resulted in a significant decrease in such expenses and fully offset the increase in expenses incurred by IKON whose expenses were reflected for the full fiscal year for the first time in fiscal year 2010. Consequently, selling, general and administrative expenses decreased by 3.0% from fiscal year 2009. As a result, Ricoh’s operating income for fiscal year 2010 decreased by 11.5%, with operating income as a percentage of net sales decreasing from 3.6% to 3.3% as compared to fiscal year 2009.

 

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KEY PERFORMANCE INDICATORS

The following table shows changes for the last three fiscal years in the key performance indicators that Ricoh’s management uses in assessing its performance. Ricoh’s management considers these indicators to be important in monitoring and evaluating its performance to meet the expectation of its shareholders.

 

     For the year ended March 31,  
     2008     2009     2010  

Net Sales (in billions of Yen)

   2,219.9      2,091.6      2,016.3   

Operating income to net sales ratio(1)

   8.2   3.6   3.3

Return on assets(2)

   4.8   0.3   1.1

Inventory turnover within months(3)

   1.78      1.86      1.70   

Interest-bearing debt (in billions of Yen)

   384.3      779.1      684.4   

 

Notes:

(1) Operating income to net sales ratio = Operating income divided by net sales.
(2) Return on assets = Net income divided by average total assets for the fiscal year.
(3) Inventory turnover within months = Inventory divided by average monthly cost of sales.

In fiscal year 2010, Ricoh’s consolidated net sales decreased by 3.6% to ¥2,016.3 billion, from ¥2,091.6 billion for fiscal year 2009, due primarily to the decrease in net sales in all of its operating segments. Operating income to net sales ratio decreased by 0.3 percentage points to 3.3% from 3.6% for fiscal year 2009 due primarily to the decrease in operating income resulting from the decrease in net sales. Return on assets increased by 0.8 percentage points to 1.1% from 0.3% for fiscal year 2009 due mainly to an increase in net income and a decrease in assets such as account receivables and inventories. Inventory turnover within months improved and decreased by 0.16 points. Interest-bearing debt decreased by ¥94.7 billion as Ricoh repaid some of its outstanding interest-bearing debt by using the additional cash generated from operations as a result of various cost cutting efforts and applying additional cash and cash equivalents on hand.

 

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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 scenarios.

Ricoh considers an accounting policy to be critical if it is important to its financial condition and results, and requires significant judgments and estimates on the part of management in its application. Ricoh believes that the following represent the critical accounting policies of the Company. For a summary of the significant accounting policies, including the critical accounting policies discussed below, see Note [2] to the Consolidated Financial Statements.

Revenue Recognition

Ricoh believes that revenue recognition is critical for its financial statements because net income is directly affected by the timing of revenue recognition.

Ricoh generates revenue principally through the sale of equipment, supplies and related services under separate contractual arrangements for each. Generally, Ricoh recognizes revenue when (1) it has a firm contract, (2) the product has been shipped to and accepted by the customer or the service has been provided, (3) the sales price is fixed or determinable and (4) amounts are reasonably assured of collection.

Most equipment sales require that Ricoh install the product. As such, revenue is recognized at the time of delivery and installation at the customer location. Equipment revenues are based on established prices by product type and model and are net of discounts. A sales return is accepted only when the equipment is defective and does not meet Ricoh’s product performance specifications. Other than installation, there are no customer acceptance clauses in Ricoh’s sales contracts.

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.

 

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Allowance for Doubtful Receivables

Ricoh performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness, as determined by Ricoh’s review of the customers’ credit information. Ricoh continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon its historical experience and any specific customer collection issues that Ricoh has identified. While such credit losses have historically been within Ricoh’s expectations and the provisions established, Ricoh cannot guarantee that it will continue to experience the same credit loss rates that it has in the past. Changes in the underlying financial condition of our customers could result in a material impact on Ricoh’s consolidated results of operation and financial position.

Pension Accounting

The total costs for employees’ severance payments and pension plans represented approximately 0.8%, 0.9% and 1.2% of Ricoh’s total costs and expenses for fiscal years 2008, 2009 and 2010, 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, 2010, 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 ¥140.5 billion.

For fiscal years 2008, 2009 and 2010, Ricoh used expected long-term rates of return on pension plan assets of 3.2%, 3.5% 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 35%, 40%, 20% and 5% of the plan assets is projected to be allocated to equity securities, debt securities, life insurance company general accounts and other financial instruments, respectively. As of March 31, 2010, the actual allocation of assets was generally consistent with the projected allocation stated above. The actual returns for fiscal years 2008, 2009 and 2010 were approximately 6.4% (loss), 15.7% (loss) and 15.5% (gain), respectively. The actual returns on pension plan assets may vary in future periods, depending on market conditions. The market-related value of plan assets is measured using fair values on the plan measurement date.

With respect to the discount rate used in the annual actuarial valuation of the pension benefit obligations, the other critical assumption, Ricoh’s weighted average discount rates for fiscal years 2008, 2009 and 2010 were 3.1%, 3.6% and 3.7%, 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, 2010.

 

Change in Assumption

   Change in
Pension Benefit
Obligations
  Change in
Pre-Tax Pension
Expenses
     (Billions of Yen)

50 basis point increase / decrease in discount rate

   – /+ ¥28.0   – /+ ¥2.4

50 basis point increase / decrease in expected return on assets

   —     – /+ ¥1.5

 

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Purchase Accounting

Ricoh accounts for acquired businesses using the purchase method of accounting which requires that the assets acquired and liabilities assumed be recorded at the date of the acquisition at their respective estimated fair values. The judgments made in determining the estimated fair value assigned to each class of assets acquired, as well as the estimated life of each asset, can materially impact the net income of the periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. In determining the estimated fair value for intangible assets, Ricoh typically utilizes the income approach, which discounts the projected future net cash flow using an appropriate discount rate that reflects the risks associated with such projected future cash flow. Determining the useful life of an intangible asset also requires judgment, as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives. Intangible assets determined to have an indefinite useful life are reassessed periodically based on the factors prescribed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 320 including, but not limited to, the expected use of the asset by us, legal or contractual provisions that may affect the useful life or renewal or extension of the asset’s contractual life without substantial cost, and the effects of demand, competition and other economic factors.

Impairment of Long-Lived Assets and Goodwill

As of March 31, 2010, the aggregate of Ricoh’s property, goodwill and intangible assets was ¥657.5 billion, which accounted for 27.5% of Ricoh’s total consolidated assets. Ricoh believes that impairment of long-lived assets and goodwill are critical to Ricoh’s financial statements because the recoverability of the amounts or lack thereof, could significantly affect its results of operations.

Ricoh periodically reviews the carrying value of its goodwill for continued appropriateness. This review is based upon Ricoh’s projections of anticipated future cashflows and estimated fair value of the reporting units for which goodwill is assigned. Ricoh reviews long-lived assets and acquired intangible assets with a definite life for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The recoverability of assets to be held and used is assessed by comparing the carrying amount of an asset or asset group to the expected future undiscounted net cashflows of the asset or asset group. If an asset or asset group is considered to be impaired, the impairment charge to be recognized is measured as the amount by which the carrying amount of the asset or asset group exceeds fair value. Long-lived assets meeting the criteria to be considered as held for sale are reported at the lower of their carrying amount or fair value less costs to sell.

While Ricoh believes that its estimates of future cashflows are reasonable, different assumptions regarding such cashflows could materially affect Ricoh’s evaluations.

Ricoh completed its annual impairment assessment of goodwill and indefinite-lived intangible assets for the fiscal years 2009 and 2010 and determined that there were no reporting units with material amounts of goodwill that were at risk of failing step one. Accordingly, Ricoh concluded that no impairment charge was necessary for fiscal years 2009 and 2010.

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 financial condition and near term prospects of the issuer and (2) 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.

 

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Realizability of Deferred Tax Assets

Ricoh records a valuation allowance to reduce its 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.

New Accounting Guidance Not Yet Adopted

In October 2009, the FASB issued ASU 2009-13. This ASU eliminates the residual method of revenue recognition and allows the use of management’s best estimate of selling price for individual elements of an arrangement when vendor specific objective evidence (VSOE) or third-party evidence (TPE) is unavailable. This ASU is effective for fiscal years beginning on or after June 15, 2010 and early adoption is permitted. If Ricoh does not elect early adoption, this ASU will be adopted by Ricoh in the first quarter beginning April 1, 2011. Ricoh is currently evaluating the effect that adoption of this ASU will have on its consolidated results of operations and financial condition.

In October 2009, the FASB issued ASU 2009-14. This ASU amends the scope of pre-existing software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. It is effective for fiscal years beginning on or after June 15, 2010 and early adoption is permitted. If Ricoh does not elect early adoption, this ASU will be adopted by Ricoh in the first quarter beginning April 1, 2011. Ricoh is currently evaluating the effect that adoption of this ASU will have on its consolidated results of operations and financial condition.

In December 2009, the FASB issued ASU 2009-16. This ASU eliminates the concept of a qualifying special-purpose entity, establishes conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies the financial-asset derecognition criteria, revises how interests retained by the transferor in a sale of financial assets initially are measured, removes the guaranteed mortgage securitization recharacterization provisions and requires additional disclosures. It is effective for fiscal years beginning after November 15, 2009 and for subsequent interim and annual reporting periods, and will be adopted by Ricoh in the first quarter beginning April 1, 2010. Ricoh is currently evaluating the effect that adoption of this ASU will have on its consolidated results of operations and financial condition.

In December 2009, the FASB issued ASU 2009-17. This ASU requires an enterprise to perform an analysis to identify the primary beneficiary of a variable interest entity and also requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. It is effective for fiscal years beginning after November 15, 2009 and for subsequent interim and annual reporting periods and earlier application is prohibited. It will be adopted by Ricoh in the first quarter beginning April 1, 2010. Ricoh is currently evaluating the effect that the adoption of this ASU will have on its consolidated results of operations and financial condition.

 

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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
U.S. Dollars
    % Change  
     2008     2009     2010     2010(1 )     2009     2010  

Net sales

                  

Products

   ¥ 1,292,228        ¥ 1,027,694        ¥ 964,564        $ 10,371,656      (20.5   (6.1

Post sales and rentals

     817,230          955,490          952,676          10,243,828      16.9      (0.3

Other revenue

     110,531          108,512          99,097          1,065,559      (1.8   (8.7
                                                              

Total

     2,219,989      100.0     2,091,696      100.0     2,016,337      100.0     21,681,043      (5.8   (3.6
                                                              

Cost of sales

                  

Products

     855,852          710,892          681,986          7,333,183      (16.9   (4.1

Post sales and rentals

     346,945          440,510          433,781          4,664,312      27.0      (1.5

Other revenue

     89,465          85,908          78,227          841,151      (4.0   (8.9
                                                              

Total

     1,292,262      58.2     1,237,310      59.2     1,193,994      59.2     12,838,645      (4.3   (3.5
                                                              

Gross profit

     927,727      41.8     854,386      40.8     822,343      40.8     8,842,398      (7.9   (3.8

Selling, general and administrative expenses

     746,221      33.6     779,850      37.2     756,346      37.5     8,132,753      4.5      (3.0
                                                              

Operating income

     181,506      8.2     74,536      3.6     65,997      3.3     709,645      (58.9   (11.5
                                                              

Other (income) expenses:

                  

Interest and dividend income

     (6,341       (5,227       (3,472       (37,333    

Interest expense

     4,835          5,863          8,144          87,570       

Foreign currency exchange loss, net

     10,901          15,576          4,756          51,140       

Loss on impairment of securities

     142          26,837          169          1,817       

Other, net

     (2,700       549          (1,124       (12,086    
                                                              

Total

     6,837      0.3     43,597      2.0     8,473      0.4     91,108      537.7      (80.6
                                                              

Income before income taxes and equity in earnings of affiliates

     174,669      7.9     30,939      1.5     57,524      2.9     618,538      (82.3   85.9   
                                                              

Provision for income taxes:

     63,396      2.9     22,158      1.1     27,678      1.4     297,613      (65.0   24.9   
                                                              

Equity in earnings of affiliates

     1,247          71          6          65       
                                                              

Consolidated net income

     112,520      5.0     8,852      0.4     29,852      1.5     320,989      (93.9   237.2   
                                                              

Net income attributable to noncontrolling interests

     6,057      0.3     2,322      0.1     1,979      0.1     21,280      (61.6   (14.8
                                                              

Net income attributable to Ricoh Company, Ltd.

     106,463      4.8     6,530      0.3     27,873      1.4     299,710      (93.9   326.8   
                                                              
     YEN           Change  

Reference: Exchange Rates*

   2008     2009     2010           2009     2010  

US$ 1

     ¥114.40        ¥100.55        ¥92.91        ¥(13.85   ¥(7.64

EURO 1

     ¥161.69        ¥143.74        ¥131.21        ¥(17.95   ¥(12.53
* These rates are the annual average exchange rate calculated by Ricoh using 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.

 

Note:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2010,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2010, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥93 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2010.

 

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SALES BY PRODUCT

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
   % Change  
     2008     2009     2010     2010(1)    2009     2010  

Imaging and Solutions

                      

Imaging Solutions

   ¥ 1,709,491    77.0   ¥ 1,598,614    76.4   ¥ 1,516,172    75.2   $ 16,302,925    (6.5   (5.2

Network System Solutions

     200,082    9.0        234,484    11.2        274,071    13.6        2,947,000    17.2      16.9   

Industrial Products

     144,340    6.5        115,550    5.5        101,692    5.0        1,093,462    (19.9   (12.0

Other

     166,076    7.5        143,048    6.9        124,402    6.2        1,337,656    (13.9   (13.0
                                                          

Total

   ¥ 2,219,989    100.0   ¥ 2,091,696    100.0   ¥ 2,016,337    100.0   $ 21,681,043    (5.8   (3.6
                                                          

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2010,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2010, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥93 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2010.
(2) The above consolidated financial data set forth net sales to external customers by product.

Fiscal Year 2010 Compared to Fiscal Year 2009

Net sales. Consolidated net sales of Ricoh for fiscal year 2010 decreased by 3.6% (or ¥75.3 billion) to ¥2,016.3 billion from ¥2,091.6 billion for fiscal year 2009. For fiscal year 2010, Ricoh recorded a decrease in net sales in all of its operating segments. This decrease was due primarily to the decrease in customer demand for Ricoh products resulting from the global economic downturn stemming from the global financial crisis and the debt crisis in Dubai and Greece.

More specifically, the 3.6% decrease was due primarily to the 6.1% decrease in sale of products, the 0.3% decrease in sale of post sales and rentals, and the 8.7% decrease in sales of other revenue.

The net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen also adversely affected Ricoh’s consolidated net sales in fiscal year 2010 as compared to fiscal year 2009 in Japanese Yen. Had the foreign currency exchange rates remained the same as in fiscal year 2009, Ricoh’s consolidated net sales would have increased by 1.1%.

In addition, while net sales generated by IKON contributed to net sales during fiscal year 2010, since fiscal year 2010 was the first fiscal year in which IKON’s results were consolidated into Ricoh’s financials for a full fiscal period, the contribution made by IKON was not sufficient to fully offset the decrease in Ricoh’s net sales. Had IKON’s contribution to net sales been reflected for the same period as in fiscal year 2009 (which was for the period of five months from November to March), Ricoh’s consolidated net sales would have decreased by 10.4%.

Products. The 6.1% decrease in net sales derived from products was due primarily to the decrease in net sales of PPCs/MFPs and laser printers resulting primarily from the decrease in capital spending by customers in light of the global economic downturn which started with the global financial crisis and has been prolonged by the debt crisis in Dubai and Greece, and the appreciation of the Japanese Yen. In light of such situation, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which also contributed to the decrease in net sales. Despite such economic environment, Ricoh continued to introduce new product models with advanced features during fiscal year 2010 and Ricoh recorded an increase in the number of color MFP units sold as such products were favorably received by customers who wished to expand their office digital color networking capacity and enhance the security features of their office equipment. While net sales generated by products sold by IKON contributed to net sales during fiscal year 2010, since fiscal year 2010 was the first fiscal year in which IKON’s results were consolidated into Ricoh’s financials for a full fiscal period, the contribution made by IKON was not sufficient to fully offset the decrease in Ricoh’s net sales of PPCs/MFPs and laser printers. Had IKON’s contribution to net sales in products been reflected for the same period as in fiscal year 2009 (which was for the period of five months from November to March), Ricoh’s consolidated net sales of products would have decreased by 15.2%.

 

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Post sales and rentals. Net sales derived from post sale services and rentals of equipment decreased 0.3% as compared to the previous fiscal year due primarily to a decrease in sales of post sale services, such as maintenance services, as well as a decrease in sales of supplies for PPCs/MFPs, laser printers and GELJET printers. This decrease in sales of post sale services and supplies was due primarily to the decrease in net sales of PPCs/MFPs and laser printers. Customers’ decisions to reduce capital investments in office equipment and decrease printing costs by reducing the volume of color printing, which decreased sales of value-added supplies for color products, also decreased net sales of post sale services and supplies. While sales in the network solutions business, such as support services that assist customers establish networked and secured environments in connection with Ricoh’s imaging solutions products, solution software and IKON’s document outsourcing services (such as on-site printing services), contributed to the sales of post sales and rentals, the contribution made by such sales in the network solutions business was not sufficient to fully absorb the decrease in sales of post sale services and supplies. Had IKON’s contribution to net sales in post sales and rentals been reflected for the same period as in fiscal year 2009 (which was for the period of five months from November to March), Ricoh’s consolidated net sales of post sales and rentals would have decreased by 5.3%.

Other revenue. Net sales derived from other sources (such as financing and logistics) decreased 8.7% as compared to the previous fiscal year due mainly to decreased net sales from financing services. Net sales from financing services decreased as leasing volume decreased during fiscal year 2010 due mainly to the decline in corporate demand for capital investments as a result of the economic downturn in Japan.

Cost of sales. Consolidated cost of sales for fiscal year 2010 decreased by 3.5% (or ¥43.3 billion) to ¥1,193.9 billion from ¥1,237.3 billion for fiscal year 2009. This decrease was due primarily to the decrease in sales of products as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen.

Products. Cost of sales derived from products decreased by 4.1% due primarily to the decrease in sales of products as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. In addition, the reduction of production volume due to the decreased demand resulted in Ricoh not being able to fully absorb certain fixed costs.

Post sales and rentals. Cost of sales derived from post sale services and rentals of equipment decreased by 1.5% due primarily to the decrease in sales from post sale services, such as maintenance services, as well as a decrease in sales of supplies for PPCs/MFPs, laser printers and GELJET printers.

Other revenue. Cost of sales derived from other sources (such as financing and logistics) decreased by 8.9% due mainly to decreased net sales from financing services, which decreased in line with the decrease in sales of products.

Gross profit. Consolidated gross profit for fiscal year 2010 decreased by 3.8% (or ¥32.0 billion) to ¥822.3 billion from ¥854.3 billion for fiscal year 2009. This decrease in gross profit primarily reflects the decrease in net sales in Ricoh’s operating segments as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen.

Selling, general and administrative expenses. Consolidated selling, general and administrative expenses for fiscal year 2010 decreased by 3.0% (or ¥23.5 billion) to ¥756.3 billion from ¥779.8 billion for fiscal year 2009. This decrease was primarily due to group-wide cost reduction efforts in R&D, manufacturing and sales operations (which decreased selling, general and administrative expenses by ¥54.0 billion as compared to fiscal year 2009) as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen (which decreased selling, general and administrative expenses by ¥32.1 billion as compared to fiscal year 2009). Such decreases fully offset the increase in expenses that resulted from reflecting a full fiscal year of expenses incurred by IKON for the first time (which increased selling, general and administrative expenses by ¥68.8 billion as compared to fiscal year 2009).

Operating income. Consolidated operating income for fiscal year 2010 decreased by 11.5% (or ¥8.5 billion) to ¥65.9 billion from ¥74.5 billion for fiscal year 2009. Operating income as a percentage of net sales decreased by 0.3 percentage points from 3.6% for fiscal year 2009 to 3.3% for fiscal year 2010. This decrease in operating income compared to fiscal year 2009 was due primarily to the decrease in gross profit resulting from the decrease in net sales, which was partially offset by the decrease in selling, general and administrative expenses, as group-wide cost reduction efforts in R&D, manufacturing and sales operations contributed to a decline in such expenses.

 

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Interest and dividend income. Consolidated interest and dividend income for fiscal year 2010 decreased by ¥1.7 billion to ¥3.4 billion from ¥5.2 billion for fiscal year 2009. This decrease in interest and dividend income was attributable to lower interest rates reflecting the adverse financial market conditions on a global basis.

Interest expense. Consolidated interest expense for fiscal year 2010 increased by ¥2.2 billion to ¥8.1 billion from ¥5.8 billion for fiscal year 2009. This increase in interest expense reflected the increase in the average outstanding amount of interest-bearing debt that Ricoh borrowed from third parties in fiscal year 2010.

Foreign currency exchange loss, net. Consolidated foreign currency exchange loss, net included in other (income) expenses for fiscal year 2010 decreased by ¥10.8 billion to ¥4.7 billion from ¥15.5 billion for fiscal year 2009. This decrease was primarily due to the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. For additional information on Ricoh’s foreign exchange hedging activities, see Item 11. Quantitative and Qualitative Disclosures About Market Risk.

Loss on impairment of securities. Consolidated loss on impairment of securities for fiscal year 2010 decreased by ¥26.6 billion to ¥0.1 billion from ¥26.8 billion for fiscal year 2009. This decrease in loss on impairment of securities was attributable to the lower volatility in the stock markets as compared to fiscal year 2009.

Other, net. Consolidated other, net included in other (income) expenses changed to an income of ¥1.1 billion for fiscal year 2010 from a loss of ¥0.5 billion for fiscal year 2009.

Provision for income taxes. Total consolidated provision for income taxes for fiscal year 2010 increased by ¥5.5 billion to ¥27.6 billion from ¥22.1 billion for fiscal year 2009. The effective tax rate was 48.1% for fiscal year 2010 compared to 71.6% for fiscal year 2009. The effective tax rate was higher than the Japanese statutory tax rate of approximately 40% due primarily to the fact that a recognition of valuation allowance for deferred tax assets resulted from uncertainty about certain consolidated subsidiaries’ ability to earn taxable income in future fiscal years. The effective tax rate of 48.1% in fiscal year 2010 was approximately 24 percentage points lower than the effective tax rate of 71.6% in fiscal year 2009. This decrease in the effective tax rate was due mainly to the decrease in tax benefit not recognized on operating losses of certain consolidated subsidiaries. See Note [8] to the Consolidated Financial Statements for additional information.

Equity in earnings of affiliates. Consolidated equity in earnings of affiliates for fiscal year 2010 decreased by ¥65 million to ¥6 million from ¥71 million for fiscal year 2009. See Note [6] to the Consolidated Financial Statements for additional information.

Net income attributable to noncontrolling interests. Consolidated net income attributable to noncontrolling interests for fiscal year 2010 decreased by ¥0.3 billion to ¥1.9 billion from ¥2.3 billion for fiscal year 2009. This decrease was due primarily to the lower performance of Ricoh Leasing Co., Ltd. for fiscal year 2010.

 

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Operating Segments

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
    % Change  
     2009     2010     2010(1 )    

Imaging and Solutions

            

Net sales

   ¥ 1,833,098      100.0   ¥ 1,790,243      100.0   $ 19,249,925      (2.3

Operating expenses

     1,687,732      92.1     1,649,820      92.2     17,740,000      (2.2

Operating income

   ¥ 145,366      7.9   ¥ 140,423      7.8   $ 1,509,925      (3.4

Industrial Products

            

Net sales

   ¥ 119,671      100.0   ¥ 106,128      100.0   $ 1,141,161      (11.3

Operating expenses

     124,597      104.1        107,483      101.3        1,155,731      (13.7

Operating income (loss)

   ¥ (4,926   (4.1 )%    ¥ (1,355   (1.3 )%    $ (14,570   —     

Other

            

Net sales

   ¥ 143,048      100.0   ¥ 124,402      100.0   $ 1,337,656      (13.0

Operating expenses

     142,690      99.7        127,849      102.8        1,374,720      (10.4

Operating income

   ¥ 358      0.3   ¥ (3,447   (2.8 )%    $ (37,065   —     

Corporate and Elimination

            

Net sales

   ¥ (4,121     ¥ (4,436     $ (47,699  

Operating expenses

     62,141          65,188          700,946     

Operating income (loss)

   ¥ (66,262     ¥ (69,624     $ (748,645  

Consolidated

            

Net sales

   ¥ 2,091,696      100.0   ¥ 2,016,337      100.0   $ 21,681,043      (3.6

Operating expenses

     2,017,160      96.4        1,950,340      96.7        20,971,398      (3.3

Operating income

   ¥ 74,536      3.6   ¥ 65,997      3.3   $ 709,645      (11.5

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2010,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2010, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥93 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2010.
(2) The above consolidated financial data, which set forth net sales, operating expenses and operating income (loss) for each operating segment, include both transactions with external customers as well as intersegment transactions. Notwithstanding the foregoing, all net sales recorded in the Imaging and Solutions operating segment and the Other operating segment reflect sales to external customers only, as none of the products in the Imaging and Solutions operating segment or the Other operating segment were sold to other Ricoh group companies that conduct businesses in the other operating segments. Accordingly, the consolidated net sales figure for the Imaging and Solutions operating segment set forth in the above table is the aggregate of the sales figures for the Imaging Solutions product category and the Network System Solutions product category set forth in the “SALES BY PRODUCT” table included under Item 5.A. Operating Results.

Consolidated net sales of Ricoh for fiscal year 2010 decreased by 3.6% (or ¥75.3 billion) to ¥2,016.3 billion from ¥2,091.6 billion for fiscal year 2009.

This 3.6% percent decrease was due primarily to the 2.3% decrease in sales in the Imaging and Solutions segment, which accounted for 88.8% of consolidated net sales. The 2.3% decrease in sales in the Imaging and Solutions segment was in turn due primarily to the 5.2% decrease in sales in the Imaging Solutions product category, which accounted for 75.2% of consolidated net sales. The 5.2% decrease in sales in the Imaging Solutions product category was partially offset by the 16.9% increase in net sales in the Network System Solutions product category.

 

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Imaging and Solutions

Net sales in the Imaging and Solutions segment for fiscal year 2010 decreased by 2.3% (or ¥42.8 billion) to ¥1,790.2 billion from ¥1,833.0 billion for fiscal year 2009. This decrease was due primarily to lower sales generated in the Imaging Solutions product category.

More specifically, sales in the Imaging Solutions product category for fiscal year 2010 decreased by 5.2% (or ¥82.4 billion) to ¥1,516.1 billion from ¥1,598.6 billion for fiscal year 2009. This decrease was due primarily to the decrease in net sales of PPCs/MFPs and laser printers, and the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. The decrease in net sales of PPCs/MFPs and laser printers was due primarily to the decrease in customer demand for Ricoh products resulting from the global economic downturn as well as customers’ decisions to decrease printing costs by reducing the volume of color printing, which decreased sales of value-added supplies for color products. While net sales generated by IKON, which became a consolidated subsidiary in fiscal year 2009 and whose financial figures were reflected for the full fiscal year for the first time in fiscal year 2010, contributed to overall net sales in the Imaging Solutions product category for fiscal year 2010, the contribution made by IKON to net sales was not sufficient to fully offset the decrease in net sales of PPCs/MFPs and laser printers resulting from the global economic downturn and the decrease in customer demand for PPCs/MFPs and laser printers. In addition, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which contributed to the decrease in net sales. Had IKON’s contribution to net sales in the Imaging Solutions product category been reflected for the same period as in fiscal year 2009 (which was for the period of five months from November to March), net sales in this product category would have decreased by 11.9%.

Sales in the Network System Solutions product category for fiscal year 2010 increased by 16.9% (or ¥39.5 billion) to ¥274.0 billion from ¥234.4 billion for fiscal year 2009. Sales in the solutions business, such as support services that assist customers establish networked environments using Ricoh’s imaging solutions products and software solutions to optimize total printing costs, continued to increase in the overseas markets in fiscal year 2010. Sales in the solutions business increased because customers sought products that streamlined the process of document scanning, indexing and distribution by integrating hardware and software. In addition, net sales generated by IKON, which became a consolidated subsidiary in fiscal year 2009 and whose financial figures were reflected for the full fiscal year for the first time in fiscal year 2010, contributed to the increase in sales in this product category. Had IKON’s contribution to net sales in the Network System Solutions product category been reflected for the same period as in fiscal year 2009 (which was for the period of five months from November to March), net sales in this category would have increased by 2.6%.

Excluding the net effect of the foreign currency exchange rate fluctuations, sales in the Imaging and Solutions segment would have increased by 2.8% (or ¥51.2 billion) for fiscal year 2010 as compared to fiscal year 2009.

For fiscal year 2010, the cost of sales in the Imaging and Solutions segment decreased due primarily to the decrease in net sales and the net effect of the appreciation of the Japanese Yen in relation to the U.S. Dollar and the Euro. In addition, because Ricoh reduced its production volume in response to the decrease in demand, Ricoh was not able to fully absorb certain fixed costs. Due to group-wide cost reduction efforts in R&D, manufacturing and sales operations as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen, Ricoh’s selling, general and administrative expenses decreased. Such decrease fully offset the increase in expenses that resulted from reflecting a full fiscal year of expenses incurred by IKON for the first time. As a result, operating expenses in the Imaging and Solutions segment for fiscal year 2010 decreased by 2.2% (or ¥37.9 billion) to ¥1,649.8 billion from ¥1,687.7 billion for fiscal year 2009.

As a result of the above, operating income for the Imaging and Solutions segment for fiscal year 2010 decreased by 3.4% (or ¥4.9 billion) to ¥140.4 billion from ¥145.3 billion for fiscal year 2009.

 

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Industrial Products

Net sales in the Industrial Products segment for fiscal year 2010 decreased by 11.3% (or ¥13.5 billion) to ¥106.1 billion from ¥119.6 billion for fiscal year 2009. This decrease was due primarily to the decrease in sales of semiconductor devices, thermal media and electronic components, which experienced a decline in demand due primarily to the global economic downturn.

Operating expenses in this segment for fiscal year 2010, decreased by 13.7% (or ¥17.1 billion) to ¥107.4 billion from ¥124.5 billion for fiscal year 2009. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. Selling, general and administrative expenses decreased slightly due mainly to the decrease in net sales and in ongoing operating expenditures as a result of the group-wide cost reduction efforts.

As a result of the above, operating loss for the Industrial Products segment for fiscal year 2010 decreased by ¥3.5 billion to ¥1.3 billion from ¥4.9 billion for fiscal year 2009.

Other

Net sales in the Other segment for fiscal year 2010 decreased by 13.0% (or ¥18.6 billion) to ¥124.4 billion from ¥143.0 billion for fiscal year 2009. During fiscal year 2010, sales of digital cameras decreased due primarily to weak demand for new digital camera products that Ricoh introduced. In addition, net sales from the financing business conducted by Ricoh Leasing Co., Ltd. decreased as leasing volume decreased during fiscal year 2010. Such decrease was due mainly to the decline in corporate demand for capital investments as a result of the economic downturn in Japan.

Operating expenses in this segment for fiscal year 2010 decreased by 10.4% (or ¥14.8 billion) to ¥127.8 billion from ¥142.6 billion for fiscal year 2009. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. Selling, general and administrative expenses decreased slightly due mainly to the decrease in net sales and in ongoing operating expenditures as a result of the group-wide cost reduction efforts.

As a result of the above, operating income(loss) for the Other segment for fiscal year 2010 decreased by ¥3.8 billion to an operating loss of ¥3.4 billion as compared to an operating income of ¥0.3 billion for fiscal year 2009.

 

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Geographic Segments by Geographic Origin

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
    % Change  
     2009     2010     2010(1 )    

Japan

            

Net sales

   ¥ 1,393,196      100.0   ¥ 1,273,437      100.0   $ 13,692,871      (8.6

Operating expenses

     1,331,638      95.6        1,240,361      97.4        13,337,215      (6.9

Operating income

   ¥ 61,558      4.4   ¥ 33,076      2.6   $ 355,656      (46.3

The Americas

            

Net sales

   ¥ 506,789      100.0   ¥ 560,021      100.0   $ 6,021,731      10.5   

Operating expenses

     532,734      105.1        571,884      102.1        6,149,290      7.3   

Operating income (loss)

   ¥ (25,945   (5.1 )%    ¥ (11,863   (2.1 )%    $ (127,559   —     

Europe

            

Net sales

   ¥ 523,539      100.0   ¥ 463,013      100.0   $ 4,978,634      (11.6

Operating expenses

     504,116      96.3        432,822      93.5        4,654,000      (14.1

Operating income

   ¥ 19,423      3.7   ¥ 30,191      6.5   $ 324,634      55.4   

Other

            

Net sales

   ¥ 265,644      100.0   ¥ 245,987      100.0   $ 2,645,022      (7.4

Operating expenses

     252,951      95.2        231,646      94.2        2,490,817      (8.4

Operating income

   ¥ 12,693      4.8   ¥ 14,341      5.8   $ 154,204      13.0   

Corporate and Elimination

            

Net sales

   ¥ (597,472     ¥ (526,121     $ (5,657,215  

Operating expenses

     (604,279       (526,373       (5,659,925  

Operating income

   ¥ 6,807        ¥ 252        $ 2,710     

Consolidated

            

Net sales

   ¥ 2,091,696      100.0   ¥ 2,016,337      100.0   $ 21,681,043      (3.6

Operating expenses

     2,017,160      96.4        1,950,340      96.7        20,971,398      (3.3

Operating income

   ¥ 74,536      3.6   ¥ 65,997      3.3   $ 709,645      (11.5

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2010,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2010, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥93 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2010.
(2) 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 2010 decreased by 8.6% (or ¥119.7 billion) to ¥1,273.4 billion from ¥1,393.1 billion for fiscal year 2009. This decrease was due primarily to the decrease in net sales of PPCs/MFPs and laser printers, and the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. The decrease in net sales of PPCs/MFPs and laser printers was due primarily to the decrease in customer demand for Ricoh products resulting from the global economic downturn as well as customers’ decisions to decrease printing costs by reducing the volume of color printing, which decreased sales of value-added supplies for color products. Decreased sales of semiconductor devices as well as digital cameras also contributed to the overall decrease in sales in Japan. Furthermore, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which contributed to the decrease in net sales.

Operating expenses in Japan for fiscal year 2010 decreased by 6.9% (or ¥91.2 billion) to ¥ 1,240.3 billion from ¥1,331.6 billion for fiscal year 2009. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. Selling, general and administrative expenses also decreased due mainly to the decrease in net sales and in ongoing operating expenditures as a result of Ricoh’s group-wide cost reduction efforts.

As a result of the above, operating income for fiscal year 2010 decreased by 46.3% (or ¥28.4 billion) to ¥33.0 billion from ¥61.5 billion for fiscal year 2009.

 

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The Americas

Net sales in the Americas for fiscal year 2010 increased by 10.5% (or ¥53.2 billion) to ¥560.0 billion from ¥506.7 billion for fiscal year 2009. Despite sluggish economic conditions in the Americas due to the economic downturn in the United States and the net effect of the depreciation of the U.S. Dollar relative to the Japanese Yen, Ricoh recorded increased sales of value-added color PPCs/MFPs, production printing products and network system solutions in the Americas for fiscal year 2010. This increase in sales was due mainly to the fact that net sales generated by IKON for the full fiscal year was consolidated into net sales in the Americas, as IKON became a consolidated subsidiary during fiscal year 2009. Had IKON’s contribution to net sales in the Americas been reflected for the same period as in fiscal year 2009 (which was for the period of five months from November to March), net sales in the Americas for fiscal year 2010 would have decreased by 13.6%.

Operating expenses in the Americas for fiscal year 2010 increased by 7.3% (or ¥39.1 billion) to ¥571.8 billion from ¥532.7 billion for fiscal year 2009. While the consolidation of expenses of IKON contributed to the increase in operating expenses in the Americas, overall operating expenses increased at a lower percentage of increase than the increase in net sales due primarily to the decrease in ongoing operating expenditures as a result of Ricoh’s group-wide cost reduction efforts.

As a result of the above, operating loss for fiscal year 2010 decreased by ¥14.0 billion to ¥11.8 billion from ¥25.9 billion for fiscal year 2009.

Europe

Sales in Europe for fiscal year 2010 decreased by 11.6% (or ¥60.5 billion) to ¥463.0 billion from ¥523.5 billion for fiscal year 2009. This decrease in sales was due primarily to a decrease in sales of PPCs/MFPs and laser printers reflecting a decrease in demand for such products as a result of the global financial crisis, the debt crisis in Dubai and Greece and the net effect of the depreciation of the Euro relative to the Japanese Yen. Although net sales generated by IKON, which became a consolidated subsidiary in fiscal year 2009 and whose financial figures were reflected for the full fiscal year for the first time in fiscal year 2010, contributed to net sales in Europe and Ricoh continued to introduce new products that met customer demand, such factors were not sufficient to fully offset the decrease in overall demand for Ricoh products resulting from the global economic downturn stemming from the global financial crisis. In addition, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which contributed to the decrease in net sales. Had IKON’s contribution to Europe been reflected for the same period as in fiscal year 2009 (which was for the period of five months from November to March), net sales in Europe for fiscal year 2010 would have decreased by 15.3%.

Operating expenses in Europe for fiscal year 2010 decreased by 14.1% (or ¥71.2 billion) to ¥432.8 billion from ¥504.1 billion for fiscal year 2009. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. Selling, general and administrative expenses also decreased at a higher percentage of decrease than the decrease in net sales due mainly to the decrease in net sales and in ongoing operating expenditures as a result of Ricoh’s group-wide cost reduction efforts.

As a result of the above, operating income for fiscal year 2010 increased by 55.4% (or ¥10.7 billion) to ¥30.1 billion from ¥19.4 billion for fiscal year 2009.

Other

Net sales in the Other geographic segment, which includes China, Southeast Asia and Oceania, decreased for fiscal year 2010 by 7.4% (or ¥19.6 billion) to ¥245.9 billion from ¥265.6 billion for fiscal year 2009. This decrease was due primarily to the decrease in exports to other geographic segments, reflecting decreased demand for Ricoh’s products resulting from the global economic downturn stemming from the global financial crisis.

Operating expenses in the Others geographic segment for fiscal year 2010 decreased by 8.4% (or ¥21.3 billion) to ¥231.6 billion from ¥252.9 billion for fiscal year 2009. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in exports to other geographic segments. Selling, general and administrative expenses also decreased at a higher percentage of decrease than the decrease in net sales due mainly to the decrease in net sales and in ongoing operating expenditures as a result of Ricoh’s group-wide cost reduction efforts.

As a result of the above, operating income for fiscal year 2010 increased by 13.0% (or ¥1.6 billion) to ¥14.3 billion from ¥12.6 billion for fiscal year 2009.

 

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Fiscal Year 2009 Compared to Fiscal Year 2008

Net sales. Consolidated net sales of Ricoh for fiscal year 2009 decreased by 5.8% (or ¥128.3 billion) to ¥2,091.6 billion from ¥2,219.9 billion for fiscal year 2008. For fiscal year 2009, Ricoh recorded a decrease in net sales in all of its operating segments. This decrease was due primarily to the decrease in customer demand for Ricoh products resulting from the global economic recession stemming from the global financial crisis.

More specifically, the 5.8% decrease was due primarily to the 20.5% decrease in sale of products, which was partially offset by an increase in sale of post sale services.

The net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen also adversely affected Ricoh’s consolidated net sales in fiscal year 2009 as compared to fiscal year 2008 in Japanese Yen. Had the foreign currency exchange rates remained the same as in fiscal year 2008, Ricoh’s consolidated net sales would have increased by 1.1%.

In addition, while net sales generated by IKON, which became a consolidated subsidiary in fiscal year 2009 (whose net sales were reflected for the five month period of November to March), as well as InfoPrint Solutions Company, which became a consolidated subsidiary in fiscal year 2008 (whose net sales were reflected for the full fiscal year for the first time), contributed to the increase in overall net sales during fiscal year 2009, such increase was not sufficient to fully offset the decrease in Ricoh’s overall net sales. Had the contributions made by IKON to net sales not been reflected and the contributions of InfoPrint Solutions Company been reflected for the same period as in fiscal year 2008 (which was for the period of five months from April to August), Ricoh’s consolidated net sales would have decreased by 13.5%.

Products. The 20.5% decrease in net sales derived from products was due primarily to the decrease in net sales of PPCs/MFPs and laser printers resulting primarily from the sharp decrease in capital spending by customers due to the global economic recession which started with the global financial crisis, and the appreciation of the Japanese Yen. In addition, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which contributed to the decrease in net sales. Despite such environment, Ricoh continued to introduce new product models with advanced features during fiscal year 2009 and Ricoh recorded an increase in the number of color MFP units sold as such products were favorably received by customers who wished to expand their office digital color networking capacity. While net sales generated by products sold by IKON and InfoPrint Solutions Company during fiscal year 2009 contributed to net sales, such increase was not sufficient to fully offset the decrease in net sales of PPCs/MFPs and laser printers.

Post sales and rentals. Net sales derived from post sale services and rentals of equipment increased 16.9% compared to the previous fiscal year due primarily to an increase in sales from post sale services, such as maintenance services, as well as an increase in sales of supplies for PPCs/MFPs, laser printers and GELJET printers. This increase in sales of post sale services and supplies was generated primarily by the increase in the number of equipment in operation (commonly known as machines-in-field, which include new equipment) and the increase in sales of value-added supplies for color products (as opposed to monochrome products). In addition, sales in the network solutions business, such as support services that assist customers establish networked environments in connection with Ricoh’s imaging solutions products, solution software and IKON’s document outsourcing services (such as on-site printing services), also contributed to the increase in sales of post sales and rentals.

Other revenue. Net sales derived from other sources (such as financing and logistics) decreased mainly due to decreased net sales from financing services, which decreased as sales of products decreased.

Cost of sales. Consolidated cost of sales for fiscal year 2009 decreased by 4.3% (or ¥54.9 billion) to ¥1,237.3 billion from ¥1,292.2 billion for fiscal year 2008. This decrease was due primarily to the decrease in sales of products as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen.

Products. Cost of sales derived from products decreased by 16.9% due primarily to the decrease in sales of products as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. In addition, because Ricoh reduced its production volume in response to the decrease in demand, Ricoh was not able to fully absorb certain fixed costs.

Post sales and rentals. Cost of sales derived from post sale services and rentals of equipment increased by 26.9% due primarily to the increase in sales from post sale services, such as maintenance services, as well as an increase in sales of supplies for PPCs/MFPs, laser printers and GELJET printers.

Other revenue. Cost of sales derived from other sources (such as financing and logistics) decreased by 3.9% due mainly to decreased net sales from financing services, which decreased as sales of products decreased.

          Gross profit. Consolidated gross profit for fiscal year 2009 decreased by 7.9% (or ¥73.3 billion) to ¥854.3 billion from ¥927.7 billion for fiscal year 2008. This decrease in gross profit primarily reflects the decrease in net sales in Ricoh’s operating segments as well as the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. In addition, net sales decreased at a higher percentage rate than cost of sales due to the fact that Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, and Ricoh was not able to fully absorb certain fixed costs as a result of the decrease in production volume.

 

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Selling, general and administrative expenses. Consolidated selling, general and administrative expenses for fiscal year 2009, increased by 4.5% (or ¥33.6 billion) to ¥779.8 billion from ¥746.2 billion for fiscal year 2008. While group-wide cost reduction efforts partially decreased ongoing operating expenditures, Ricoh incurred additional strategic expenses in connection with its efforts to (1) enhance its sales and service structures, such as through the IKON acquisition, (2) expand its production printing business and (3) make structural changes aimed at improving its operational efficiency on a worldwide basis of all aspects of its R&D, manufacturing and sales operations. Fiscal year 2009 was also the first year in which selling, general and administrative expenses of IKON (for part of the fiscal year) and InfoPrint Solutions Company (for the full fiscal year) were reflected in Ricoh’s consolidated financial statements, which contributed to the increase in selling, general and administrative expenses by ¥72.8 billion. Ricoh invested ¥124.4 billion in R&D activity during fiscal year 2009 (which was ¥1.6 billion less than fiscal year 2008) for purposes of developing PPCs/MFPs, laser printers, GELJET printers and production printing products with new capabilities to maintain Ricoh’s large market share position in these products in the current competitive marketplace. While the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen resulted in a decrease in selling, general and administrative expenses of approximately ¥49.9 billion, and the R&D expenses decreased by ¥1.6 billion as mentioned above, such decreases were not sufficient to fully offset the various items discussed above that increased selling, general and administrative expenses.

Operating income. Consolidated operating income for fiscal year 2009 decreased by 58.9% (or ¥106.9 billion) to ¥74.5 billion from ¥181.5 billion for fiscal year 2008. Operating income as a percentage of net sales decreased by 4.6 percentage points from 8.2% for fiscal year 2008 to 3.6% for fiscal year 2009. This significant decrease in operating income compared to fiscal year 2008 was due primarily to the decrease in gross profit resulting from the decrease in net sales and to the increase in selling, general and administrative expenses, as Ricoh incurred certain expenses during fiscal year 2009 to expand its business and improve its operational efficiency as discussed above, and the expenses of IKON and InfoPrint Solutions Company were reflected in Ricoh’s consolidated financial statements.

Interest and dividend income. Consolidated interest and dividend income for fiscal year 2009 decreased by ¥1.1 billion to ¥5.2 billion from ¥6.3 billion for fiscal year 2008. This decrease in interest and dividend income was attributable to lower interest rates reflecting the adverse financial market conditions on a global basis.

Interest expense. Consolidated interest expense for fiscal year 2009 increased by ¥1.0 billion to ¥5.8 billion from ¥4.8 billion for fiscal year 2008. This increase in interest expense reflected the increase in the amount of outstanding interest-bearing debt that Ricoh borrowed from third parties in fiscal year 2009 in connection with its acquisition of IKON.

Foreign currency exchange loss, net. Consolidated foreign currency exchange loss, net included in other (income) expenses for fiscal year 2009 increased by ¥4.6 billion to ¥15.5 billion from ¥10.9 billion for fiscal year 2008. For additional information on Ricoh’s foreign exchange hedging activities, see Item 11. Quantitative and Qualitative Disclosures About Market Risk.

Loss on impairment of securities. Consolidated loss on impairment of securities for fiscal year 2009 increased by ¥26.6 billion to ¥26.8 billion from ¥0.1 billion for fiscal year 2008. This increase in loss on impairment of securities was attributable to the decrease in the stock markets.

Other, net. Consolidated other, net included in other (income) expenses changed to a loss of ¥0.5 billion for fiscal year 2009 from an income of ¥2.7 billion for fiscal year 2008.

Provision for income taxes. Total consolidated provision for income taxes for fiscal year 2009 decreased by ¥41.2 billion to ¥22.1 billion from ¥63.3 billion for fiscal year 2008. The effective tax rate was 71.6% for fiscal year 2009 compared to 36.3% for fiscal year 2008. The effective tax rate was higher than the Japanese statutory tax rate of approximately 40% due primarily to the fact that a recognition of valuation allowance for deferred tax assets resulted from uncertainty about certain consolidated subsidiaries’ ability to earn taxable income in future fiscal years. The effective tax rate of 71.6% in fiscal year 2009 was approximately 36 percentage points higher than the effective tax rate of 36.3% in fiscal year 2008. This increase in the effective tax rate was due mainly to the increase in tax benefit not recognized on operating losses of certain consolidated subsidiaries. See Note [8] to the Consolidated Financial Statements for additional information.

Equity in earnings of affiliates. Consolidated equity in earnings of affiliates for fiscal year 2009 decreased by ¥1.1 billion to ¥0.0 billion from ¥1.2 billion for fiscal year 2008. This decrease was due primarily to the fact that Ricoh no longer recorded any earnings for a company that ceased to be an affiliate as of October 2007 due to certain restructuring initiatives undertaken by such company. See Note [6] to the Consolidated Financial Statements for additional information.

Net income attributable to noncontrolling interests. Consolidated net income attributable to noncontrolling interests for fiscal year 2009 decreased by ¥3.7 billion to ¥2.3 billion from ¥6.0 billion for fiscal year 2008. This decrease was due primarily to the fact that Ricoh no longer recorded earnings for Ricoh Elemex Corporation, which became a wholly-owned subsidiary during fiscal year 2009 through a share exchange that was completed in August 2008.

 

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Operating Segments

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
    % Change  
     2008     2009     2009(1 )    

Imaging and Solutions

            

Net sales

   ¥ 1,909,573      100.0   ¥ 1,833,098      100.0   $ 18,516,141      (4.0

Operating expenses

     1,674,940      87.7        1,687,732      92.1     17,047,798      0.8   

Operating income

   ¥ 234,633      12.3   ¥ 145,366      7.9   $ 1,468,343      (38.0

Industrial Products

            

Net sales

   ¥ 148,883      100.0   ¥ 119,671      100.0   $ 1,208,798      (19.6

Operating expenses

     144,708      97.2        124,597      104.1        1,258,556      (13.9

Operating income (loss)

   ¥ 4,175      2.8   ¥ (4,926   (4.1 )%    $ (49,758   —     

Other

            

Net sales

   ¥ 166,076      100.0   ¥ 143,048      100.0   $ 1,444,929      (13.9

Operating expenses

     163,529      98.5        142,690      99.7        1,441,313      (12.7

Operating income

   ¥ 2,547      1.5   ¥ 358      0.3   $ 3,616      (85.9

Corporate and Elimination

            

Net sales

   ¥ (4,543     ¥ (4,121     $ (41,626  

Operating expenses

     55,306          62,141          627,687     

Operating income (loss)

   ¥ (59,849     ¥ (66,262     $ (669,313  

Consolidated

            

Net sales

   ¥ 2,219,989      100.0   ¥ 2,091,696      100.0   $ 21,128,242      (5.8

Operating expenses

     2,038,483      91.8        2,017,160      96.4        20,375,354      (1.0

Operating income

   ¥ 181,506      8.2   ¥ 74,536      3.6   $ 752,889      (58.9

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2009,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2009, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥99 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2009.
(2) The above consolidated financial data, which set forth net sales, operating expenses and operating income (loss) for each operating segment, include both transactions with external customers as well as intersegment transactions. Notwithstanding the foregoing, all net sales recorded in the Imaging and Solutions operating segment and the Other operating segment reflect sales to external customers only, as none of the products in the Imaging and Solutions operating segment or the Other operating segment were sold to other Ricoh group companies that conduct businesses in the other operating segments. Accordingly, the consolidated net sales figure for the Imaging and Solutions operating segment set forth in the above table is the aggregate of the sales figures for the Imaging Solutions product category and the Network System Solutions product category set forth in the “SALES BY PRODUCT” table included under Item 5.A. Operating Results.

Consolidated net sales of Ricoh for fiscal year 2009 decreased by 5.8% (or ¥128.3 billion) to ¥2,091.6 billion from ¥2,219.9 billion for fiscal year 2008.

This 5.8% percent decrease was due primarily to the 4.0% decrease in sales in the Imaging and Solutions segment which accounted for 87.6% of consolidated net sales. The 4.0% decrease in sales in the Imaging and Solutions segment was in turn due primarily to the 6.5% decrease in sales in the Imaging Solutions product category, which accounted for 76.4% of consolidated net sales. The 6.5% decrease in sales in the Imaging Solutions product category was partially offset by the 17.2% increase in net sales in the Network System Solutions product category.

 

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Imaging and Solutions

Net sales in the Imaging and Solutions segment for fiscal year 2009 decreased by 4.0% (or ¥76.4 billion) to ¥1,833.0 billion from ¥1,909.5 billion for fiscal year 2008. This decrease was due primarily to lower sales recorded in the Imaging Solutions product category.

More specifically, sales in the Imaging Solutions product category for fiscal year 2009 decreased by 6.5% (or ¥110.8 billion) to ¥1,598.6 billion from ¥1,709.4 billion for fiscal year 2008. This decrease was due primarily to the decrease in net sales of monochrome PPCs/MFPs and the net effect of the depreciation of the U.S. Dollar and the Euro in relation to the Japanese Yen. The decrease in net sales of monochrome PPCs/MFPs was due primarily to the effects of the global economic recession and the shift in customer demand from monochrome products to products with color capabilities. Color PPCs/MFPs still remained popular among customers, especially overseas, as these products are equipped with advanced digital and networking technologies, which address customers’ needs for conducting business operations effectively and efficiently by digitalizing and colorizing documents and enabling the handling of large volumes of information. Accordingly, due to their popularity, net sales of value-added supplies for color PPCs/MFPs remained strong and together with the net sales generated by IKON and InfoPrint Solutions Company contributed to the overall net sales in this category. Nonetheless, the contributions these factors made to net sales were not sufficient to fully offset the decrease in net sales of monochrome PPCs/MFPs resulting from the global economic recession and the sharp decrease in customer demand for monochrome PPCs/MFPs. In addition, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which contributed to the decrease in net sales. Had the contributions made by IKON to net sales not been reflected and the contributions of InfoPrint Solutions Company been reflected for the same period as in fiscal year 2008 (which was for the period of five months from April to August), net sales in the Imaging Solutions product category for fiscal year 2009 would have decreased by 15.0%.

Sales in the Network System Solutions product category for fiscal year 2009 increased by 17.2% (or ¥34.4 billion) to ¥234.4 billion from ¥200.0 billion for fiscal year 2008. Sales in the solutions business, such as support services that assist customers establish networked environments in connection with Ricoh’s imaging solutions products and solutions with software to optimize total printing costs, continued to increase in the overseas markets in fiscal year 2009. Sales in the printing solutions business increased because customers sought products that streamlined the process of document scanning, indexing and distribution by integrating hardware and software. In addition, IKON’s document outsourcing services (such as on-site printing services) also contributed to the increase in sales in this category. Had IKON’s contribution to net sales not been reflected, net sales in the Network System Solutions product category for fiscal year 2009 would have increased only by 4.3%.

Excluding the net effect of the foreign currency exchange rate fluctuations, sales in the Imaging and Solutions segment would have increased by 3.7% (or ¥70.9 billion) for fiscal year 2009 as compared to fiscal year 2008.

For fiscal year 2009, the cost of sales in the Imaging and Solutions segment decreased due primarily to the decrease in net sales and the net effect of the appreciation of the Japanese Yen in relation to the U.S. Dollar and the Euro. In addition, because Ricoh reduced its production volume in response to the decrease in demand, Ricoh was not able to fully absorb certain fixed costs. In terms of selling, general and administrative expenses, while the group-wide cost reduction efforts contributed to a decline in ongoing operating expenditures, Ricoh incurred additional strategic expenses in connection with its efforts to (1) enhance its sales and service structures, such as through the IKON acquisition, (2) expand its production printing business and (3) make structural changes aimed at improving its operational efficiency in this segment. As a result, operating expenses in the Imaging and Solutions segment for fiscal year 2009 increased by 0.8% (or ¥12.7 billion) to ¥1,687.7 billion from ¥1,674.9 billion for fiscal year 2008.

Operating income for the Imaging and Solutions segment for fiscal year 2009 decreased by 38.0% (or ¥89.2 billion) to ¥145.3 billion from ¥234.6 billion for fiscal year 2008. Operating income as a percentage of net sales for fiscal year 2009 decreased by 4.4 percentage points to 7.9% from 12.3% as compared to fiscal year 2008, due primarily to the decrease in net sales and increase in selling, general and administrative expenses as discussed above.

 

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Industrial Products

Net sales in the Industrial Products segment for fiscal year 2009 decreased by 19.6% (or ¥29.2 billion) to ¥119.6 billion from ¥148.8 billion for fiscal year 2008. This decrease was due primarily to the decrease in sales of semiconductors devices, thermal media and electronic components, which experienced a sharp decline in demand due primarily to the global economic recession.

Operating expenses in this segment for fiscal year 2009, decreased by 13.9% (or ¥20.1 billion) to ¥124.5 billion from ¥144.7 billion for fiscal year 2008. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. Selling, general and administrative expenses decreased slightly due mainly to the decrease in net sales and in ongoing operating expenditures as a result of group-wide cost reduction efforts.

As a result of the above, operating income (loss) for the Industrial Products segment for fiscal year 2009 decreased by ¥9.1 billion to an operating loss of ¥4.9 billion from an operating income of ¥4.1 billion for fiscal year 2008.

Other

Net sales in the Other segment for fiscal year 2009 decreased by 13.9% (or ¥23.0 billion) to ¥143.0 billion from ¥166.0 billion for fiscal year 2008. During fiscal year 2009, sales of digital cameras decreased due primarily to weak demand for new digital camera products that Ricoh introduced. In addition, net sales from the financing business conducted by Ricoh Leasing Co., Ltd. decreased due mainly to the sharp decline in corporate demand for capital investments as a result of the economic recession in Japan.

Operating expenses in this segment for fiscal year 2009 decreased by 12.7% (or ¥20.8 billion) to ¥142.6 billion from ¥163.5 billion for fiscal year 2008. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. Selling, general and administrative expenses decreased slightly due mainly to the decrease in net sales and in ongoing operating expenditures as a result of group-wide cost reduction efforts.

As a result of the above, operating income for the Other segment for fiscal year 2009 decreased by ¥ 2.1 billion to ¥0.3 billion as compared to ¥2.5 billion for fiscal year 2008. Operating income as a percentage of net sales for fiscal year 2009 decreased by 1.2 percentage points to 0.3% from 1.5% as compared to fiscal year 2008.

 

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Geographic Segments by Geographic Origin

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
    % Change  
     2008     2009     2009(1 )    

Japan

            

Net sales

   ¥ 1,535,513      100.0   ¥ 1,393,196      100.0   $ 14,072,687      (9.3

Operating expenses

     1,427,575      93.0        1,331,638      93.0        13,450,889      (6.7

Operating income

   ¥ 107,938      7.0   ¥ 61,558      7.0   $ 621,798      (43.0

The Americas

            

Net sales

   ¥ 435,783      100.0   ¥ 506,789      100.0   $ 5,119,081      16.3   

Operating expenses

     433,429      99.5        532,734      99.5        5,381,152      22.9   

Operating income (loss)

   ¥ 2,354      0.5   ¥ (25,945   0.5   $ (262,071   —     

Europe

            

Net sales

   ¥ 604,809      100.0   ¥ 523,539      100.0   $ 5,288,273      (13.4

Operating expenses

     565,736      93.5        504,116      96.3        5,092,081      (10.9

Operating income

   ¥ 39,073      6.5   ¥ 19,423      3.7   $ 196,192      (50.3

Other

            

Net sales

   ¥ 317,598      100.0   ¥ 265,644      100.0   $ 2,683,273      (16.4

Operating expenses

     291,141      91.7        252,951      95.2        2,555,061      (13.1

Operating income

   ¥ 26,457      8.3   ¥ 12,693      4.8   $ 128,212      (52.0

Corporate and Elimination

            

Net sales

   ¥ (673,714     ¥ (597,472     $ (6,035,071  

Operating expenses

     (679,398       (604,279       (6,103,828  

Operating income

   ¥ 5,684        ¥ 6,807        $ 68,758     

Consolidated

            

Net sales

   ¥ 2,219,989      100.0   ¥ 2,091,696      100.0   $ 21,128,242      (5.8

Operating expenses

     2,038,483      91.8        2,017,160      96.4        20,375,354      (1.0

Operating income

   ¥ 181,506      8.2   ¥ 74,536      3.6   $ 752,889      (58.9

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2009,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2009, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥99 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2009.
(2) The above consolidated financial data, which set forth net sales, operating expenses and operating income (loss) for each geographic segment by geographic origin, include both transactions with external customers as well as intersegment transactions.

Japan

Sales in Japan for fiscal year 2009 decreased by 9.3% (or ¥142.3 billion) to ¥1,393.1 billion from ¥1,535.5 billion for fiscal year 2008. This decrease was due primarily to decreased sales of PPCs/MFPs, which decrease was partially offset by the increase in sales of laser printers. The decrease in sales of PPCs/MFPs was primarily attributable to (1) the deterioration of customer demand for office equipment during fiscal year 2009 due mainly to the global economic recession as customers reduced their capital investment in office equipment and focused on reducing printing costs by reducing printing volume, and (2) the appreciation of the Japanese Yen against the U.S. Dollar and the Euro. The increase in sales of laser printers, which partially offset the decrease in sales of PPCs/MFPs, was due primarily to increased sales of post sale services such as maintenance services and supplies. Sales of solutions products, such as support services, document management applications and other software, decreased in Japan due to the overall depressed market despite Ricoh’s efforts to expand the “Operius” business. In addition, decreased sales of semiconductor devices as well as digital cameras also contributed to the overall decrease in sales in Japan. Furthermore, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which contributed to the decrease in net sales.

Operating expenses in Japan for fiscal year 2009 decreased by 6.7% (or ¥95.9 billion) to ¥ 1,331.6 billion from ¥1,427.5 billion for fiscal year 2008. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. Selling, general and administrative expenses also decreased due mainly to the decrease in net sales and in ongoing operating expenditures as a result of Ricoh’s group-wide cost reduction efforts.

As a result of the above, operating income for fiscal year 2009 decreased by 43.0% (or ¥46.3 billion) to ¥61.5 billion from ¥107.9 billion for fiscal year 2008.

 

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The Americas

Net sales in the Americas for fiscal year 2009 increased by 16.3% (or ¥71.0 billion) to ¥506.7 billion from ¥435.7 billion for fiscal year 2008. Despite sluggish economic conditions in the Americas due to the economic recession in the United States and the net effect of the depreciation of the U.S. Dollar relative to the Japanese Yen, Ricoh recorded increased sales of value-added color PPCs/MFPs and laser printers in the Americas for fiscal year 2009. This increase in sales was due mainly to the fact that (1) Ricoh introduced new models that responded to the diverse range of customer needs for color, networking and high-speed products in this geographic segment and (2) fiscal year 2009 was the first fiscal year in which net sales generated by IKON for part of the fiscal year was consolidated into Ricoh, as IKON became a consolidated subsidiary during fiscal year 2009, and net sales generated by InfoPrint Solutions Company for the full fiscal year was consolidated into Ricoh, as InfoPrint Solutions Company became a consolidated subsidiary during fiscal year 2008. Had the contributions made by IKON to net sales not been reflected and the contributions made by InfoPrint Solutions Company been reflected for the same period as in fiscal year 2008 (which was for the period of five months from April to August), net sales in the Americas for fiscal year 2009 would have decreased by 14.2%.

Operating expenses in the Americas for fiscal year 2009 increased by 22.9% (or ¥99.3 billion) to ¥532.7 billion from ¥433.4 billion for fiscal year 2008. Despite the increase in sales of value-added color PPCs/MFPs and laser printers, operating expenses increased at a higher percentage of increase than the increase in net sales due primarily to the increasingly competitive business environment in the Americas which required Ricoh to increase its strategic sales promotions and incur greater marketing related expenses. In addition, the consolidation of expenses of IKON and InfoPrint Solutions Company contributed to the increase in operating expenses in the Americas.

As a result of the above, operating income (loss) for fiscal year 2009 decreased by ¥28.2 billion to an operating loss of ¥25.9 billion from an operating income of ¥2.3 billion for fiscal year 2008.

Europe

Sales in Europe for fiscal year 2009 decreased by 13.4% (or ¥81.2 billion) to ¥523.5 billion from ¥604.8 billion for fiscal year 2008. This decrease in sales was due primarily to a decrease in sales of PPCs/MFPs reflecting a decrease in demand for such products as a result of the global financial crisis and the net effect of the depreciation of the Euro relative to the Japanese Yen. While Ricoh continued to introduce new products that met customer demand, such efforts were not sufficient to fully offset the decrease in demand. In addition, Ricoh lowered the sales price of certain products to stimulate sales in the sluggish and competitive market, which contributed to the decrease in net sales. Had the contributions made by IKON to net sales not been reflected and the contributions made by InfoPrint Solutions Company been reflected for the same period as in fiscal year 2008 (which was for the period of five months from April to August), net sales in Europe for fiscal year 2009 would have decreased by 18.3%.

Operating expenses in Europe for fiscal year 2009 decreased by 10.9% (or ¥61.6 billion) to ¥504.1 billion from ¥565.7 billion for fiscal year 2008. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. Selling, general and administrative expenses also decreased due mainly to the decrease in net sales.

As a result of the above, operating income for fiscal year 2009 decreased by 50.3% (or ¥19.6 billion) to ¥19.4 billion from ¥39.0 billion for fiscal year 2008.

Other

Net sales in the Other geographic segment, which includes China, Southeast Asia and Oceania, decreased for fiscal year 2009 by 16.4% (or ¥51.9 billion) to ¥265.6 billion from ¥317.5 billion for fiscal year 2008. This decrease was due primarily to the decrease in exports to other geographic segments, reflecting decreased demand for Ricoh’s products resulting from the global economic recession stemming from the global financial crisis.

Operating expenses in the Others geographic segment for fiscal year 2009 decreased by 13.1% (or ¥38.1 billion) to ¥252.9 billion from ¥291.1 billion for fiscal year 2008. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in exports to other geographic segments. Selling, general and administrative expenses also decreased due mainly to the decrease in net sales.

As a result, operating income for fiscal year 2009 decreased by 52.0% (or ¥13.7 billion) to ¥12.6 billion from ¥26.4 billion for fiscal year 2008.

 

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B. Liquidity and Capital Resources

Cashflows

The following table summarizes our cashflows for each of the three fiscal years ended March 31, 2008, 2009 and 2010, as reported in our Consolidated Statements of Cashflows in the accompanying Consolidated Financial Statements.

 

     (Billions of Yen)  
     For the year ended March 31,  
     2008     2009     2010  

Net cash provided by operating activities

   194.3      87.4      190.7   

Net cash used in investing activities

   (198.3   (283.1   (89.5

Net cash provided by (used in) financing activities

   (72.1   295.9      (113.3

Net increase (decrease) in cash and cash equivalents

   (85.1   87.8      (16.3

Cash and cash equivalents at beginning of year

   255.7      170.6      258.4   

Cash and cash equivalents at end of year

   170.6      258.4      242.1   

Operating Cashflows

For fiscal year 2010, net cash provided by operating activities consisted primarily of depreciation and amortization of ¥98.9 billion, consolidated net income of ¥29.8 billion, a decrease in finance receivables of ¥23.3 billion, a decrease in inventories of ¥19.5 billion, an increase in accrued income taxes and accrued expenses and other of ¥15.5 billion and a decrease in trade receivables of ¥5.4 billion, which were partially offset by a decrease in trade payables of ¥10.1 billion and pension and severance costs, less payment of ¥2.6 billion. As compared to fiscal year 2009, net cash provided by operating activities in fiscal year 2010 increased mainly because trade payables and consolidated net income increased by ¥87.2 billion and ¥21.0 billion, respectively.

For fiscal year 2009, net cash provided by operating activities consisted primarily of depreciation and amortization of ¥101.8 billion, a decrease in trade receivables of ¥37.9 billion, loss on impairment of securities of ¥26.8 billion and net income from continuing operations of ¥6.5 billion, which were partially offset by a decrease in trade payables of ¥97.3 billion, accrued income taxes and accrued expenses and other of ¥14.0 billion, deferred income taxes of ¥5.1 billion and an increase in finance receivables of ¥3.0 billion. As compared to fiscal year 2008, net cash provided by operating activities in fiscal year 2009 decreased mainly because net income decreased by ¥99.9 billion.

For fiscal year 2008, net cash provided by operating activities consisted primarily of net income from continuing operations of ¥106.4 billion, depreciation and amortization of ¥95.7 billion, an increase in accrued income taxes and accrued expenses and other of ¥5.2 billion and deferred income taxes of ¥4.9 billion, which were partially offset by an increase in finance receivables of ¥17.1 billion and an increase in trade receivables of ¥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.

Investing Cashflows

For fiscal year 2010, net cash used in investing activities consisted mainly of ¥66.9 billion of expenditures for property, plant and equipment, ¥19.9 billion of other net, and ¥4.7 billion for the acquisition of new subsidiaries, net of cash acquired. Net cash used in investing activities decreased in fiscal year 2010 mainly because Ricoh did not make any major acquisitions that required the investment of cash.

For fiscal year 2009, net cash used in investing activities consisted mainly of, ¥157.4 billion for the acquisition of new subsidiaries, net of cash acquired, ¥96.9 billion of expenditures for property, plant and equipment and ¥27.1 billion of other, net. Net cash used in investing activities increased in fiscal year 2009 mainly because Ricoh used cash in connection with the establishment and commencement of IKON’s operations.

For fiscal year 2008, net cash used in investing activities consisted mainly of ¥97.9 billion in payments for purchases of available-for-sale securities, ¥96.7 billion for acquisitions of new subsidiaries, net of cash acquired, ¥85.2 billion of expenditures for property, plant and equipment and ¥19.3 billion of other, net. Ricoh realized ¥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.

 

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Financing Cashflows

For fiscal year 2010, net cash used in financing activities consisted primarily of ¥105.2 billion of net decrease in short-term borrowing, ¥66.5 billion to repay long-term indebtedness, ¥22.8 billion to pay dividends and ¥20.0 billion to repay long-term debt securities, which were partially offset by ¥55.0 billion of proceeds received from long-term debt securities and ¥46.9 billion of proceeds received from long-term indebtedness. As compared to fiscal year 2009, net cash used in financing activities increased in fiscal year 2010 as Ricoh repaid some of its outstanding interest-bearing debt by using the additional cash generated from operations as a result of various cost cutting efforts and applying additional cash and cash equivalents on hand.

For fiscal year 2009, net cash provided by financing activities consisted primarily of ¥237.1 billion of proceeds from long-term indebtedness, ¥110.2 billion of net increase in short-term borrowings and ¥85.0 billion of proceeds from the issuance of long-term debt securities. Ricoh repaid ¥59.5 billion of long-term indebtedness, ¥50.5 billion of long-term debt securities and ¥25.3 billion of dividends. As compared to fiscal year 2008, net cash provided from financing activities increased in fiscal year 2009 as Ricoh increased its short-term borrowings and received proceeds from the issuance of long-term debt.

For fiscal year 2008, net cash used in financing activities consisted primarily of ¥75.7 billion to repay long-term indebtedness and ¥22.6 billion to pay dividends, which were partially offset by ¥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 ¥32.3 billion and acquired ¥15.7 billion of treasury stock.

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 method that Ricoh has implemented to achieve greater efficiency is building up its group cash management system in Japan, the United States and Europe. This cash management system functions as an arrangement whereby Ricoh’s funds are pooled together and cash resources are lent and borrowed from one group company to another company, with finance companies located in Japan, the United States and the Netherlands coordinating this arrangement. This pooling-of-funds arrangement has reduced the occurrence of excess accumulation of cash in one group company while another group company engages in unnecessary borrowing from third party institutions to meet its cash requirements. As such, the pooling-of-funds arrangement has reduced interest expense and related costs paid to third parties in connection with borrowings to finance operations.

Ricoh also enters into various derivative financial instrument contracts in the normal course of its business and in connection with the management of its assets and liabilities. In order to hedge against the potentially adverse impacts of foreign currency fluctuations on its assets and liabilities denominated in foreign currencies, Ricoh enters into foreign exchange contracts and foreign currency options. Another form of derivative financial contracts that Ricoh enters into is interest rate swap agreements to hedge against the potentially adverse impacts of fair value or cashflow fluctuations on its outstanding debt interests. Ricoh uses these 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 limited 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.

 

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Sources of Funding

Ricoh’s principal sources of funding are a combination of cash and cash equivalents on hand, various lines of credit and the issuance of commercial paper, medium-term notes and long-term debt securities. In assessing its liquidity and capital resources needs, Ricoh places importance on the net income figure in the income statement, balances of cash and cash equivalents in the balance sheet and operating cashflows in the cashflow statements.

As of March 31, 2010, Ricoh had ¥242.1 billion in cash and cash equivalents and ¥694.0 billion in aggregate borrowing facilities. Of the ¥694.0 billion in aggregate borrowing facilities, ¥606.1 billion was available to be borrowed by Ricoh as of March 31, 2010. The below table indicates additional information relating to such borrowing facilities that were available to Ricoh as of March 31, 2010.

 

     (Billions of Yen)
     Average
Interest Rate (%)
   Amount Available

Bank loans

   1.1    287.4

Commercial paper

   0.2    225.7

Medium-term notes

   —      93.0
         

Total

   —      606.1
         

More specifically, Ricoh Leasing Co., Ltd. has a ¥27.0 billion committed credit line with several banks having credit ratings satisfactory to Ricoh. This ¥27.0 billion committed credit line amount is included in the ¥694.0 billion figure for aggregate borrowing facilities.

The Company, Ricoh Leasing Co., Ltd. and certain overseas subsidiaries raise capital by issuing commercial paper, medium-term notes and long-term debt securities. Ricoh Leasing Co., Ltd. and certain overseas subsidiaries of the Company issue commercial paper to meet their short-term funding requirements. Utilization of such capacity depends on Ricoh’s financing needs, investor demand and market conditions, as well as the ratings outlook for Ricoh’s securities. Interest rates for commercial paper issued by the Company and its subsidiaries ranged from 0.10% to 0.26%, interest rates for bank loans ranged from 0.20% to 9.11% and interest rates for long-term debt securities ranged from 0.61% to 7.30% during fiscal year 2010. For fiscal year 2010, the Company and its subsidiaries did not have any medium-term notes outstanding.

Ricoh believes that it has adequate resources for funding its working capital needs, repaying its outstanding indebtedness and executing new transactions, due to its diverse funding sources and the inflow of cash generated from its operating activities. Even if Ricoh is unable to access the capital markets by offering its own securities on acceptable terms, Ricoh has access to other sources of liquidity, including bank loans, cash flows from operations and sales of assets.

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, 2010, 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.

While some of its subsidiaries may be restricted from paying dividends for various reasons, such as capital adequacy requirements, Ricoh does not expect such restrictions to have a significant impact on its ability to meet its cash obligations.

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, 2010. 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.

 

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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 2011. Even if there were a decrease in cashflows from operations as a result of fluctuations in customer demands from one year to another due to unexpected changes in global economic conditions, Ricoh believes that current funds on hand along with funds available under existing borrowing facilities would be sufficient to finance its anticipated operations. In addition, Ricoh believes that it is able to secure adequate resources to fund ongoing operating requirements and investments related to the expansion of existing businesses and the development of new projects through its access to the financial and capital markets. While interest rates of such instruments may fluctuate as it may be affected by the financial market turbulence resulting in part from the global economic downturn, Ricoh believes that the effect of such fluctuations will not significantly affect Ricoh’s liquidity, mainly due to the adequate amount of Ricoh’s cash and cash equivalents on hand, stable cashflow generated from its operating activities and group-wide cash management system.

Ricoh expects that its capital expenditures for fiscal year 2011 will amount to approximately ¥72.0 billion, which will principally be used for investments in manufacturing facilities of digital and networking equipment with new engines, toners, semiconductor and thermal media. More specifically, Ricoh plans to use a portion of such amount during fiscal year 2011 to complete the construction of a new building to expand the Ricoh Technology Center located in Kanagawa, Japan, which was established in 2005 as Ricoh’s main development center. The Ricoh Technology Center currently houses the copier and printer development division as well as the manufacturing technology division, and is engaged in elemental technology development, product design, product evaluation and developing manufacturing technology for state-of-the-art color products. With the expansion of the Ricoh Technology Center, Ricoh plans to relocate the software development department, the inkjet technology development department and the supply development department (responsible for developing toners and photoconductors) to improve its flexible cross-functional (inter-departmental) development structure and strengthen human resources development. By relocating and housing all of these development departments in one facility, Ricoh expects to enhance its product engineering capabilities and overall development efficiency. In addition, Ricoh is obligated to repay long-term indebtedness in the aggregate principal amount of ¥93.9 billion during fiscal year 2011, and in the aggregate principal amount of ¥353.1 billion during fiscal years 2012 through 2014.

The Company and certain of its subsidiaries have various employee pension plans covering all of their employees. As described in Note [11] to the Consolidated Financial Statements, the unfunded portion of these employee pension plans amounted to ¥140.5 billion, as of March 31, 2010. The unfunded amount was recorded as an asset of ¥5.7 billion and a liability of ¥146.3 billion on the consolidated balance sheet of Ricoh as of March 31, 2009. The amounts contributed to pension plans for fiscal years 2008, 2009 and 2010 were ¥14.5 billion, ¥14.7 billion and ¥14.5 billion, respectively.

Ricoh believes that its cashflow from operating and investing activities together with existing lines of credit and borrowing facilities constitute adequate sources of funding to satisfy its liquidity needs and future obligations as described above.

 

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C. Research and Development, Patents and Licenses

Research and Development

Since its formation, Ricoh’s basic management philosophy has been to contribute to society by developing and providing innovative and useful products with an emphasis on the relationship between people and information. Based on this management philosophy, Ricoh undertakes a variety of R&D activities to develop new technologies, products and systems to facilitate better communication. The Research and Development Group and the Corporate Technology Development Group function as the headquarters of Ricoh’s R&D activities, which are conducted at its R&D bases throughout Japan and certain satellite R&D bases overseas. Ricoh conducts a wide range of R&D activities, from seeds research (i.e., early stage research) to research in elemental technologies, product applications and manufacturing technologies, including environmental technologies.

In Japan, Ricoh conducts basic and advanced research in connection with optical technologies, new materials, devices, information electronics, environmental technologies and software technologies as well as elemental development for new products. In addition, Ricoh has established satellite R&D bases in the United States and China through which it conducts R&D activities that focus on developing products that can be marketed globally and that take into consideration the needs of such particular geographic area. All aspects of Ricoh’s research efforts are focused on developing products and services that are suitable for the new work environment. Ricoh also engages in R&D activities to protect the environment in every stage of each of its products’ life cycles to realize Ricoh’s three core values of “harmonizing with the environment (i.e., reducing and minimizing environmental impact),” “simplifying your life and work (i.e., enhancing user friendliness and striving towards simplification),” and “supporting knowledge management (i.e., offering solutions to process information).” For fiscal years 2008, 2009 and 2010, Ricoh’s consolidated R&D expenditures totaled ¥126.0 billion, ¥124.4 billion and ¥109.8 billion, respectively.

Out of total consolidated R&D expenditures of ¥109.8 billion for fiscal year 2010, ¥79.2 billion was used for R&D activities relating to the Imaging and Solutions segment. Ricoh’s R&D activities in the Imaging and Solutions segment continued to include (1) designing new optical designs for copiers, printers and production printing products, (2) developing imaging data processing technology, (3) developing electrophotographic supply technology, (4) advancing elemental technology for the next-generation of image producing engines, (5) developing cutting edge software technology and (6) developing applications for the advancement of IT solutions.

Out of total consolidated R&D expenditures of ¥109.8 billion for fiscal year 2010, ¥9.8 billion was used for R&D activities relating 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) research and development for supply parts such as thermal media.

Out of total consolidated R&D expenditures of ¥109.8 billion for fiscal year 2010, ¥1.9 billion was used for R&D activities relating 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 ¥109.8 billion for fiscal year 2010, ¥18.9 billion was used for R&D activities relating to fundamental research fields. Such R&D activities include R&D in nanotechnology, micro-machining, general technologies in measuring, analysis and simulation, new materials and devices, next-generation image display technologies, manufacturing technology, system software modules, photonics technology for high speed and high quality image processing, the next-generation of office systems and office solutions, and environmental technologies.

For a summary of Ricoh’s R&D expenditures for fiscal years 2008, 2009 and 2010, see Note [19] to the Consolidated Financial Statements.

 

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Patents and Licenses

Ricoh owns approximately 33,400 patents as of March 31, 2010, 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 the termination 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 Business Machines Corporation    USA    Comprehensive cross license patent agreement relating to the information processing technology area (reciprocal agreement)    March 28, 2007 to expiration date of the patent subject to the agreement
ADOBE Systems Incorporated    USA    Patent licensing agreements relating to development on printer software and sales (the counterparty as the licensee)    January 1, 1999 to March 31, 2015
Lemelson Medical, Education & Research Foundation Limited Partnership    USA    Patent licensing agreement relating to computer image analysis and other products (the counterparty as the licensee)    March 31, 1993 to expiration date of the patent subject to the agreement
Canon Inc.    Japan    Patent licensing agreement relating to office equipment (reciprocal agreement)    October 1, 1998 to expiration date of the patent subject to the agreement
Kyocera Mita Corporation    Japan    Patent licensing agreement relating to method of controlling multi function peripheral (the Company as the licensor)    January 1, 2007 to December 31, 2011
Sony Corporation    Japan    Patent licensing agreements relating to optical disks (the Company as the licensor ) and digital cameras (reciprocal agreement)    April 1, 2009 to March 31, 2018
Hitachi, Ltd.    Japan    Patent licensing agreement relating to optical record and playback equipment, and multi function peripheral (reciprocal agreement)    January 1, 2007 to December 31, 2013
Brother Industries, Ltd.    Japan    Patent licensing agreement relating to digital photography (the Company as the licensor)    October 1, 2009 to September 30, 2014

 

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D. Trend Information

See “OVERVIEW” above and “Cautionary Statement with Respect to Forward-Looking Statements” elsewhere in this Annual Report.

E. Off-Balance Sheet Arrangements

As disclosed in Note [5] to the Consolidated Financial Statements, Ricoh, through its domestic leasing affiliate, has certain procedures in place to sell some of its lease receivables through securitization programs; however, no lease receivables have been securitized during the last three fiscal years. Securitization involves the creation of 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. 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, 2010, Ricoh had one SPE, which held assets that Ricoh sold in a securitization totaling ¥25.6 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, which arrangements are not included on Ricoh’s balance sheet. As of March 31, 2010, the total amount of such guarantees was ¥41 million.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth Ricoh’s contractual obligations as of March 31, 2010.

 

      Millions of Yen
Payments due by period
   Total    Less than
1 year
   1-3 years    3-5 years    More than
5 years

CONTRACTUAL OBLIGATIONS

              

Long-term Debt Obligations

   ¥ 605,738    ¥ 93,061    ¥ 207,308    ¥ 239,852    ¥ 65,517

Interest Expense Associated with Long-term Debt Obligations

     31,298      8,075      10,332      8,703      4,188

Capital (Finance) Lease Obligations

     2,965      924      1,662      297      82

Operating Lease Obligations

     84,463      22,844      35,555      18,549      7,515

Purchase Obligations

     30,880      30,880      —        —        —  
                                  

TOTAL

   ¥ 755,344    ¥ 155,784    ¥ 254,857    ¥ 267,401    ¥ 77,302
                                  

Ricoh expects to contribute ¥14.3 billion to its pension plan during fiscal year 2011 and is currently unable to predict funding requirements for periods beyond fiscal year 2011 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 ¥52.3 billion for fiscal year 2010.

G. Safe Harbor

See “Cautionary Statement With Respect to Forward-Looking Statements.”

 

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Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Directors and Corporate Auditors of the Company as of June 25, 2010 were as follows:

 

Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Masamitsu Sakurai

(January 8, 1942)

  

Chairman of the Board and Representative Director

   Apr. 1966   

Joined the Company

      May 1984   

President of Ricoh UK Products Ltd.

      Apr. 1990   

General Manager of Purchasing Division

      June 1992   

Director

      Apr. 1993   

President of Ricoh Europe B.V.

      June 1994    Managing Director
      Apr. 1996   

President and Representative Director

      June 2005   

Representative Director (Current)

      June 2005    President
      June 2005   

Chairman of the Board (Current)

      Apr. 2007   

Chairman (Current)

  

 

Principal business activities and other principal directorships performed outside of Ricoh:

  

Chairman of Japan Association of Corporate Executives

Director of COCA-COLA WEST COMPANY, LIMITED

Director of Saga Television Station Co., Ltd.

Director of Omron Corporation.

 

Shiro Kondo

(October 7, 1949)

  

Representative Director

   Apr. 1973   

Joined the Company

      July 1999   

Deputy General Manager of Imaging System Business Group

      June 2000   

Senior Vice President

      Oct. 2000   

General Manager of Imaging System Business Group

      June 2002   

Executive Vice President

      June 2003   

Managing Director

      Oct. 2004   

In charge of Imaging Engine Solution Development

      Oct. 2004   

General Manager of MFP Business Group

      June 2005   

Director

      June 2005   

Corporate Executive Vice President

      Apr. 2007   

Representative Director (Current)

      Apr. 2007   

President (Current)

      Apr. 2007   

CEO (Chief Executive Officer) (Current)

   Principal business activities and other principal directorships performed outside of Ricoh:
  

Representative of Asahi Insurance Company

 

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Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Takashi Nakamura

  

Director

   Apr. 1972   

Joined the Company

(September 2, 1946)

      Apr. 1990   

President of Ricoh UK Products Ltd.

      Jan. 1995   

President of Ricoh Europe B.V.

      May 1998   

Deputy General Manager of Corporate Planning Division

      June 1998   

Director

      June 2000   

Senior Vice President

      June 2002   

President of Ricoh Elemex Corporation

      June 2004   

Managing Director

      June 2005   

Director (Current)

      Jan. 2006   

Corporate Executive Vice President (Current)

      Jan. 2006    CHO (Chief Human Resource Officer) (Current)
      Apr. 2008   

General Manager of Personnel Division (Current)

      Apr. 2010   

In charge of Corporate Social Responsibility (Current)

  

 

Principal business activities and other principal directorships performed outside of Ricoh:

  

Corporate Auditor of TOYO KANETSU K.K.

 

Kazunori Azuma

  

Director

   Apr. 1971   

Joined the Company

(February 11, 1949)

      Oct. 1994   

President of Hokkaido Ricoh Co., Ltd.

      June 2000   

Senior Vice President

      Oct. 2000   

President of Ricoh Technosystems Co., Ltd.

      June 2003   

Managing Director

      June 2003   

Executive Vice President

      Oct. 2003   

Chairman of Ricoh Technosystems Co., Ltd.

      Nov. 2003   

General Manager of Marketing Group (Current)

      June 2005   

Director (Current)

      June 2005   

Corporate Executive Vice President (Current)

      Apr. 2009   

General Manager of Global Marketing Taskforce

      June 2009   

General Manager of Global Marketing Group (Current)

      Apr. 2010   

CMO (Chief Marketing Officer) (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)

      Apr. 2006   

CIO (Chief Information Officer) (Current)

      Apr. 2006   

General Manager of Corporate Planning Division

      Feb. 2008   

In charge of Internal Management and Control Division (Current)

      July. 2008   

General Manager of Finance and Accounting Division

      Apr. 2009   

CSO (Chief Strategy Officer) (Current)

      Apr. 2009   

General Manager of CRGP Office (Current)

      Apr. 2009   

Deputy General Manager of Global Marketing Taskforce

      June 2009   

General Manager of Global Marketing Support Division (Current)

      June 2009   

General Manager of Trade Affairs & Export/Import Administration Division (Current)

  

 

Principal business activities and other principal directorships performed outside of Ricoh:

  

Corporate Auditor of COCA-COLA WEST COMPANY, LIMITED

 

 

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Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Hiroshi Kobayashi

  

Director

   Apr. 1974   

Joined the Company

(July 2, 1948)

      Apr. 2002   

General Manager of Corporate Planning Division

      June 2002   

Senior Vice President

      June 2004   

Executive Vice President

      Oct. 2004   

General Manager of LP Business Group

      June 2005   

Corporate Senior Vice President

      Apr. 2007   

General Manager of Printer Business Group

      Apr. 2008   

General Manager of Office Business Planning Center

      Apr. 2009   

General Manager of Corporate Technology Development Group (Current)

     

Apr. 2009

  

Chairman of Ricoh Software Research Center (Beijing), Co., Ltd. (Current)

      June 2010   

Director (Current)

      June 2010   

Corporate Executive Vice President (Current)

Shiro Sasaki

  

Director

   Apr. 1972   

Joined the Company

(December 23, 1949)

      Apr. 2000   

President of Gestetner Holdings PLC

      Apr. 2002   

President of NRG Group PLC

      June 2004   

Senior Vice President

      June 2005   

Corporate Vice President

      Apr. 2006   

Corporate Senior Vice President

      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   

Chairman of Ricoh Europe (Netherlands) B.V. (Current)

      June 2009   

General Manager of Europe Marketing Group (Current)

      June 2010   

Director (Current)

      June 2010   

Corporate Executive Vice President (Current)

Yoshimasa Matsuura

  

Director

   Apr. 1971   

Joined the Company

(June 23, 1947)

      May 1995   

President of Ricoh UK Products Ltd.

      May 1999   

General Manager of Supply Chain Management Planning Division

      June 2004   

Senior Vice President

      Oct. 2004   

General Manager of Office Business Planning Center

      June 2005   

Deputy General Manager of MFP Business Group

      June 2005   

Corporate Vice President

      Apr. 2007   

Corporate Senior Vice President

      Apr. 2007   

General Manager of MFP Business Group (Current)

      Apr. 2008   

General Manager of Controller Development Division

      June 2010   

Director (Current)

      June 2010   

Corporate Executive Vice President (Current)

Nobuo Inaba

   Director    Apr. 1974   

Joined the Bank of Japan

(November 11, 1950)

      June 2001   

Director-General, Information System Services Department

      June 1996   

Director

      Apr. 1999   

General Manager of Research and Development Group

      June 2002   

Director-General, Bank Examination and Surveillance Department

      May 2004   

Executive Director, Financial System Stability

      July 2006   

Executive Director, Monetary Policy

      May 2008   

Joined the Company

      May 2008   

Executive Advisor

      Apr. 2010   

President, Ricoh Institute of Sustainability and Business (Current)

      June 2010   

Director (Current)

      June 2010   

Corporate Executive Vice President (Current)

 

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Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Eiji Hosoya

  

Director

   Apr. 1968   

Joined Japanese National Railways

(February 24, 1945)

      June 1990   

General Manager of Business Management Department of Corporate Planning Headquarters of East Japan Railway Company

      June 1993   

Director of East Japan Railway Company

      June 1996   

Executive Director of East Japan Railway Company

      June 2000   

Executive Vice President of East Japan Railway Company

      June 2000   

General Manager of Life-style Business Development Headquarters of East Japan Railway Company

      Apr. 2002   

Vice Chairman of Japan Association of Corporate Executives

      June 2003   

Director, Chairman and Representative Executive Officer of Resona Holdings, Inc. (Current)

      June 2005   

Representative Director and Chairman of Resona Bank, Ltd.

      June 2009   

Director and Chairman of Resona Bank, Ltd. (Current)

      June 2010   

Director (Current)

Mochio Umeda

  

Director

   Jan. 1988   

Joined Arthur D. Little (Japan) Inc.

(August 30, 1960)

      Oct. 1994   

Director of Arthur D. Little, Inc.

      May 1997   

Founded MUSE Associates, LLC.

      May 1997   

President of MUSE Associates, LLC. (Current)

      Aug. 2000   

Founded Pacifica Fund I, LP.

      Aug. 2000   

Managing Director of Pacifica Fund I, LP. (Current)

      June 2010   

Director (Current)

Yuji Inoue

   Corporate Auditor    Apr. 1971   

Joined the Company

(April 4, 1948)

      Jan. 1997   

Deputy General Manager of Finance and Accounting Division

      Apr. 1998   

General Manager of Finance and Accounting Division

      Oct. 1998   

General Manager of Business Department of Ricoh Leasing Co., Ltd

      June 1999   

Managing Director of Ricoh Leasing Co., Ltd

      Apr. 2000   

President of Ricoh Leasing Co., Ltd.

      June 2000   

Senior Vice President

      June 2004   

Managing Director

      June 2005   

Corporate Senior Vice President

      June 2005   

President and Chief Executive Officer of Ricoh Leasing Co., Ltd

      June 2009   

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)

 

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Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Takao Yuhara

  

Corporate Auditor

   Apr. 1969   

Joined Nippon Chemical Industrial Co., Ltd.

(June 7, 1946)

      May 1971   

Joined Sony Corporation

      Mar. 1988   

Vice President of Sony International (Singapore) Ltd.

      Apr. 1996   

Vice President of Display Company of Sony Corporation

      June 2002   

Corporate Vice President and General Manager of Corporate Planning Division of Sony Corporation

      June 2003   

Corporate Vice President and Group CFO (Chief Financial Officer) of Sony Corporation

      June 2004   

In charge of Corporate Executive Finance and IR of Sony Corporation

      Dec. 2007   

Managing Executive Officer and Senior General Manager, Group Business Management Division of ZENSHO CO., LTD.

      Apr. 2008   

Officer in charge of Group Finance of ZENSHO CO., LTD.

      June 2008   

Managing Executive Director of ZENSHO CO., LTD. (Current)

      June 2008   

Corporate Auditor (Current)

      Nov. 2008   

Senior General Manager, Group Business Management Division, Group Finance and Accounting Division of ZENSHO CO., LTD. (Current)

Tsukasa Yunoki

(July 6, 1943)

  

Corporate Auditor

   Mar. 1968   

Graduated from the National Legal Training and Research Institute

      Apr. 1968   

Legal registration as a Japanese attorney

      Apr. 1968   

Joined Tomizawa Junjiroh Legal Services

      Jan. 1970   

Established Yunoki Legal Services

      May 1997   

President of Yunoki Legal Services (Current)

      June 2010   

Corporate Auditor (Current)

Kiyohisa Horie

(March 7, 1948)

  

Substitute Corporate Auditor

   Apr. 1970   

Joined Horie Morita Audit Office (now: Meiji Audit Corporation)

        

Joined Showa Accounting Office

      Aug. 1980   

Registered as Certified Public Accountant

      Mar. 1988   

Registered as Tax Accountant

      Apr. 1988   

Senior Partner of Meiji Audit Corporation (Current)

      May 1988   

Representative Director of Showa Accounting Office (Current)

      May 1988   

Managing Partner of Meiji Audit Corporation (Current)

      May 1998   

Vice-Chairman & Managing Partner of Meiji Audit Corporation (Current)

 

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Table of Contents

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 37 such officers each with one of the following roles:

 

   

Executive officers: Oversee operations under the authority granted from the president and report to the president.

 

   

Group executive officers: Assist the president with the management of Ricoh group.

Executive Officers of the Company as of June 25, 2010 were as follows:

 


Name

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Masamitsu Sakurai

(January 8, 1942)

  

Chairman and Chairman of the Board

   See above for his business experience and other information.

Shiro Kondo

(October 7, 1949)

  

President and Chief Executive Officer

   See above for his business experience and other information.

Takashi Nakamura

(September 2, 1946)

  

Corporate Executive Vice President

   See above for his business experience and other information.
  

(Chief Human Resource Officer)

(Corporate Social Responsibility)

General Manager of Personnel Division

  

Kazunori Azuma

(February 11, 1949)

  

Corporate Executive Vice President

   See above for his business experience and other information.
  

(Chief Marketing Officer)

(General Manager of Global Marketing Group)

  

Zenji Miura

(January 5, 1950)

  

Corporate Executive Vice President

   See above for his business experience and other information.
  

(Chief Financial Officer)

  
  

(Chief Information Officer)

  
  

(Chief Strategy Officer)

  
  

(Internal Management and Control Division)

  
  

(General Manager of CRGP Office)

  
  

(General Manager of Global Marketing Support Division)

  
  

(General Manager of Trade Affairs & Export/Import Administration Division)

  

Hiroshi Kobayashi

(July 2, 1948)

  

Corporate Executive Vice President

   See above for his business experience and other information.
  

(General Manager of Corporate Technology Development Group)

  
  

(Chairman of Ricoh Software Research Center (Beijing), Co., Ltd.)

  

Yoshimasa Matsuura

(June 23, 1947)

  

Corporate Executive Vice President

   See above for his business experience and other information.
  

(General Manager of MFP Business Group)

  

 

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Table of Contents


Name

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Nobuo Inaba

(November 11, 1950)

  

Corporate Executive Vice President

   See above for his business experience and other information.
  

(President, Ricoh Institute of Sustainability and Business)

  

Terumoto Nonaka

   Corporate Senior Vice President    Jan. 1988   

Joined the Company

(October 28, 1947)

   (General Manager of Research and Development Group)    Jan. 1990   

Deputy General Manager of Electronic Devices Division

      June 2000   

Senior Vice President

      Oct. 2000   

President of Electronic Devices Company

      June 2002   

Executive Vice President

      June 2005   

Corporate Senior Vice President (Current)

      July 2006   

Chairman of Ricoh Electronics Devices Shanghai Co., Ltd. (Current)

      Apr. 2009   

General Manager of Research and Development Group (Current)

Kenji Hatanaka

  

Corporate Senior Vice President

   Apr. 1969   

Joined the Company

(July 1, 1946)

  

(General Manager of Marketing Group)

   June 2000   

Senior Vice President

      June 2003   

General Manager of Tokyo Branch of Marketing Group

      June 2003   

General Manager of Kanto Branch of Marketing Group

      June 2004   

Executive Vice President

      Jan. 2005   

President of Ricoh Sales Co., Ltd.

      June 2005   

Corporate Senior Vice President (Current)

      June 2009   

General Manager of Marketing Group (Current)

Hiroshi Adachi

  

Corporate Senior Vice President

   Apr. 1968   

Joined the Company

(January 8, 1946)

  

(President of Thermal Media Company)

(Chairman of Ricoh Thermal Media (Beijing) Co., Ltd.)

(Chairman of Ricoh Thermal Media (Wuxi) Co., Ltd.)

(Chairman of Ricoh International (Shanghai) Co., Ltd.)

   Oct. 2000   

President of Thermal Media Company (Current)

      Nov. 2001   

Chairman of Ricoh Thermal Media (Beijing) Co., Ltd. (Current)

      June 2002   

Senior Vice President

      June 2004   

Chairman of Ricoh International (Shanghai) Co., Ltd. (Current)

      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 Business Group)

   Apr. 1998   

General Manager of Production Strategic Center

      June 1999   

President of Ricoh UK Products Ltd.

      June 2004   

Senior Vice President

      June 2005   

Deputy General Manager of Imaging System Production Business Group

      June 2005   

General Manager of Procurement Control Center of Production Business Group

      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

 

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Table of Contents

Name

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Hisashi Takata

  

Corporate Senior Vice President

   Apr. 1974   

Joined the Company

(May 20, 1951)

  

(Deputy General Manager of Global Marketing Group)

(General Manager of Marketing Intelligence Center of Global Marketing Group)

General Manager of RGS Businesses Center of Global Marketing Group (Current)

(Chairman of Ricoh China Co., Ltd.)

   Apr. 1999   

General Manager of Business Strategy Division of International 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

      Oct. 2005   

General Manager of GJ Marketing Division of Marketing Group

      Apr. 2007   

Deputy General Manager of Printing Business Division

      Apr. 2008   

General Manager of Printer Business Group

      Jan. 2009   

General Manager of Printer Sales Promotion Center of Printer Business Group

      Apr. 2009   

Corporate Senior Vice President (Current)

      June 2009   

Deputy General Manager of Global Marketing Group (Current)

      June 2009   

General Manager of GM Strategy Center of Global Marketing Group

      June 2009   

Chairman of Ricoh China Co., Ltd. (Current)

      Apr. 2010   

General Manager of Marketing Intelligence Center of Global Marketing Group (Current)

     

Apr. 2010

  

General Manager of RGS Businesses Center of Global Marketing Group (Current)

Soichi Nagamatsu

  

Corporate Senior Vice President

   July 2004   

Joined the Company

(March 25, 1951)

  

(General Manager of Corporate Planning Division)

   July 2004   

Vice General Manager of Research and Development Group

      Apr. 2006   

Corporate Vice President

      Apr. 2006   

General Manager of Research and Development Group

      Apr. 2006   

General Manager of Corporate Technology Planning Division

      Apr. 2007   

General Manager of Office System Development Center of Research and Development Group

      Apr. 2008   

General Manager of Corporate Technology Development Group General Manager of Office Solution

      Apr. 2008   

Technology Development Center of Corporate Technology Development Group

      Apr. 2008   

General Manager of Advanced Technology R&D Center of Research and Development Group

      Apr. 2008   

Chairman of Ricoh Software Research Center (Beijing) Co., Ltd.

      Apr. 2009   

General Manager of Corporate Planning Division (Current)

      Apr. 2010   

Corporate Senior Vice President (Current)

Yohzoh Matsuura

  

Corporate Senior Vice President

   Apr. 1980   

Joined the Company

(April 15, 1956)

  

(General Manager of Imaging Engine Development Division)

(General Manager of Platform Development Center of Imaging Engine Development Division)

   Oct. 2004   

General Manager of Imaging Engine Development Division (Current)

      Apr. 2006   

Associate Director

      Apr. 2007   

Deputy General Manager of MFP Business Group

      Apr. 2008   

Corporate Vice President (Current)

      Apr. 2008   

General Manager of Fundamental & Control Technology Center of Imaging Engine Development Division

      Apr. 2010   

Corporate Senior Vice President (Current)

      Apr. 2010   

General Manager of Platform Development Center of Imaging Engine Development Division (Current)

 

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Table of Contents

Name

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Kiyoto Nagasawa

  

Corporate Vice President

   Apr. 1973   

Joined the Company

(August 16, 1948)

  

(President of Electronic Devices Company

(Chairman of Ricoh Electronics Devices Shanghai Co., Ltd.)

   Apr. 2001   

General Manager of C&F Business Division 2

      June 2002   

Senior Vice President

      June 2005   

General Manager of Quality of Management Division

      June 2005   

Corporate Vice President (Current)

      Apr. 2009   

President of Electronic Devices Company (Current)

      Apr. 2009   

Chairman of Ricoh Electronics Devices Shanghai Co., Ltd. (Current)

Yutaka Ebi

  

Corporate Vice President

   Apr. 1972   

Joined the Company

(October 20, 1949)

  

(General Manager of Legal & Intellectual Property Division)

   Apr. 2001   

General Manager of Imaging Technology Division

      June 2002   

Senior Vice President

      Oct. 2004   

General Manager of Legal & Intellectual Property Division (Current)

      June 2005   

Corporate Vice President (Current)

Norihisa Goto

  

Corporate Vice President

   Apr. 1972   

Joined the Company

(March 8, 1949)

  

(General Manager of Production Printing Business Group)

   Oct. 1997   

President of Ricoh Deutschland GmbH

      Mar. 2001   

Chairman of Lanier Worldwide, Inc.

      Jan. 2003   

President of Lanier Worldwide, Inc.

      June 2003   

Senior Vice President

      June 2005   

Corporate Vice President (Current)

      June 2006   

Vice Chairman of Ricoh Corporation (now Ricoh Americas Corporation)

      June 2006   

CEO of Ricoh U.S. - Ricoh Corporation (now Ricoh U.S. - Ricoh Americas Corporation)

      Oct. 2008   

Deputy General Manager of Production Printing Business Group

      Apr. 2009   

General Manager of Production Printing Business Group (Current)

Mitsuhiko Ikuno

  

Corporate Vice President

   May 1975   

Joined the Company

(March 26, 1953)

  

General Manager of Information Technology and Solution Division

   June 2000   

President of Ricoh Asia Industry Ltd.

      June 2004   

President of Shanghai Ricoh Facsimile Co., Ltd.

      June 2004   

Senior Vice President

      June 2005   

Corporate Vice President (Current)

      Oct. 2006   

President of Shanghai Ricoh Digital Equipment Co., Ltd.

      Apr. 2008   

General Manager of Information Technology and Solution Division (Current)

Kenichi Matsubayashi

  

Corporate Vice President

   Apr. 1971   

Joined the Company

(June 5, 1948)

  

(General Manager of RS Products Division of Production Business Group)

   Apr. 1995   

Manager of RS Business Planning Department

      Oct. 2003   

General Manager of RS Products Division of Production Business Group (Current)

      June 2005   

Corporate Vice President (Current)

Kazuhiro Yuasa

  

Corporate Vice President

   Apr. 1977   

Joined the Company

(September 1, 1952)

  

(President of Personal Multi Media Company)

   Apr. 2001   

Deputy General Manager of ICD Division of Personal Multi Media Company

      Oct. 2002   

Deputy General Manager of ICS Division of Personal Multi Media Company

      Nov. 2002   

General Manager of ICS Division of Personal Multi Media Company

      Apr. 2006   

Associate Director

      Apr. 2006   

President of Personal Multi Media Company (Current)

      Apr. 2008   

Corporate Vice President (Current)

Masayuki Nishimoto

  

Corporate Vice President

   Apr. 1980   

Joined the Company

(December 27, 1957)

  

(General Manager of Printer Business Group)

   Apr. 2004   

President of Hokkaido Branch of Marketing Group

      Apr. 2006   

General Manager of Solution Marketing Center of Marketing Group

      Oct. 2007   

General Manager of New Business Promotion Center of Marketing Group

      Apr. 2008   

Associate Director

      Apr. 2009   

General Manager of Business Strategy Group of Marketing Group

      June 2009   

General Manager of Printer Business Group(Current)

      Apr. 2010   

Corporate Vice President (Current)

 

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Table of Contents

Name

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Katsumi Kurihara

  

Corporate Vice President

   Apr. 1978   

Joined the Company

(March 24, 1956)

  

(General Manager of Quality of Management Division)

   Apr. 2004   

Deputy General Manager of Engineering Process Innovation Center of MFP Business Group

      Apr. 2006   

General Manager of Engineering Process Innovation Center of MFP Business Group

      Apr. 2007   

Deputy General Manager of Office Business Planning Center

      Apr. 2007   

General Manager of Engineering Process Innovation Center of Office Business Planning Center

      Apr. 2008   

Associate Director

      Apr. 2009   

General Manager of Quality of Management Division (Current)

      Apr. 2009   

General Manager of Engineering Process Innovation Center of Quality of Management Division (Current)

      Apr. 2010   

Corporate Vice President (Current)

Junichi Matsuno

  

Corporate Vice President

   Apr. 2008   

Joined the Company

(April 18, 1954)

  

(General Manager of GJ Design & Development Division)

   Apr. 2008   

Deputy General Manager of Corporate Technology Development Group

      Apr. 2008   

General Manager of Printing Technology Development Center of Corporate Technology Development Group

      Apr. 2008   

Deputy General Manager of LE Development Center of GJ Design & Development Division

      Apr. 2009   

Associate Director

      Apr. 2009   

General Manager of GJ Design & Development Division (Current)

      Apr. 2009   

General Manager of Technology Strategy Center of GJ Design & Development Division

      Apr. 2010   

Corporate Vice President (Current)

Kunihito Minakawa

  

Corporate Vice President

   Apr.1978   

Joined the Company

(August 15, 1954)

  

(General Manager of Finance and Accounting Division)

   June 2008   

General Manager of Business Strategy & Planning Center of International Business Group

      Apr. 2009   

Associate Director

      Apr. 2009   

General Manager of Finance and Accounting Division (Current)

      Apr. 2010   

Corporate Vice President (Current)

Seiji Sakata

  

Corporate Vice President

   Apr. 1981   

Joined the Company

(September 12, 1958)

  

(General Manager of Controller Development Division )

(Deputy General Manager of MFP Business Group)

   Apr. 2008   

Deputy General Manager of MFP Business Group (Current)

      Oct. 2008   

General Manager of 2nd Designing Center of MFP Business Group

      Apr. 2009   

Associate Director

      Apr. 2009   

General Manager of Controller Development Division (Current)

      Apr. 2010   

Corporate Vice President (Current)

      June. 2009   

General Manager of Printer Business Group(Current)

      Apr. 2010   

Corporate Vice President (Current)

 

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Table of Contents

Group Executive Officers of the Company as of June 25, 2010 were as follows:

 

Name

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Shiro Sasaki

(December 23, 1949)

  

Corporate Executive Vice President

  

See above for his business experience and other information.

  

(Chairman of Ricoh Europe, PLC.)

     
  

(Chairman of Ricoh Europe (Netherlands) B.V.)

     
  

(General manager of Europe Marketing Group)

     
Kazuo Togashi   

Corporate Senior Vice President

   Apr. 1972   

Joined the Company

(November 28, 1949)   

(Chairman and CEO (Chief Executive Officer) of Ricoh Americas Holdings, Inc.)

(General Manager of Americas Marketing Group)

   Apr. 1998   

President of Ricoh Europe B.V.

      June 2000   

Senior Vice President

      Apr. 2002   

Chairman of said company

      Apr. 2002   

Chairman of NRG Group PLC

      June 2002   

Executive Vice President

      June 2003   

Managing Director

      June 2005   

Corporate Senior Vice President (Current)

      Apr. 2006   

General Manager of International Business Group

      Apr. 2006   

General Manager of Regional Business Support Center of International Business Group

      Apr. 2006   

General Manager of Trade Affairs & Export/Import Administration Center of International Business Group

      Jan. 2008   

Chairman of Ricoh China Co., Ltd.

      Apr. 2009   

General Manager of Business Strategy & Planning Center of International Business Group

      Apr. 2009   

Deputy General Manager of Global Marketing Taskforce

      June 2009   

Chairman and CEO (Chief Executive Officer) of Ricoh Americas Corporation

      June 2009   

General Manager of Americas Marketing Group (Current)

      Apr. 2010   

Chairman and CEO (Chief Executive Officer) of Ricoh Americas Holdings, Inc. (Current)

Sadahiro Arikawa

  

Corporate Senior Vice President

   Apr. 1971   

Joined the Company

(March 31, 1949)

  

(President of Ricoh Leasing Co., Ltd.)

   Apr. 2001   

General Manager of Fukuoka Branch of Marketing Group

      Dec. 2001   

President of Ricoh Kyusyu Co., Ltd.

      Apr. 2004   

General Manager of Major Accounts Marketing Division

      June 2004   

Senior Vice President

      June 2005   

Corporate Vice President

      Apr. 2009   

Associate Director

      Apr. 2009   

Corporate Senior Vice President of Ricoh Leasing Co., Ltd.

      June 2009   

President of Ricoh Leasing Co., Ltd. (Current)

      June 2009   

Corporate Senior Vice President (Current)

Hiroshi Tsuruga

  

Corporate Vice President

   Apr. 1971   

Joined the Company

(November 18, 1948)

  

(President of Tohoku Ricoh Co., Ltd.)

   Apr. 1999   

General Manager of Information Technology and Solution Division

      June 2002   

Senior Vice President

      June 2005   

Deputy President of Tohoku Ricoh Co., Ltd.

      June 2005   

Corporate Vice President (Current)

      Apr. 2006   

President of Tohoku Ricoh Co., Ltd. (Current)

Kohji Sawa

  

Corporate Vice President

   Apr. 1971   

Joined the Company

(June 5, 1948)

  

(President of Ricoh Elemex Corporation)

   Apr. 1998   

General Manager of Imaging System Component Production Division

      Apr. 2000   

General Manager of Procurement Control Center

      July 2001   

General Manager of Optical Component Development Center

      June 2002   

Senior Vice President

      June 2005   

Corporate Vice President (Current)

General Manager of Information Technology and Solution Division

      Apr. 2008   

Corporate Senior Vice President of Ricoh Elemex Corporation

      June 2008   

President of Ricoh Elemex Corporation (Current)

 

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Table of Contents

Name

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Yoshihiro Niimura

  

Corporate Vice President

   Apr. 1975   

Joined the Company

(May 22, 1951)

  

(President of Ricoh China Co., Ltd.)

(Chairman and President of Ricoh Electronic Technology (China) Co., Ltd.)

(General Manager of China Marketing Group)

   June 2004   

President of Ricoh China Co., Ltd. (Current)

      June 2004   

Chairman and President of Ricoh Electronic Technology (China) Co., Ltd. (Current)

      June 2004   

Senior Vice President

      June 2005   

Corporate Vice President (Current)

      June 2009   

General Manager of China Marketing Group (Current)

        

Michel De Bosschere

(June 16, 1948)

  

Corporate Vice President

(Chairman of Ricoh Belgium N.V.)

(President of Ricoh France S.A.S.)

   June 1993   

Managing Director of Nashua/tec Benelux

      Jan. 2000   

President of NRG Benelux B.V.

      June 2004   

Senior Vice President

      June 2005   

Corporate Vice President (Current)

      Aug. 2007   

President of Ricoh Nederland B.V.

      Nov. 2007   

Chairman of NRG Benelux B.V.

Chairman of Ricoh Nederland B.V.

      Nov. 2007   

Chairman of Ricoh Belgium N.V. (Current)

        

Chairman of NRG Belgium S.A.

      Mar. 2009   

President of Ricoh France S.A.S. (Current)

Daisuke Segawa

  

Corporate Vice President

   Mar. 1980   

Joined the Company

(July 21, 1954)

  

(President and CEO (Chief Executive Officer) of InfoPrint Solutions Company, LLC)

   Dec. 1998   

General Manager of Treasury Department

      Oct. 2004   

General Manager of Corporate Planning Division

      June 2005   

Corporate Vice President

      Apr. 2006   

General Manager of Finance and Accounting Division (Current)

      July 2008   

Senior Vice President of InfoPrint Solutions Company, LLC

      Apr. 2009   

Associate Director

      May 2009   

President and CEO (Chief Executive Officer) of InfoPrint Solutions Company, LLC (Current)

      June 2009   

Corporate Vice President (Current)

Nobuaki Majima

  

Corporate Vice President

   Apr. 1981   

Joined the Company

(May 24, 1952)

  

(President of Ricoh Asia Pacific, Pte. Ltd.)

(General Manager of Asia Pacific Marketing Group)

   Mar. 2001   

President of Ricoh Deutschland GmbH

      Apr. 2006   

President of Ricoh Asia Pacific, Pte. Ltd. (Current)

      Apr. 2008   

Associate Director

      Apr. 2009   

Corporate Vice President (Current)

      June 2009   

General Manager of Asia Pacific Marketing Group (Current)

Yoshinori Yamashita

  

Corporate Vice President

   Apr. 1980   

Joined the Company

(August 22, 1957)

  

(President of Ricoh Electronics, Inc.)

   Mar. 2004