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, 2011

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)

 

* 859,942 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, 2011: 725,502,668 shares (excluding 19,409,410 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 24, 2011 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 ¥80.32 = 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 2011” refers to Ricoh’s fiscal year ended March 31, 2011, 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

     10   

Item 4A. Unresolved Staff Comments

     33   

Item 5. Operating and Financial Review and Prospects

     34   

Item 6. Directors, Senior Management and Employees

     72   

Item 7. Major Shareholders and Related Party Transactions

     93   

Item 8. Financial Information

     94   

Item 9. The Offer and Listing

     94   

Item 10. Additional Information

     96   

Item 11. Quantitative and Qualitative Disclosures About Market Risk

     111   

Item 12. Description of Securities Other Than Equity Securities

     114   

PART II

  

Item 13. Defaults, Dividend Arrearages and Delinquencies

     116   

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

     116   

Item 15. Controls and Procedures

     116   

Item 16. [RESERVED]

     117   

Item 16A. Audit Committee Financial Expert

     117   

Item 16B. Code of Ethics

     118   

Item 16C. Principal Accountant Fees and Services

     118   

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

     120   

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

     120   

Item 16F. Change in Registrant’s Certifying Accountant

     120   

Item 16G. Corporate Governance

     120   

PART III

  

Item 17. Financial Statements

     121   

Item 18. Financial Statements

     121   

Item 19. Exhibits

     121   


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, 2010 and 2011, the related consolidated statements of income, changes in equity and cash flows for the three years ended March 31, 2009, 2010 and 2011 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,
 
     2007      2008      2009      2010      2011  

Income Statement Data:

              

Net sales:

   ¥ 2,068,925       ¥ 2,219,989       ¥ 2,091,696       ¥ 2,016,337       ¥ 1,942,013   

Operating income

     174,380         181,506         74,536         65,997         60,196   

Income before income taxes and equity in earnings of affiliates

     174,519         174,669         30,939         57,524         45,400   

Net income attributable to Ricoh Company, Ltd.

     111,724         106,463         6,530         27,873         19,650   

Per American Depositary Share:(1)

              

Net income (basic)

     765.50         730.20         45.10         192.05         135.40   

Net income (diluted)

     759.45         710.75         43.75         186.80         132.65   

Balance Sheet Data:

              

Total assets

     2,243,406         2,214,368         2,513,495         2,383,943         2,262,396   

Total Ricoh Company, Ltd. shareholders’ equity

     1,070,913         1,080,196         975,373         973,341         929,877   

Total equity

     1,127,782         1,138,479         1,024,350         1,023,874         982,764   

Common stock

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

Weighted average number of shares outstanding

     729,744,656         729,010,475         723,924,525         725,613,259         725,554,477   

 

-1-


Table of Contents
     Millions of Yen except per share amounts and number of shares
Year ended March 31,
 
           2007                 2008                 2009                 2010                 2011        

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

          

Interim

     65.00        80.00        90.00        82.50        82.50   
   $ (0.56   $ (0.72   $ (0.96   $ (0.95   $ (0.98

Year-end

     75.00        85.00        75.00        82.50        82.50   
   $ (0.61   $ (0.80   $ (0.78   $ (0.92   $ (1.03

Cash and cash equivalents

     255,737        170,607        258,484        242,165        179,169   

Capital investments

     85,800        85,215        96,958        66,979        66,976   

Long-term indebtedness, excluding current installment

     236,801        225,930        509,403        514,718        479,422   

 

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 24, 2011, 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 ¥80.32 = 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
2010
     January
2011
     February
2011
     March
2011
     April
2011
     May
2011
 

High

     81.67         81.56         81.48         78.74         81.31         80.12   

Low

     84.23         83.36         83.79         82.98         85.26         82.12   

 

     Year ended March 31,  
     2007      2008      2009      2010      2011  

Year-end

     117.56         99.85         99.15         93.40         82.76   

Average*

     116.55         113.61         100.85         92.49         85.00   

High

     110.07         96.88         87.80         86.12         78.74   

Low

     121.81         124.09         110.48         100.71         94.68   

 

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

 

-2-


Table of Contents

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 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;

 

-3-


Table of Contents
   

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.

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.

 

-4-


Table of Contents

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.

 

-5-


Table of Contents

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.

Situation Of Recovery From The Great East Japan Earthquake May Affect to Ricoh’s Production

Many suppliers including Ricoh suffered damage by the Great East Japan Earthquake and on March 11, 2011. Although Ricoh has already resumed production by May 2011, some suppliers of Ricoh might not have recovered yet and may not fully supply materials and parts to Ricoh as previously, which may affect to Ricoh’s production.

Nuclear reactors in Fukushima were damaged by the Great East Japan Earthquake, which causes shortage of electronic power in East Japan. In summer 2011, which is peak of consumption of electricity, Japanese government request to Industrials and Individuals to save consumption of electricity by 15%. Moreover, there might be scheduled or unscheduled power failure in that summer. Such uncertainty of electronic power may affect to Ricoh’s production.

Crude Oil Price Fluctuations Affect Ricoh’s Results

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

Ricoh Is Subject to Government Regulation That Can Limit Its Activities or Increase Its Cost of Operations

Ricoh is subject to various governmental regulations and approval procedures in the countries in which it operates. For example, Ricoh may be required to obtain approvals for its business and investment plans, be subject to export regulations and tariffs, as well as rules and regulations relating to commerce, antitrust, patent, consumer and business taxation, exchange control, and environmental and recycling laws. Ricoh has established a Corporate Social Responsibility Office to heighten awareness of the importance of corporate social responsibility. Through this office, Ricoh involves its employees in various activities designed to ensure compliance with applicable regulations as part of its overall risk management and compliance program. However, if Ricoh is unable to comply with any of these regulations or fails to obtain the requisite approvals, Ricoh’s activities in such countries may be restricted. In addition, even if Ricoh is able to comply with these regulations, compliance can result in increased costs. In either event, Ricoh’s financial results and condition may be adversely affected.

 

-6-


Table of Contents

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.

 

-7-


Table of Contents

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.

Risks Associated with Ricoh’s Equipment Financing Business May Adversely Affect Ricoh’s Financial Condition

Ricoh provides financing to some of its customers in connection with its equipment sales and leases. Ricoh evaluates the creditworthiness and the amount of credit extended to a customer prior to the financing arrangement and during the financing term on a regular basis. Depending on such evaluations, Ricoh makes adjustments to such extensions of credit as it deems necessary to minimize any potential risks of concentrating credit risk or non-payment of credit. Despite the application of these monitoring procedures, no assurances can be made that Ricoh will be able to fully collect on such extensions of credit due to unforeseeable defaults by its customers.

In addition, these financing arrangements that Ricoh enters into with its customers result in long-term receivables bearing a fixed rate of interest. However, Ricoh finances these financing arrangements primarily with short-term borrowings subject to a variable interest rate. Although Ricoh engages in hedging activities, Ricoh is not able to fully hedge this interest rate mismatch.

If Ricoh is unable to successfully manage these risks associated with its equipment financing business, Ricoh’s financial results and condition may be adversely affected.

Ricoh May Be Subject to Product Liability Claims that Could Significantly Affect Its Financial Condition

Ricoh may be held responsible for any defects that occur with respect to its products and services. Based on the defect, Ricoh may be liable for significant damages, which may adversely affect its financial results and condition. Furthermore, as Ricoh increasingly provides products and services utilizing sophisticated and complex technologies, such defects may occur more frequently. Such potential increase in defects, which could result in an increase in Ricoh’s liability, may adversely affect its financial results and condition.

In addition, negative publicity concerning these defects could make it more difficult for Ricoh to attract and maintain customers to purchase Ricoh products and services. As a result, Ricoh’s financial results and condition may be adversely affected.

 

-8-


Table of Contents

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.

 

-9-


Table of Contents

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.

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).

 

-10-


Table of Contents
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.
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.
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 Sakai, 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).
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.
April 1987    The Company establishes Ricoh Industrie France S.A. (a subsidiary, now known as Ricoh Industrie France S.A.S.).
April 1989    The Company sets up an electronic devices facility in Yashiro-cho, Kato-gun, Hyogo (now known as the Yashiro plant).
January 1991    The Company establishes Ricoh Asia Industry (Shenzhen) Ltd. (a subsidiary) in China.
March 1995    Ricoh Corporation acquires Savin Corporation, an American office equipment sales company.

 

-11-


Table of Contents
September 1995    The Company acquires Gestetner Holdings PLC (now known as Ricoh Europe 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.
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.
July 2010    Seven domestic sales subsidiaries and the marketing group of the Company are merged into one domestic sales subsidiary named Ricoh Japan Corporation.
August 2010    The Company completes the construction of a new building that expands the Ricoh Technology Center, which is located in Ebina, Kanagawa.

 

-12-


Table of Contents

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 2009, 2010 and 2011 were ¥96.9 billion, ¥66.9 billion and ¥66.9 billion, respectively. Ricoh directed a significant portion of its capital investments for fiscal years 2009, 2010 and 2011 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. For fiscal year 2011, Ricoh’s capital investments included ¥8.1 billion for the construction of a new building at the Ricoh Technology Center, ¥5.6 billion for purchasing mold casts used in the manufacturing of MFPs, production printing equipment and printers and ¥4.6 billion for the construction of a second plant that manufactures polymerized PxP toner. More specifically, in fiscal year 2011, Ricoh completed the construction of a new building to expand the Ricoh Technology Center that is located in Kanagawa, Japan, which was established in 2005 as Ricoh’s main development center. With the expansion of the Ricoh Technology Center, Ricoh relocated the software development department, the inkjet technology development department and the supply development department (responsible for developing toners and photoconductors) to this newly expanded center. As a result, the Ricoh Technology Center now houses such departments as well as the copier and printer development division and the manufacturing technology division. Ricoh Technology Center is also engaged in elemental technology development, product design, product evaluation and developing manufacturing technology for state-of-the-art color products. With the consolidation of these departments and divisions at the Ricoh Technology Center, Ricoh aims to (1) improve its flexible cross-functional (inter-departmental) development structures, (2) strengthen human resources development and (3) enhance its product engineering capabilities and overall development efficiency. By geographic segment, in fiscal year 2011, Ricoh made capital investments in Japan, the Americas, Europe and Other in the amounts of ¥45.6 billion, ¥8.5 billion, ¥10.1 billion and ¥2.7 billion, respectively. Ricoh projects that for fiscal year 2012, its capital investments will amount to approximately ¥67.0 billion, which will principally be used for investments in manufacturing facilities of digital and networking equipment with new engines, toners, semiconductors and thermal media. It is expected that Ricoh’s capital investments in Japan, the Americas, Europe and Other will be in the amount of approximately ¥44.2 billion, ¥10.2 billion, ¥8.9 billion and ¥3.7 billion, respectively, in fiscal year 2012. These capital investments are expected to be financed with internally generated funds and/or borrowings from third parties.

 

-13-


Table of Contents

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

Ricoh’s operating segments consist of “Imaging & Solutions,” “Industrial Products” and “Other.”

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 2009, 2010 and 2011.

SALES BY PRODUCT

 

     Millions of Yen (except for percentages)
For the Year Ended March 31,
 
     2009     2010     2011  

Imaging & Solutions

               

Imaging Solutions

   ¥ 1,598,614         76.4   ¥ 1,516,172         75.2   ¥ 1,429,824         73.6

Network System Solutions

     234,484         11.2        274,071         13.6        283,483         14.6   

Industrial Products

     115,550         5.5        101,692         5.0        106,830         5.5   

Other

     143,048         6.9        124,402         6.2        121,876         6.3   
                                                   

Total

   ¥ 2,091,696         100.0   ¥ 2,016,337         100.0   ¥ 1,942,013         100.0
                                                   

 

Note:

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

Imaging & 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 2011, the Imaging Solutions product category accounted for 73.6% 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.

 

-14-


Table of Contents

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).

In response to customer demand, Ricoh continues to be focused 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 2011, Ricoh released its imagio MP C5001/C4001/C3301/C2801 series (also known as Aficio MP C5001/C4001/C3301/C2801 series when sold overseas) as part of its color MFP product lineup. These new color MFPs (1) decrease average energy consumption by approximately 25% (MP C5001/C4001 series) and 50% (MP C3301/C2801 series) compared to that of earlier models by using an induction heating fusing unit, which heats up quickly and uses less electricity, and the newly developed “black PxP toners”, which enables fusing at lower temperatures, (2) increase customers’ productivity by shortening the start-up time from when the equipment is in wait mode, (3) increase printing and scanning speeds, which improve customers’ productivity, (4) enable customers to print directly from USB memory and/or SD cards, which enhance customers’ work efficiency and (5) provide enhanced security features, such as a user authentication system to prevent unauthorized access to images and an encryption system that encrypts user names and passwords. Ricoh also released imagio MP C2201 series (also known as Aficio MP C2201 series when sold overseas) as part of its color MFP product lineup during fiscal year 2011, which (1) reduced average energy consumption by using the new color QSU (quick start up) technology and the newly developed “black PxP toners” and (2) shortened start-up times to 10 seconds from when the equipment is in wait mode as compared to 27 seconds for prior models, such that the shortened start-up time is now equivalent to start-up times of monochrome MFPs.

 

-15-


Table of Contents

In addition, Ricoh developed and introduced during fiscal year 2011 the imagio MP W3601/W2401 series (also known as Aficio MP W3601/W2401 series when sold overseas), a wide format MFP with features that increased customers’ productivity compared to prior models, such as (1) having a copying speed of 6 pages per minute and (2) being equipped with a 600 dpi resolution full color scanner. In addition, this wide format MFP series provided as standard features security functions that were previously optional.

In terms of laser printers, Ricoh developed and introduced during fiscal year 2011 low- to high-end color laser printers for A4-sized paper featuring a compact body of 400 mm (width) x 480mm (depth) x 387mm (height) , which enables usage in a wide range of work environments, and functions that improve customers’ productivity, such as a printing speed of 25 pages per minute.

With respect to GELJET printers, Ricoh developed and introduced the IPSiO GX e7700 series (also known as Aficio GX e 7700 series when sold overseas) during fiscal year 2011. This series was introduced to target mid-end users and is a series of color printers featuring (1) a function that enables printing on a wide range of paper sizes from special A3-size paper to L-size paper, (2) a broad spectrum of printing functions to satisfy a wide range of customer requirements, (3) lower overall printing costs with a function that automatically adjusts the print density depending on the document contents, (4) environmentally friendly characteristics, such as reduced average energy consumption to a level comparable to that of a fluorescent light bulb, (5) high speed printing, such as taking less than 2.6 seconds to print the first color page and being able to print 29 pages per minute in both monochrome and color, and (6) easy-to-use applications that can be operated at the front of the printer on a daily basis.

Furthermore, in terms of production printing products, Ricoh developed and introduced the RICOH Pro C901/C901S for its production printing customers during fiscal year 2011. The RICOH Pro C901/C901S is a color laser printer with a high print speed of 90 pages per minute for both monochrome and color printing on A4-size paper. In addition, this laser printer (1) uses oil-free polymerized PxP toners to produce high quality images, (2) has high-speed print, copy and scan capabilities, (3) uses a new fusing unit that improves paper handling, (4) has an improved large color TFT LCD operation panel that simplifies operation and (5) has various options that enable customers to improve their production efficiency, such as various finishing and binding options.

(2) Network System Solutions

For fiscal year 2011, the Network System Solutions product category accounted for 14.6% 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.

 

-16-


Table of Contents

In Japan, Ricoh has its own solutions brand called “Operius” and 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 strives to assist its customers in creating a working environment that is more efficient. For example, Ricoh develops storage and management solutions 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 addition, in Japan as well as the overseas market, Ricoh has been expanding its managed document services (“MDS”) since its acquisition of IKON in fiscal year 2009. Historically, Ricoh has grown its business by inventing and selling new products. While Ricoh remains committed to providing innovative hardware and software products, Ricoh believes that its MDS can provide customers added-values. The objective of Ricoh’s MDS is to provide customers with a competitive advantage over its competitors, decrease costs, improve efficiencies and strengthen data security protection.

Ricoh is expanding its MDS business globally because it believes that customers’ needs are changing. Unlike before, customers appear to be less willing to pay for hardware and software which they must manage and optimize themselves. Rather, customers appear to be seeking a consultative partner that provides not only innovative products but also solutions that enable customers to pay only for what they actually use, which may change quickly based on changes in customers’ companies and the markets they serve. Based on Ricoh’s experience, customers also appear to be looking to outsource non-core business functions to third-party partners who are willing to invest, collaborate and work with them.

More specifically, Ricoh’s MDS is a global service that helps customers improve their document workflow and office processes, manages and optimizes customer’s information, increases productivity and reduces TCO. Ricoh’s MDS is provided to customers in the following five phases:

Phase I (Understand – Understanding the state of the customer’s environment): In this phase, Ricoh works with customers and conducts a detailed assessment of the state of the customer’s document output environment. Ricoh’s dedicated team of analysts performs this assessment and provides the customer with an analysis of the customer’s environment, including limitations to its environment and associated costs.

Phase II (Improve – Presenting a proposed design that focuses on the customer’s goals): Using the assessment from Phase I, Ricoh’s experts (including a team of analysts, system engineers, consultants and technology specialists) develop and provide recommendations to achieve the customer’s objectives in this phase. Such objectives may include enhancing efficiency, increasing productivity, and deriving measurable and sustained cost savings.

 

-17-


Table of Contents

Phase III (Transform – Transforming the customer’s environment): In this phase, Ricoh provides a clear roadmap that shows how the customer can transition from the current state to the desired future state, and offers the services of experts who can ensure that the transition to a new environment is accomplished efficiently, with minimum impact on the customer’s business, and the objectives of the change can be realized quickly.

Phase IV (Govern – Governing the new environment for continuous improvement): In this phase, Ricoh provides onsite services to generate cost savings, fleet productivity and workflow improvements. Ricoh strives to deliver measurable and sustained improvements that differentiate Ricoh’s MDS from other print solutions and ensure measurable cost containment, reduced IT efforts and enhanced end-user satisfaction.

Phase V (Optimize – Optimize the new environment): In this last phase, Ricoh provides services that transform the customer’s workflow and enables customers to deliver information at the appropriate time and format, while at the same time saving costs for such action. In providing this service, Ricoh offers the services of its experts without adding to the customers’ headcount and without having customers relinquishing control over their own information infrastructure. Ricoh’s experts will work as an extension of the customer’s staff, applying the requisite expertise as needed.

Industrial Products

The Industrial Products segment consists of products that are used in the industrial sector. For fiscal year 2011, this segment accounted for 5.5% 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.

 

-18-


Table of Contents

Other

The Other segment, which accounted for 6.3% of Ricoh’s net sales for fiscal year 2011, 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 2011, Ricoh released new digital cameras under the names “CX4” and “G700/G700SE”.

The “CX4” features (1) a 10.7x optical wide-angle zoom lens (equivalent to a 28-300 mm focal length on 35 mm cameras) with a compact body having a depth of 29.4 mm and (2) enhanced image-sensor-shift image stabilization, which reduces blurring of the image on average by the equivalent of about 3.7 shutter-speed stops, about three times faster than its predecessor model. This enhanced stabilization feature ensures crisp, sharp results when taking close-up photos, telephoto shots and other shots in which the image is likely to blur.

The “G700/G700SE” is equipped with (1) an optical lens that has 5x zoom capability (equivalent to 28-140 mm focal length on 35 mm cameras) and (2) a built-in flash that reaches up to 10 meters. The “G700/G700SE” has improved shock resistance, water resistance and chemical resistance qualities, which enables it to be used at difficult work sites. In addition, Bluetooth® and wireless LAN capabilities are standard features of the “G700SE”, which also has optional GPS and bar code reader units as accessories.

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 is also increasing its financing services in the United States and Western Europe by extending more leases to customers in order to meet the change in customers’ demand to “use” equipment rather than to “own” equipment, and to support sales of the Imaging Solutions business.

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.

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).”

 

-19-


Table of Contents

In addition to this overall group vision, management has established medium-term goals. Fiscal year 2011 was the third and last fiscal year of the 16th Mid Term Plan (“MTP”), which covered the period from fiscal year 2009 through fiscal year 2011. Under the 16th MTP, Ricoh’s objectives were 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 MTP, Ricoh 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.

During the 16th MTP, Ricoh made various efforts to achieve the plan’s objectives. For example, Ricoh worked to achieve synergy with IKON, which it acquired in fiscal year 2009, in various ways, including making efforts to replace non-Ricoh products used by IKON customers with Ricoh products. In addition, Ricoh expanded in various countries its production printing business, its MDS business and its IT services business. Ricoh also took steps to restructure its operations in accordance with the Corporate Restructuring Growth Project (“CRGP”) from October 2008, which is a group-wide project to reduce costs and restructure operations for future growth, implemented urgent cost reduction measures in fiscal year 2011 and started to shift resources to new growth areas.

In addition to the overall objectives of the 16th MTP, Ricoh also established financial targets with respect to net sales, operating income, operating income ratio (ratio of operating income to net sales), return-on-equity (“ROE”) and payout ratio (ratio of dividends paid to net income) that were to be achieved by the last fiscal year of the plan. More specifically, the financial targets were net sales of ¥2,300.0 billion, operating income of ¥170.0 billion, operating income ratio of 7.4%, ROE of 12.5% and payout ratio of 30.0%. Actual results as of fiscal year 2011 (the last fiscal year of the 16th MTP) were net sales of ¥1,942.0 billion, operating income of ¥60.1 billion, operating income ratio of 3.1%, ROE of 2.1% and payout ratio of 121.9%. These results were due in part to the change in business environment that occurred during the 16th MTP as well as the appreciation of the Japanese Yen relative to the U.S. Dollar and the Euro. More specifically, the average exchange rate between the Japanese Yen and the U.S. Dollar was ¥100.55 to US$1 for fiscal year 2009 and ¥85.77 to US$1 for fiscal year 2011. The average exchange rate between the Japanese Yen and the Euro was ¥143.74 to Euro 1 for fiscal year 2009 and ¥113.28 to Euro 1 for fiscal year 2011. Ricoh estimates that an appreciation of ¥1 against the U.S. Dollar would impact sales and operating income by ¥6.5 billion and ¥1.3 billion, respectively, and an appreciation of ¥1 against the Euro would impact sales and operating income by ¥3.5 billion and ¥1.5 billion, respectively. While the decrease in demand that occurred after the world financial crisis recovered slowly during the end of the 16th MTP, Ricoh’s customers continued to minimize color output and manage their overall printing output. Ricoh’s customers also adjusted their business models during the 16th MTP in ways that reflect a shift in values from those based on “product possession” (i.e., owning a product) to those based on “product use” (i.e., using a product). Furthermore, the increased use of mobile devices and the paperless movement accelerated during the 16th MTP, which has resulted in changing peoples’ working styles. Furthermore, increased environmental awareness has lead customers to place greater emphasis and importance when selecting a product on whether the product has been designed and can perform in a way that is friendly to the environment.

The objective of the 17th MTP, which covers the period from April 2011 to March 2014, is to achieve growth and to restructure its organization simultaneously in order to develop new values that can be provided to customers. To achieve this objective, Ricoh has implemented the following two basic group management strategies: (1) “business creation and integration” and (2) “establish highly efficient management.”

 

-20-


Table of Contents

By “business creation and integration,” Ricoh means that it will strive to strengthen its services business with the goal of increasing its market share not only in products but also in services. More specifically, Ricoh will focus on achieving five objectives under the “business creation and integration” strategy. First, Ricoh will work to maintain its top market share status in its core business (i.e., products that are used in the office environment), while streamlining its operations. Second, Ricoh will aim to expand its services business in developed countries and areas, such as the United States, Western Europe and Japan, by enhancing its MDS offerings and expanding its IT services. Third, Ricoh will strive to expand its product line-up and market share in the emerging markets. Fourth, Ricoh will work to strengthen its production printing business by making necessary adjustments to its sales and service structures and expanding its product line-up so that its production printing business can realize a profit at an early stage. Lastly, Ricoh will continue to develop new businesses to achieve growth, which new businesses will include developing network appliances and Eco solutions. Network appliances consist of projection systems, unified communication systems and other systems. Eco solutions consist of the LED illumination business, the ESCO business (which is a business that provides comprehensive services to achieve energy savings in buildings and factories with the objective of providing energy saving benefits to customers and contributing to preserving the global environment), the recycling business and other businesses. In addition, as part of the 17th MTP and in light of the shift in customer demand to merely “use” equipment as opposed to “own” equipment, Ricoh intends to (1) provide comprehensive MDS or Eco solutions by using a combination of existing systems and the Ricoh group expertise and (2) provide financial solutions for customers to facilitate the purchase of higher priced products and services, such as the building- or factory-wide comprehensive installation of LED illuminations and production printing products. Separately, to assist in the recovery of the Tohoku area after the Great East Japan Earthquake, Ricoh plans to expand its toner production capacity in the Tohoku area and establish a new recycling center in the Tohoku area. To date, Ricoh has contributed ¥0.3 billion and established a Recovery Support Department to strengthen its recovery efforts and support the mid- to long-term recovery of the affected areas.

By “establish highly efficient management,” Ricoh means that it will work to create a corporate environment through which its growth strategies can be accelerated. More specifically, Ricoh will strive to realize a corporate culture that encourages the accelerated implementation of growth strategies that seek to achieve in-depth restructuring as part of the CRGP. Ricoh intends to achieve this restructuring and accelerate acquisition synergies by (1) streamlining its sales systems, (2) reviewing non-profitable businesses and deciding either to support and turn around such businesses or withdraw from such businesses, (3) integrating production sites and shifting resources to growth areas, (4) encouraging operational re-engineering, such as re-engineering its business processes, streamlining redundant operations and reorganizing headquarter functions, (5) relocating approximately 15,000 personnel to new growth areas and reducing personnel headcount by approximately 10,000 persons, (6) reducing purchase costs by centralizing purchase functions and aggregating purchase orders and (7) reviewing its development processes (such as the “create without making” process, which means to develop products without incurring costs arising from test models) and strengthening its support for low cost development. In addition, as part of the 17th MTP and to investment in its future growth, Ricoh intends to (1) make capital investments of approximately ¥200.0 billion over the next three years (which will be maintained on an annual basis at current levels equivalent to depreciation), (2) maintain R&D expenses at 5-6% of net sales (which it intends to use to expand into new business areas and streamline existing business areas while also engaging in product development for emerging markets) and (3) expand its business infrastructure in new areas and growth areas (which it intends to accomplish by reallocating resources and implementing strategic investments into new business areas).

The financial targets that Ricoh has set to achieve by March 2014 in connection with the 17th MTP are net sales of ¥2,400.0 billion or higher, operating income of ¥210.0 billion or higher, operating income ratio of 8.8% or higher, ROE of 10.0% or higher, free cash flow (which is the sum of cash flows from operating activities plus cash flows from investing activities) of approximately ¥200.0 billion and a shareholder return ratio (the ratio between dividends and share buybacks) of approximately 30%.

 

-21-


Table of Contents

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 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 merged these seven domestic sales subsidiaries and the marketing group of the Company into one domestic sales subsidiary in July 2010, which subsidiary is named 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.

 

-22-


Table of Contents

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. The total number of Ricoh’s sales and service personnel in Japan is approximately 21,200. 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 45,800.

Ricoh’s customer support system (“@Remote”) is available globally 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.

Additional information regarding the manner in which Ricoh accounts for its after-sales services is set forth in Item 5. Critical Accounting Policies and Note 2 to the Consolidated Financial Statements which are included in this annual report.

PRINCIPAL MARKETS

Ricoh distributes its products and competes in the following four geographic areas: Japan, the Americas, Europe and Other. In the aggregate, Ricoh’s sales decreased in fiscal year 2011. As noted below, for fiscal year 2011, net sales in Japan, the Americas, Europe and Other as a percentage of total net sales were 45.1%, 26.9%, 21.3% and 6.7%, 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,
 
     2009     2010     2011  

Japan

   ¥ 938,331         44.9   ¥ 876,578         43.5   ¥ 875,859         45.1

The Americas

     502,862         24.0        557,687         27.7        521,970         26.9   

Europe

     523,407         25.0        458,584         22.7        413,936         21.3   

Other

     127,096         6.1        123,488         6.1        130,248         6.7   
                                                   

Total

   ¥ 2,091,696         100.0   ¥ 2,016,337         100.0   ¥ 1,942,013         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.

 

-23-


Table of Contents

(1) Japan

While the Japanese economy showed some moderate signs of recovery starting in the second half of fiscal year 2010, the economic situation in Japan remained unpredictable due to the appreciation of the Japanese Yen against the U.S. Dollar and the Euro as well as the decline in the stock market. Capital investments in Japan by customers have decreased due to sluggish sales performance and the appreciation of the Japanese Yen. Personal consumption has also remained weak. Ricoh continues to face a difficult business environment in Japan. In the Imaging & Solutions segment, the marketing group of the Company and seven domestic sales companies were integrated and reorganized into Ricoh Japan Corporation. Through such integration and reorganization, Ricoh sought to improve its management efficiency by creating a sales infrastructure that will enable the Ricoh Group companies to promptly respond to and address the diversifying needs of its customers.

As a result of the Great East Japan Earthquake on March 11, 2011, Ricoh suffered damages to its operations in the affected areas. For additional information on the effect of the Great East Japan Earthquake, see Item 5.A. Fiscal Year 2011 Compared to Fiscal Year 2010 – Geographic Segments by Geographic Origin – Japan.

(2) The Americas

In the Americas, economic conditions remained unpredictable despite the fact that individual consumption and capital investments showed signs of recovery.

During fiscal year 2009, Ricoh acquired the U.S.-based IKON and its subsidiaries, who supply and service a wide range of office equipment to customers, including large private corporations as well as U.S. government and public sector entities/organizations. Ricoh is increasing its efforts to switch non-Ricoh products sold by IKON to its customers (prior to Ricoh’s acquisition) to Ricoh products and integrating IKON as part of its supply chain.

(3) Europe

Although the economy showed signs of recovery during fiscal year 2011 partially due to the increase in European exports to other regions as a result of the depreciation of the Euro, the overall economic condition in Europe remained uncertain. This was due in part to the widening intra-regional economic disparities resulting from the financial crisis and high unemployment rates in some countries. In addition, the sharp depreciation of the Euro relative to other foreign currencies contributed to such uncertain economic conditions.

During fiscal year 2009, Ricoh integrated the European business operations of IKON into Ricoh Europe PLC’s operations. The purpose of this integration 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.

(4) Other

The Other geographic area includes China, South East Asia and Oceania. Demand for Ricoh products in the emerging markets, including China and India, increased in fiscal year 2011. In response to this increase in demand, Ricoh strengthened its sales force in these markets. Despite the appreciation of the Japanese Yen, sales increased in the Other geographic are in fiscal year 2011 compared to fiscal year 2010.

 

-24-


Table of Contents

COMPETITION

The office equipment industry in which Ricoh primarily competes remains highly competitive and Ricoh continues to encounter intense competition in its Imaging & Solutions segment. Furthermore, competition in each of the product categories in the Imaging & 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.

 

-25-


Table of Contents

SEASONALITY

Sales in the Imaging & 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 were generated from sales in Japan during the month of March. For fiscal year 2011, sales in Japan were affected by the Great East Japan Earthquake that occurred on March 11, 2011 and this seasonality had even less impact on sales in the Imaging & Solutions segment. More specifically, sales generated during the month of March due to this seasonality accounted for 11.7% of Ricoh’s sales in Japan for fiscal year 2011. The effect of this seasonality on a consolidated basis was minimal for fiscal year 2011, as only 5.4% of Ricoh’s total consolidated sales for fiscal year 2011 were 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 to manufacture its products.

 

-26-


Table of Contents

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.

 

-27-


Table of Contents

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.

C. Organizational Structure

As of March 31, 2011, the Ricoh group includes the Company, 227 subsidiaries and 7 affiliates located worldwide. In addition, from fiscal year 2011, Variable Interest Entities (VIE) have been consolidated. See Note [2] (u) and Note [4] to the Consolidated Financial Statements for additional information.

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.

 

-28-


Table of Contents

The following is a list of the principal subsidiaries of the Company. None of the Company’s 7 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

Hasama Ricoh, Inc.

   Japan    100.0   

Manufacturing office equipment

Tohoku Ricoh Co., Ltd.

   Japan    100.0   

Manufacturing office equipment

Ricoh Unitechno Co., Ltd.

   Japan    100.0   

Manufacturing parts for office equipment

Ricoh Printing Systems, Ltd.

   Japan    100.0   

Manufacturing and sale of 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 Japan Corporation

   Japan    100.0   

Sale of office equipment

Ricoh Technosystems Co., Ltd.

   Japan    100.0   

Maintenance, service and sale of office equipment

Ricoh IT Solutions Co., Ltd.

   Japan    100.0   

Development and construction of network system

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

Ricoh Canada Inc.

   Canada    100.0   

Sale of office equipment

IKON Office Solutions, Inc.

   U.S.A.    100.0   

Sale of office equipment

Ricoh Printing Systems America, Inc.

   U.S.A.    100.0   

Manufacturing office equipment

InfoPrint Solutions Company, LLC

   U.S.A.    100.0   

Sale of office equipment

Ricoh Europe Holdings PLC

   U.K.    100.0   

Sale of office equipment

Ricoh UK Ltd.

   U.K.    100.0   

Sale of office equipment

Ricoh Deutschland GmbH

   Germany    100.0   

Sale of office equipment

Ricoh France S.A.S

   France    100.0   

Sale of office equipment

Ricoh Italia Srl

   Italy    100.0   

Sale of office equipment

Ricoh Espana S.L.U.

   Spain    100.0   

Sale of office equipment

Ricoh Belgium N.V.

   Belgium    100.0   

Sale of office equipment

Ricoh Nederland B.V.

   Netherlands    100.0   

Sale of office equipment

 

-29-


Table of Contents

Company Name

  

Country of
Formation

  

Proportion of
ownership

interest

  

Main businesses

Ricoh Europe SCM B.V.

   Netherlands    100.0   

Sale of office equipment

Ricoh Schweiz AG

   Switzerland    100.0   

Sale of office equipment

Ricoh Sverige AB.

   Sweden    100.0   

Sale of office equipment

Ricoh Finance Nederland B.V.

   Netherlands    100.0   

Corporate finance

Ricoh China Co., Ltd.

   China    100.0   

Sale of office equipment

Ricoh Hong Kong Ltd.

   Hong Kong, China    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 Asia Pacific Operations Ltd.

  

Hong Kong,

China

   100.0   

Sale of office equipment

Ricoh (Thailand) Ltd.

   Thailand    100.0   

Sale of office equipment

Ricoh India Ltd.

   India    73.6   

Sale of office equipment

Ricoh Australia Pty, Ltd.

   Australia    100.0   

Sale of office equipment

Ricoh New Zealand Ltd.

   New Zealand    100.0   

Sale of office equipment

And 182 other subsidiaries

        

(Affiliates)

        

7 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.
(3) InfoPrint Solutions Company, LLC changed its name to Ricoh Production Print Solutions, LLC in April 2011

 

-30-


Table of Contents

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, 2011 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)

   121   

Paper and toner

Ikeda Plant (Osaka)

   27   

Electronic devices

Fukui Plant (Fukui)

   34   

Papers and toner

Gotenba Plant (Shizuoka)

   70   

Office equipment

Yashiro Plant (Hyogo)

   34   

Electronic devices

Ricoh Technology Center (Kanagawa)

   127   

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)

   19   

Office equipment

Ricoh Elemex Corporation. (Aichi)

   45   

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

 

-31-


Table of Contents

Name (Location)

  

Floor space

  

Principal activities and products manufactured

     (in thousands of
square meters)
    

Overseas:

     

Ricoh Electronics, Inc.

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

   110   

Copiers, parts relating to copiers, toner and thermal paper

Ricoh UK Products Ltd. (Telford, United Kingdom)

   36   

Copiers, parts relating to copiers and toner

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

   49   

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)

   26   

Facsimile equipment

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

   24   

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)

   38   

Printers and parts relating to printers

GR Advanced Materials Ltd. (Scotland, United Kingdom)

   7   

Supplies relating to duplicators

 

-32-


Table of Contents

As discussed earlier in this Item 4, Ricoh completed 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. This expansion of the Ricoh Technology Center was 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.

 

-33-


Table of Contents

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 semiconductor devices, digital cameras 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. 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. Significant trends in the office equipment market during the past several years consist of the movement towards digital networking systems from stand-alone models and the shift in customers’ demands toward color products from monochrome products. In addition, more recently, the needs of customers are changing such that customers are increasingly less willing to pay for hardware and software they must manage and optimize themselves. Rather, they seek solutions that enable them to pay only for what they actually use, which may change quickly based on changes in customers’ companies and the markets they serve. Based on Ricoh’s experience, customers also appear to be looking to outsource non-core business functions to third-party partners who are willing to invest, collaborate and work with them. In light of these recent trends, Ricoh is focusing on expanding its MDS business on a global basis.

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, high volume printing, which became possible upon the introduction of printers with high-speed printing capabilities, and document management solutions. Although the global economy has not yet fully recovered from its recent downturn, Ricoh remains focused on achieving sustained growth to remain competitive. 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 addition, in light of more recent trends, Ricoh’s strategy now also includes expanding its new services businesses, and strengthening its global MDS business and IT service business. To support 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, to enhance its technological strengths Ricoh made targeted R&D investments to create new products and deliver new services that provide added value for its customers during fiscal year 2011.

 

-34-


Table of Contents

In addition, in order to increase sales of its products, Ricoh has been expanding its sales infrastructure in the Imaging & 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, which joint venture company is now a wholly-owned subsidiary of Ricoh. InfoPrint Solutions has contributed to expanding Ricoh’s production printing business, and Ricoh expects that this company will further 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.

While the global economy showed some signs of moderate recovery during fiscal year 2011, difficult economic conditions persisted. Economies in the U.S. and Europe showed signs of recovery; however, the debt crisis in Europe and the political instability in the Middle East and North Africa caused uncertainties to remain in the global market. In addition, in light of such uncertainties, crude oil prices increased. Despite such economic environment, Asian countries, mainly China, maintained a high level of economic growth and was a driving force of the global economy. While the Japanese economy showed some signs of a modest recovery during fiscal year 2011, due in part to the economic stimulus measures implemented by the government and an increase in exports to emerging countries, the appreciation of the Japanese Yen, the increase in deflation and the damage brought on by the Great East Japan Earthquake in March 2011, resulted in the Japanese economy facing challenging conditions for fiscal year 2011. The Great East Japan Earthquake caused damage to Ricoh’s premises and facilities engaged in production, sales, maintenance services, and research and development and other activities at various locations in the Tohoku and Kitakanto regions. On top of these damages, the disruption of the transportation infrastructure as well as the shortage of supply of fuel and materials impacted Ricoh’s shipment of products. While Ricoh’s financial results for fiscal year 2011 were affected by the earthquake, it did not have a material impact on its consolidated financial results. Ricoh currently estimates that the financial impact of the earthquake in fiscal year 2012 will be approximately ¥10.0 billion, including estimated lost profits due to lost business opportunities; however, such amount is not expected to have any material impact on Ricoh’s consolidated results, financial position or cash flows for fiscal year 2012.

 

-35-


Table of Contents

Ricoh’s consolidated net sales for fiscal year 2011 decreased by 3.7% to ¥1,942.0 billion, from ¥2,016.3 billion for fiscal year 2010, due primarily to the decrease in net sales in its Imaging & Solutions operating segment and the Other operating segment. This decrease was due mainly to the slow economic recovery after the global economic downturn and the increase in global competition, which had the effect of decreasing customer demand for Ricoh products. The decrease in net sales was also attributable to the depreciation of the U.S. Dollar and the Euro against the Japanese Yen. Net sales would have increased by 1.9% excluding the effects of foreign currency exchange fluctuations. While cost of sales decreased by 3.5% for fiscal year 2011, 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 3.9% for fiscal year 2011 as compared to fiscal year 2010. In terms of selling, general and administrative expenses, the group-wide cost reduction efforts in Ricoh’s manufacturing and sales operations resulted in a 3.5% decrease in such expenses as compared to fiscal year 2010. As a result, Ricoh’s operating income for fiscal year 2011 decreased by 8.8%, with operating income as a percentage of net sales decreasing from 3.3% to 3.1% as compared to fiscal year 2010.

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,  
     2009     2010     2011  

Net sales (in billions of Yen)

     2,091.6        2,016.3        1,942.0   

Operating income to net sales ratio(1)

     3.6     3.3     3.1

Return on assets(2)

     0.3     1.1     0.8

Inventory turnover within months(3)

     1.86        1.70        1.78   

Interest-bearing debt (in billions of Yen)

     779.1        684.4        630.4   

 

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 2011, Ricoh’s consolidated net sales decreased by 3.7% to ¥1,942.0 billion, from ¥2,016.3 billion for fiscal year 2010, due primarily to the decrease in net sales in the Imaging & Solutions operating segment and the Other operating segment. Operating income to net sales ratio decreased by 0.2 percentage points to 3.1% from 3.3% for fiscal year 2010 due primarily to the decrease in operating income resulting from the decrease in net sales. Return on assets decreased by 0.3 percentage points to 0.8% from 1.1% for fiscal year 2010 due mainly to a decrease in net income. Inventory turnover within months increased by 0.08 points, which increase was due primarily to the Great East Japan Earthquake. Interest-bearing debt decreased by ¥54.0 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.

 

-36-


Table of Contents

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 consolidated 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.

 

-37-


Table of Contents

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. The delivered item in a multiple element arrangement should be considered a separate unit of accounting if all of the following criteria are met: (1) a delivered item has value to customers on a stand-alone basis, (2) there is objective and reliable evidence of fair value of an undelivered item and (3) the delivery of the undelivered item must be probable and controlled by Ricoh if the arrangement includes the right of return. The price charged when the element is sold separately generally determines fair value. Otherwise, revenue is deferred until the undelivered elements are fulfilled as a single unit of accounting.

Allowance for Doubtful Receivables

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.

The following table illustrates Ricoh’s allowance for doubtful receivables for finance receivables for fiscal years 2009, 2010 and 2011.

 

Description

   2009     2010     2011  
     (Millions of Yen)  

Finance receivables

     672,405        653,959        666,752   

Allowance for Finance receivables

     (11,526     (11,919     (12,299

Allowance ratio

     1.7     1.8     1.8

There was no significant change in the allowance ratio in fiscal year 2011 as compared to fiscal year 2010. The increase in allowance resulting from the Great East Japan Earthquake was fully offset by the decrease in allowance due to the lower credit loss rates.

 

-38-


Table of Contents

The following table illustrates Ricoh’s allowance for doubtful receivables for trade receivables by geographic location for fiscal years 2009, 2010 and 2011.

 

Description

   Japan     Americas     Europe     Other     Total  
     (Millions of Yen)  

For the year ended March 31, 2009:

          

Trade receivables

     243,470        115,068        127,713        20,049        506,300   

Allowance for doubtful receivables

     (7,094     (7,088     (6,521     (830     (21,533

Allowance ratio

     2.9     6.2     5.1     4.1     4.3

For the year ended March 31, 2010:

          

Trade receivables

     251,375        84,292        131,011        21,688        488,366   

Allowance for doubtful receivables

     (6,194     (3,979     (6,032     (691     (16,896

Allowance ratio

     2.5     4.7     4.6     3.2     3.5

For the year ended March 31, 2011:

          

Trade receivables

     240,847        78,536        123,703        22,620        465,706   

Allowance for doubtful receivables

     (7,927     (2,043     (5,977     (613     (16,560

Allowance ratio

     3.3     2.6     4.8     2.7     3.6

In fiscal year 2010, allowance ratio decreased in all geographic segments as compared to fiscal year 2009, especially in the Americas, due to the recovery of financial market conditions since the 2008 financial crisis.

In fiscal year 2011, allowance ratio increased in Japan as compared to fiscal year 2010 due to the Great East Japan Earthquake. The allowance ratio in the Americas decreased due to further recovery of financial market conditions since the 2008 crisis.

Pension Accounting

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 plan 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, 2011, 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 ¥140.9 billion.

For fiscal years 2009, 2010 and 2011, Ricoh used expected long-term rates of return on pension plan assets of 3.5%, 3.2% and 2.9%, 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%, 35%, 20% and 10% of the plan assets are projected to be allocated to equity securities, debt securities, life insurance company general accounts and other financial instruments, respectively. As of March 31, 2011, the actual allocation of assets was generally consistent with the projected allocation stated above. The actual returns for fiscal years 2009, 2010 and 2011 were approximately 15.7% (loss), 15.5% (gain) and 2.2% (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.

 

-39-


Table of Contents

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 2009, 2010 and 2011 were 3.6%, 3.7% and 3.4%, 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, 2011.

 

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

   – /+ ¥24.4   – /+ ¥1.5

50 basis point increase / decrease in expected return on assets

   —     – /+ ¥1.5

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 (“ASC”) 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.

 

-40-


Table of Contents

Impairment of Long-Lived Assets and Goodwill

As of March 31, 2011, the aggregate of Ricoh’s long-lived assets and goodwill was ¥616.4 billion, which accounted for 27.2% 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 reviews the carrying value of its goodwill for impairment annually at December 31, and when a triggering event occurs between annual impairment tests. This review is based upon Ricoh’s projections of anticipated future discounted cashflows used to determine the estimated fair values of the reporting units for which goodwill is assigned. Ricoh reviews long-lived 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 indefinite-lived intangible assets and goodwill for fiscal years 2009, 2010 and 2011 and determined that no impairment charge was necessary. Management also considered the Great East Japan Earthquake and its effect, and concluded that no long-lived asset or goodwill impairment had occurred as of March 31, 2011. The fair values of each of Ricoh’s reporting units significantly exceeded their respective carrying amounts.

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. Ricoh recognized asset impairment charges for its securities in the amounts of ¥26.8 billion, ¥0.1 billion and ¥1.8 billion for fiscal years 2009, 2010 and 2011, respectively.

 

-41-


Table of Contents

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 recorded 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. The amount of valuation allowance for deferred tax assets increased by ¥7.3 billion to ¥36.2 billion as of March 31, 2011 from ¥28.9 billion as of March 31, 2010. This increase is primarily due to tax benefits from operating loss carry forwards at certain consolidated subsidiaries that Ricoh believes are unlikely to be realized.

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. 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. 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.

 

-42-


Table of Contents

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  
     2009     2010     2011     2011(1)     2010     2011  

Net sales

                  

Products

   ¥ 1,027,694        ¥ 964,564        ¥ 934,263        $ 11,256,181        (6.1     (3.1

Post sales and rentals

     955,490          952,676          903,096          10,880,675        (0.3     (5.2

Other revenue

     108,512          99,097          104,654          1,260,891        (8.7     5.6   
                                                                        

Total

     2,091,696        100.0     2,016,337        100.0     1,942,013        100.0     23,397,747        (3.6     (3.7
                                                                        

Cost of sales

                  

Products

     710,892          681,986          646,194          7,785,470        (4.1     (5.2

Post sales and rentals

     440,510          433,781          428,301          5,160,253        (1.5     (1.3

Other revenue

     85,908          78,227          77,444          933,060        (8.9     (1.0
                                                                        

Total

     1,237,310        59.2     1,193,994        59.2     1,151,939        59.3     13,878,783        (3.5     (3.5
                                                                        

Gross profit

     854,386        40.8     822,343        40.8     790,074        40.7     9,518,964        (3.8     (3.9

Selling, general and administrative expenses

     779,850        37.2     756,346        37.5     729,878        37.6     8,793,711        (3.0     (3.5
                                                                        

Operating income

     74,536        3.6     65,997        3.3     60,196        3.1     725,253        (11.5     (8.8
                                                                        

Other (income) expenses:

                  

Interest and dividend income

     (5,227       (3,472       (2,986       (35,976    

Interest expense

     5,863          8,144          8,498          102,385       

Foreign currency exchange loss, net

     15,575          4,756          6,950          83,735       

Loss on impairment of securities

     26,837          169          1,844          22,217       

Other, net

     549          (1,124       490          5,904       
                                                                        

Total

     43,597        2.0     8,473        0.4     14,796        0.8     178,265        (80.6     74.6   
                                                                        

Income before income taxes and equity in earnings of affiliates

     30,939        1.5     57,524        2.9     45,400        2.3     546,988        85.9        (21.1
                                                                        

Provision for income taxes

     22,158        1.1     27,678        1.4     22,621        1.2     272,542        24.9        (18.3
                                                                        

Equity in earnings of affiliates

     71          6          (22       (265    
                                                                        

Consolidated net income

     8,852        0.4     29,852        1.5     22,757        1.2     274,181        237.2        (23.8
                                                                        

Net income attributable to noncontrolling interests

     2,322        0.1     1,979        0.1     3,107        0.2     37,434        (14.8     57.0   
                                                                        

Net income attributable to Ricoh Company, Ltd.

     6,530        0.3     27,873        1.4     19,650        1.0     236,747        326.8        (29.5
                                                                        
     YEN           Change  

Reference: Exchange Rates*

   2009     2010     2011           2010     2011  

US$ 1

     ¥100.55        ¥92.91        ¥85.77          ¥(7.64)        ¥(7.14)   

EURO 1

     ¥143.74        ¥131.21        ¥113.28          ¥(12.53)        ¥(17.93)   
* 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 2011,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2011, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥83 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2011.

 

-43-


Table of Contents

SALES BY PRODUCT

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
     % Change  
     2009     2010     2011     2011(1)      2010     2011  

Imaging & Solutions

                      

Imaging Solutions

   ¥ 1,598,614         76.4   ¥ 1,516,172         75.2   ¥ 1,429,824         73.6   $ 17,226,795         (5.2     (5.7

Network System Solutions

     234,484         11.2        274,071         13.6        283,483         14.6        3,415,458         16.9        3.4   

Industrial Products

     115,550         5.5        101,692         5.0        106,830         5.5        1,287,108         (12.0     5.1   

Other

     143,048         6.9        124,402         6.2        121,876         6.3        1,468,386         (13.0     (2.0
                                                                            

Total

   ¥ 2,091,696         100.0   ¥ 2,016,337         100.0   ¥ 1,942,013         100.0   $ 23,397,747         (3.6     (3.7
                                                                            

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2011,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2011, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥83 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2011.
(2) The above consolidated financial data set forth net sales to external customers by product.

Fiscal Year 2011 Compared to Fiscal Year 2010

Net sales. Consolidated net sales for fiscal year 2011 decreased by 3.7% (or ¥74.3 billion) to ¥1,942.0 billion from ¥2,016.3 billion for fiscal year 2010. For fiscal year 2011, Ricoh recorded a decrease in net sales in the Imaging & Solutions operating segment and the Other operating segment. This decrease was due primarily to decreased demand for Ricoh products in light of the slow economic recovery after the global economic downturn and the increase in global competition. In addition, sales in Japan were adversely affected by the Great East Japan Earthquake because sales normally peak in March in Japan.

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 2011 as compared to fiscal year 2010. Had the foreign currency exchange rates remained the same as in fiscal year 2010, Ricoh’s consolidated net sales would have increased by 1.9%.

More specifically, the 3.7% decrease was due primarily to the 3.1% decrease in sale of products and the 5.2% decrease in sale of post sales and rentals, which completely offset the 5.6% increase in sales of other revenue.

Products. The 3.1% 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 a slowly recovering economic environment, 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 decreased in net sales. Despite such economic environment, Ricoh continued to introduce new product models with advanced features during fiscal year 2011 and 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.

 

-44-


Table of Contents

Post sales and rentals. Net sales derived from post sale services and rentals of equipment decreased 5.2% 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. The decrease in sales of post sale services and supplies was also due in part to the price decrease that Ricoh implemented for its maintenance services to remain competitive. Sales of post sales services also decreased because of customers’ tendencies to reduce capital investments in office equipment. In light of the prevailing economic conditions, customers also made efforts to decrease their printing costs by reducing the volume of color printing, which decreased Ricoh’s sales of value-added supplies for color products and post sale services. 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, MDS and IT services (which are IKON’s strengths) contributed to the sale 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.

Other revenue. Net sales derived from other sources (such as financings and logistics) increased 5.6% as compared to the previous fiscal year due mainly to increased net sales from financing services and logistics. Net sales from financing services increased due primarily to Ricoh Leasing Co., Ltd. in Japan recording an increase in leasing volume during fiscal year 2011. The increase in financing services activities in the overseas market also contributed to the increase in other revenue.

Cost of sales and Gross profit. Consolidated cost of sales for fiscal year 2011 decreased by 3.5% (or ¥42.0 billion) to ¥1,151.9 billion from ¥1,193.9 billion for fiscal year 2010. 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.

Consolidated gross profit for fiscal year 2011 decreased by 3.9% (or ¥32.2 billion) to ¥790.0 billion from ¥822.3 billion for fiscal year 2010. This decrease in gross profit primarily reflects the decrease in net sales in Ricoh’s two 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.

Products. Cost of sales derived from products decreased by 5.2% 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 light of ongoing cost reductions and increased sales of value-added high-margin products, gross profit ratio of products improved from 29.3% to 30.8%.

Post sales and rentals. Cost of sales derived from post sale services and rentals of equipment decreased by 1.3% due primarily to the decrease in sales from post sale services, such as maintenance services, as well as the decrease in sales of supplies for PPCs/MFPs, laser printers and GELJET printers. Due primarily to the decrease in sales price for post sales and rentals that Ricoh had to implement to remain competitive, gross profit ratio of post sales and rentals decreased from 54.5% to 52.6%.

 

-45-


Table of Contents

Other revenue. Cost of sales derived from other sources (such as financings and logistics) decreased by 1.0% despite the increase in net sales. This decrease was mainly due to the decrease in financing costs in light of interest rates being low in Japan. As a result, gross profit ratio of other revenue improved from 21.1% to 26.0%.

Selling, general and administrative expenses. Consolidated selling, general and administrative expenses for fiscal year 2011 decreased by 3.5% (or ¥26.4 billion) to ¥729.8 billion from ¥756.3 billion for fiscal year 2010. This decrease was due primarily to group-wide cost reduction efforts in the 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.

Operating income. Consolidated operating income for fiscal year 2011 decreased by 8.8% (or ¥5.8 billion) to ¥60.1 billion from ¥65.9 billion for fiscal year 2010. Operating income as a percentage of net sales decreased by 0.2 percentage points from 3.3% for fiscal year 2010 to 3.1% for fiscal year 2011. This decrease in operating income compared to fiscal year 2010 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 the manufacturing and sales operations contributed to a decrease in such expenses.

Interest and dividend income. Consolidated interest and dividend income for fiscal year 2011 decreased by ¥0.4 billion to ¥2.9 billion from ¥3.4 billion for fiscal year 2010. 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 2011 increased by ¥0.3 billion to ¥8.4 billion from ¥8.1 billion for fiscal year 2010. This increase in interest expense reflected the increase in the average outstanding amount of bonds of the Company in fiscal year 2011, which lower interest rates could not fully offset.

Foreign currency exchange loss, net. Consolidated foreign currency exchange loss, net included in other (income) expenses for fiscal year 2011 increased by ¥2.1 billion to ¥6.9 billion from ¥4.7 billion for fiscal year 2010. This increase 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 2011 increased by ¥1.6 billion to ¥1.8 billion from ¥0.1 billion for fiscal year 2010. This increase was attributable to a certain non-listed companies whose financial status deteriorated significantly in fiscal year 2011.

Other, net. Consolidated other, net included in other (income) expenses changed to a expense of ¥0.4 billion for fiscal year 2011 from an income of ¥1.1 billion for fiscal year 2010.

Provision for income taxes. Total consolidated provision for income taxes for fiscal year 2011 decreased by ¥5.0 billion to ¥22.6 billion from ¥27.6 billion for fiscal year 2010. The effective tax rate was 49.8% for fiscal year 2011 compared to 48.1% for fiscal year 2010. This increase in the effective tax rate was due primarily to an increase in the deferred tax asset valuation allowance for tax benefits from operating loss carry forwards at certain consolidated subsidiaries that Ricoh believes are unlikely to be realized. See Note [8] to the Consolidated Financial Statements for additional information.

 

-46-


Table of Contents

Equity in earnings (losses) of affiliates. Consolidated equity in earnings (losses) of affiliates for fiscal year 2011 decreased by ¥28 million to loss of ¥22 million from income of ¥6 million for fiscal year 2010. 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 2011 increased by ¥1.1 billion to ¥3.1 billion from ¥1.9 billion for fiscal year 2010. This increase was due primarily to the improved performance of Ricoh Leasing Co., Ltd. for fiscal year 2011.

Net income attributable to Ricoh Company, Ltd. Consolidated net income attributable to the Company for fiscal year 2011 decreased by ¥8.2 billion to ¥19.6 billion from ¥27.8 billion for fiscal year 2010. This decrease was due primarily to a decrease in operating income of ¥5.8 billion and an increase in other expenses of ¥6.3 billion, which were partially offset by a decrease in the provision for income taxes of ¥5.0 billion.

 

-47-


Table of Contents

Operating Segments

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
    % Change  
     2010     2011     2011(1)    

Imaging & Solutions

            

Net sales

   ¥ 1,790,243        100.0   ¥ 1,713,307        100.0   $ 20,642,253        (4.3

Operating expenses

     1,649,820        92.2     1,578,896        92.2     19,022,843        (4.3

Operating income

   ¥ 140,423        7.8   ¥ 134,411        7.8   $ 1,619,410        (4.3

Industrial Products

            

Net sales

   ¥ 106,128        100.0   ¥ 112,243        100.0   $ 1,352,325        5.8   

Operating expenses

     107,483        101.3        111,237        99.1     1,340,205        3.5   

Operating income (loss)

   ¥ (1,355     (1.3 )%    ¥ 1,006        0.9   $ 12,120        —     

Other

            

Net sales

   ¥ 124,402        100.0   ¥ 121,876        100.0   $ 1,468,386        (2.0

Operating expenses

     127,849        102.8        126,787        104.0        1,527,555        (0.8

Operating income (loss)

   ¥ (3,447     (2.8 )%    ¥ (4,911     (4.0 )%    $ (59,169     —     

Corporate and Elimination

            

Net sales

   ¥ (4,436     ¥ (5,413     $ (65,217  

Operating expenses

     65,188          64,897          781,891     

Operating income (loss)

   ¥ (69,624     ¥ (70,310     $ (847,108  

Consolidated

            

Net sales

   ¥ 2,016,337        100.0   ¥ 1,942,013        100.0   $ 23,397,747        (3.7

Operating expenses

     1,950,340        96.7        1,881,817        96.9        22,672,494        (3.5

Operating income

   ¥ 65,997        3.3   ¥ 60,196        3.1   $ 725,253        (8.8

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2011,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2011, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥83 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2011.
(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 & Solutions operating segment and the Other operating segment reflect sales to external customers only, as none of the products in the Imaging & 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 & 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 2011 decreased by 3.7% (or ¥74.3 billion) to ¥1,942.0 billion from ¥2,016.3 billion for fiscal year 2010.

This 3.7% percent decrease was due primarily to the 4.3% decrease in sales in the Imaging and Solutions segment, which accounted for 88.2% of consolidated net sales. The 4.3% decrease in sales in the Imaging and Solutions segment was in turn due primarily to the 5.7% decrease in sales in the Imaging Solutions product category, which accounted for 73.6% of consolidated net sales. The 5.7% decrease in sales in the Imaging Solutions product category was partially offset by the 3.4% increase in net sales in the Network System Solutions product category.

 

-48-


Table of Contents

Imaging & Solutions

Net sales in the Imaging & Solutions segment for fiscal year 2011 decreased by 4.3% (or ¥76.9 billion) to ¥1,713.3 billion from ¥1,790.2 billion for fiscal year 2010. 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 2011 decreased by 5.7% (or ¥86.3 billion) to ¥1,429.8 billion from ¥1,516.1 billion for fiscal year 2010. 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 in a slowly recovering economic environment as well as customers’ tendencies to decrease printing costs by reducing the volume of color printing, which decreased sales of value-added supplies for color products. In addition, Ricoh’s decision to lower sales prices of certain products to stimulate sales in the sluggish and competitive market also contributed to the decrease in net sales.

Sales in the Network System Solutions product category for fiscal year 2011 increased by 3.4% (or ¥9.4 billion) to ¥283.4 billion from ¥274.0 billion for fiscal year 2010. 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 2011. 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, with the assistance from IKON, Ricoh increased sales in its MDS business in the U.S., Europe and Japan in fiscal year 2011.

Excluding the net effect of the foreign currency exchange rate fluctuations, sales in the Imaging & Solutions segment would have increased by 1.8% (or ¥32.7 billion) for fiscal year 2011 as compared to fiscal year 2010.

For fiscal year 2011, the cost of sales in the Imaging & Solutions segment decreased due primarily to the decrease in net sales, group-wide cost reduction efforts in manufacturing and the net effect of the appreciation of the Japanese Yen relative to the U.S. Dollar and the Euro. However lower pricing which resulted from high competition affected to decrease in gross profit. Due primarily to group-wide cost reduction efforts in 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, selling, general and administrative expenses decreased. As a result, operating expenses in the Imaging & Solutions segment for fiscal year 2011 decreased by 4.3% (or ¥70.9 billion) to ¥1,578.8 billion from ¥1,649.8 billion for fiscal year 2010.

As a result of the above, operating income for the Imaging & Solutions operating segment for fiscal year 2011 decreased by 4.3% (or ¥6.0 billion) to ¥134.4 billion from ¥140.4 billion for fiscal year 2010, however, the operating income ratio remained unchanged at 7.8%.

 

-49-


Table of Contents

Industrial Products

Net sales in the Industrial Products segment for fiscal year 2011 increased by 5.8% (or ¥6.1 billion) to ¥112.2 billion from ¥106.1 billion for fiscal year 2010. This increase was due primarily to the increase in sales of optical equipment and electronic components. In optical equipment, sales of lens used in projection systems increased. In electronic components, Ricoh experienced an increase in net sales because the domestic market for systems controller units showed signs of recovery in fiscal year 2011.

Operating expenses in this segment for fiscal year 2011 increased by 3.5% (or ¥3.7 billion) to ¥111.2 billion from ¥107.4 billion for fiscal year 2010. This increase was due primarily to the increase in cost of sales resulting from the increase in net sales. In addition, the cost of sales ratio of optical equipments and electronic components to net sales improved as a result of the group-wide cost reduction efforts. In addition, sales of electronic component products with higher gross profit ratios increased, which contributed to the overall increase in gross profit. Due to group-wide cost reduction efforts in 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, selling, general and administrative expenses decreased.

As a result of the above, operating income (loss) for the Industrial Products segment for fiscal year 2011 was ¥1.0 billion (of income) from ¥1.3 billion (of loss) for fiscal year 2010.

Other

Net sales in the Other segment for fiscal year 2011 decreased by 2.0% (or ¥2.5 billion) to ¥121.8 billion from ¥124.4 billion for fiscal year 2010. This decrease was due primarily to the decrease in net sales of digital cameras in the overseas market as customer demand for Ricoh’s new digital camera products was weak. Net sales from the financing business conducted by Ricoh Leasing Co., Ltd. in Japan increased as leasing volume increased during fiscal year 2011 reflecting the fact that the Japanese economy experienced a moderate recovery. Net sales from logistics also increased due to an increase in services provided to dealers of PPCs/MFPs. Such net sales increases derived from the finance and logistics businesses, however, did not completely offset the decrease in net sales of digital cameras.

Operating expenses in this segment for fiscal year 2011 decreased by 0.8% (or ¥1. 0 billion) to ¥126.7 billion from ¥127.8 billion for fiscal year 2010. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. However, the increase in gross profit was offset by the increase in selling, general and administrative expenses due primarily to advertisement expenses used to promote the new digital cameras introduced in fiscal year 2011.

As a result of the above, operating loss for the Other segment for fiscal year 2011 increased by ¥1.4 billion to ¥4.9 billion as compared to ¥3.4 billion for fiscal year 2010.

 

-50-


Table of Contents

Geographic Segments by Geographic Origin

 

     Millions of Yen (except for percentages)     Thousands of
U.S. Dollars
    % Change  
     2010     2011     2011(1)    

Japan

            

Net sales

   ¥ 1,273,437        100.0   ¥ 1,286,323        100.0   $ 15,497,867        1.0   

Operating expenses

     1,240,361        97.4        1,256,422        97.7        15,137,614        1.3   

Operating income

   ¥ 33,076        2.6   ¥ 29,901        2.3   $ 360,253        (9.6

The Americas

            

Net sales

   ¥ 560,021        100.0   ¥ 524,889        100.0   $ 6,323,964        (6.3

Operating expenses

     571,884        102.1        528,553        100.7        6,368,109        (7.6

Operating income (loss)

   ¥ (11,863     (2.1 )%    ¥ (3,664     (0.7 )%    $ (44,145     —     

Europe

            

Net sales

   ¥ 463,013        100.0   ¥ 419,672        100.0   $ 5,056,289        (9.4

Operating expenses

     432,822        93.5        391,909        93.4        4,721,795        (9.5

Operating income

   ¥ 30,191        6.5   ¥ 27,763        6.6   $ 334,494        (8.0

Other

            

Net sales

   ¥ 245,987        100.0   ¥ 273,406        100.0   $ 3,294,048        11.1   

Operating expenses

     231,646        94.2        261,005        95.5        3,144,638        12.7   

Operating income

   ¥ 14,341        5.8   ¥ 12,401        4.5   $ 149,410        (13.5

Corporate and Elimination

            

Net sales

   ¥ (526,121     ¥ (562,277     $ (6,774,422  

Operating expenses

     (526,373       (556,072       (6,699,663  

Operating income (loss)

   ¥ 252        ¥ (6,205     $ (74,759  

Consolidated

            

Net sales

   ¥ 2,016,337        100.0   ¥ 1,942,013        100.0   $ 23,397,747        (3.7

Operating expenses

     1,950,340        96.7        1,881,817        96.9        22,672,494        (3.5

Operating income

   ¥ 65,997        3.3   ¥ 60,196        3.1   $ 725,253        (8.8

 

Notes:

(1) The above consolidated financial data set forth under the heading “Thousands of U.S. Dollars 2011,” which have been translated from Japanese Yen to U.S. Dollar for the fiscal year ended March 31, 2011, are included solely for the convenience of readers outside of Japan and have been calculated using the exchange rate of ¥83 to US$1, the approximate rate of exchange prevailing at the Federal Reserve Board on March 31, 2011.
(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 2011 increased by 1.0% (or ¥12.8 billion) to ¥1,286.3 billion from ¥1,273.4 billion for fiscal year 2010. This increase was due primarily to the increase in exports from Japan as a result of increased demand in the overseas markets. Increased sales of semiconductor devices as well as optical equipment also contributed to the increase in sales in Japan. Such increases in sales were partially offset by the decrease in net sales of PPCs/MFPs and laser printers, which was due primarily to (1) the decrease in customer demand for such Ricoh products in light of the slowly recovering economic environment and (2) customers’ tendencies to decrease printing costs by reducing the volume of color printing, which decreased sales of value-added supplies for color products. Furthermore, 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.

 

-51-


Table of Contents

Operating expenses in Japan for fiscal year 2011 increased by 1.3% (or ¥16.0 billion) to ¥ 1,256.4 billion from ¥1,240.3 billion for fiscal year 2010. This increase was due primarily to the increase in cost of sales resulting from the increase in net sales. Selling, general and administrative expenses decreased due primarily to ongoing operating expenditures as a result of Ricoh’s group-wide cost reduction efforts. Due primarily to the appreciation of the Japanese Yen against the U.S. Dollar and the Euro, operating income ratio decreased from 2.6% to 2.3%.

In addition, as a result of the Great East Japan Earthquake on March 11, 2011, Ricoh suffered damages to its equipment, manufacturing, sales, services and R&D sites in the affected areas. Although Ricoh established a taskforce for emergency disaster control shortly after the earthquake took place and worked hard to achieve full recovery, the sales and shipments of products were delayed widely in Japan due to the disruption to the transportation infrastructure as well as the shortage of supply of fuel. The effect of the earthquake on Ricoh’s financial results for fiscal year 2011 is estimated to be approximately ¥9.4 billion of operating losses consisting of the following: (1) estimated lost profits due to lost business opportunities amounting to ¥4.4 billion, (2) bad debt expense for trade receivables and finance receivables amounting to ¥3.4 billion, (3) losses due to write-downs of inventories and property, plant and equipment amounting to ¥1.2 billion and (4) other amounting to ¥0.4 billion.

As a result of the above, operating income in Japan for fiscal year 2011 decreased by 9.6% (or ¥3.1 billion) to ¥29.9 billion from ¥33.0 billion for fiscal year 2010.

The Americas

Net sales in the Americas for fiscal year 2011 decreased by 6.3% (or ¥35.1 billion) to ¥524.8 billion from ¥560.0 billion for fiscal year 2010. Although net sales in the Americas increased due primarily to the improved sales structure and expanded sales channel Ricoh gained through its acquisition of IKON, overall sales in the Americas segment decreased due to the appreciation of the Japanese Yen against the U.S. Dollar.

Operating expenses in the Americas for fiscal year 2011 decreased by 7.6% (or ¥43.3 billion) to ¥528.5 billion from ¥571.8 billion for fiscal year 2010. This decrease in operating expenses was due primarily to synergies derived from IKON’s successful efforts in getting customers to switch to Ricoh products from other manufacturers’ products.

As a result of the above, operating loss for fiscal year 2011 decreased by ¥8.1 billion to ¥3.6 billion from ¥11.8 billion for fiscal year 2010.

Europe

Sales in Europe for fiscal year 2011 decreased by 9.4% (or ¥43.3 billion) to ¥419.6 billion from ¥463.0 billion for fiscal year 2010. This decrease in sales was due primarily to the appreciation of the Japanese Yen against the Euro.

Operating expenses in Europe for fiscal year 2011 decreased by 9.5% (or ¥40.9 billion) to ¥391.9 billion from ¥432.8 billion for fiscal year 2010. This decrease was due primarily to the decrease in cost of sales resulting from the decrease in net sales. In addition, selling, general and administrative expenses decreased at a higher percentage of decrease than the decrease in net sales due mainly to the decrease in ongoing operating expenditures as a result of Ricoh’s group-wide cost reduction efforts.

 

-52-


Table of Contents

As a result of the above, operating income for fiscal year 2011 decreased by 8.0% (or ¥2.4 billion) to ¥27.7 billion from ¥30.1 billion for fiscal year 2010; however, the operating income ratio improved by 0.1 percentage points from 6.5% to 6.6%.

Other

Net sales in the Other geographic segment, which includes China, Southeast Asia and Oceania, increased for fiscal year 2011 by 11.1% (or ¥27.4 billion) to ¥273.4 billion from ¥245.9 billion for fiscal year 2010. This increase was due primarily to the increase in sales in the emerging markets, including China and India. Ricoh strengthened its sales force mainly in such emerging markets to respond to increased customer demand. Consequently, despite the appreciation of the Japanese Yen, sales in the Other geographic segment increased.

Operating expenses in the Other geographic segment for fiscal year 2011 increased by 12.7% (or ¥29.3 billion) to ¥261.0 billion from ¥231.6 billion for fiscal year 2010. This increase was due primarily to the increase in cost of sales resulting from the increase in sales. Selling, general and administrative expenses also increased due mainly to prior investment for future growth and the appreciation of the Japanese Yen.

As a result of the above, operating income for fiscal year 2011 decreased by 13.5% (or ¥1.9 billion) to ¥12.4 billion from ¥14.3 billion for fiscal year 2010.

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%.

 

-53-


Table of Contents

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%.

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’ tendencies 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.

 

-54-


Table of Contents

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.

 

-55-


Table of Contents

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.

 

-56-


Table of Contents

Operating Segments

 

     Millions of Yen (except for percentages)     % Change  
     2009     2010    

Imaging & Solutions

          

Net sales

   ¥ 1,833,098        100.0   ¥ 1,790,243        100.0     (2.3

Operating expenses

     1,687,732        92.1     1,649,820        92.2     (2.2

Operating income

   ¥ 145,366        7.9   ¥ 140,423        7.8     (3.4

Industrial Products

          

Net sales

   ¥ 119,671        100.0   ¥ 106,128        100.0     (11.3

Operating expenses

     124,597        104.1        107,483        101.3        (13.7

Operating income (loss)

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

Other

          

Net sales

   ¥ 143,048        100.0   ¥ 124,402        100.0     (13.0

Operating expenses

     142,690        99.7        127,849        102.8        (10.4

Operating income

   ¥ 358        0.3   ¥ (3,447     (2.8 )%      —     

Corporate and Elimination

          

Net sales

   ¥ (4,121     ¥ (4,436    

Operating expenses

     62,141          65,188       

Operating income (loss)

   ¥ (66,262     ¥ (69,624    

Consolidated

          

Net sales

   ¥ 2,091,696        100.0   ¥ 2,016,337        100.0     (3.6

Operating expenses

     2,017,160        96.4        1,950,340        96.7        (3.3

Operating income

   ¥ 74,536        3.6   ¥ 65,997        3.3     (11.5

 

Notes:

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 & Solutions operating segment and the Other operating segment reflect sales to external customers only, as none of the products in the Imaging & 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 & 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.

 

-57-


Table of Contents

Imaging & Solutions

Net sales in the Imaging & 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 & Solutions segment would have increased by 2.8% (or ¥51.2 billion) for fiscal year 2010 as compared to fiscal year 2009.

 

-58-


Table of Contents

For fiscal year 2010, the cost of sales in the Imaging & 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 & 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 & 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.

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.

 

-59-


Table of Contents

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.

Geographic Segments by Geographic Origin

 

     Millions of Yen (except for percentages)     % Change  
     2009     2010    

Japan

          

Net sales

   ¥ 1,393,196        100.0   ¥ 1,273,437        100.0     (8.6

Operating expenses

     1,331,638        95.6        1,240,361        97.4        (6.9

Operating income

   ¥ 61,558        4.4   ¥ 33,076        2.6     (46.3

The Americas

          

Net sales

   ¥ 506,789        100.0   ¥ 560,021        100.0     10.5   

Operating expenses

     532,734        105.1        571,884        102.1        7.3   

Operating income (loss)

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

Europe

          

Net sales

   ¥ 523,539        100.0   ¥ 463,013        100.0     (11.6

Operating expenses

     504,116        96.3        432,822        93.5        (14.1

Operating income

   ¥ 19,423        3.7   ¥ 30,191        6.5     55.4   

Other

          

Net sales

   ¥ 265,644        100.0   ¥ 245,987        100.0     (7.4

Operating expenses

     252,951        95.2        231,646        94.2        (8.4

Operating income

   ¥ 12,693        4.8   ¥ 14,341        5.8     13.0   

Corporate and Elimination

          

Net sales

   ¥ (597,472     ¥ (526,121    

Operating expenses

     (604,279       (526,373    

Operating income

   ¥ 6,807        ¥ 252       

Consolidated

          

Net sales

   ¥ 2,091,696        100.0   ¥ 2,016,337        100.0     (3.6

Operating expenses

     2,017,160        96.4        1,950,340        96.7        (3.3

Operating income

   ¥ 74,536        3.6   ¥ 65,997        3.3     (11.5

 

Notes:

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.

 

-60-


Table of Contents

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.

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%.

 

-61-


Table of Contents

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 Other 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.

 

-62-


Table of Contents

B. Liquidity and Capital Resources

Cashflows

The following table summarizes Ricoh’s cashflows for each of the three fiscal years ended March 31, 2009, 2010 and 2011, as reported in the Consolidated Statements of Cashflows in the accompanying Consolidated Financial Statements.

 

     (Billions of Yen)
For the year ended March 31,
 
     2009     2010     2011  

Net cash provided by operating activities

     87.4        190.7        130.0   

Net cash used in investing activities

     (283.1     (89.5     (92.0

Net cash provided by (used in) financing activities

     295.9        (113.3     (92.1

Net increase (decrease) in cash and cash equivalents

     87.8        (16.3     (62.9

Cash and cash equivalents at beginning of year

     170.6        258.4        242.1   

Cash and cash equivalents at end of year

     258.4        242.1        179.1   

Operating Cashflows

As compared to fiscal year 2010, net cash provided by operating activities during fiscal year 2011 decreased by ¥60.6 billion primarily due to a decrease in cash collections from customers in Japan resulting from a) lower customer demand for PPCs/MFPs, laser printers and semiconductor devices due to the economic downturn, and b) a decrease in the sales price of certain products due to high competition. In addition, further appreciation of the Yen against the U.S. Dollar and the Euro resulted in decrease of overseas sales and resulting cash collections from customers.

As compared to fiscal year 2009, net cash provided by operating activities during fiscal year 2010 increased by ¥103.3 billion primarily due to the Company’s cost reduction program in order to cope with the downturn in economy, which resulted in lower cash expended for inventory and other operating costs and expenses. In addition, the acquisition of IKON in October 2008, which had a full year impact on net cash flow increases in fiscal 2010, compared to a partial year impact in fiscal 2009.

Investing Cashflows

For fiscal year 2011, net cash used in investing activities consisted mainly of ¥66.9 billion of expenditures for tangible fixed assets and ¥18.8 billion of expenditures for intangible fixed assets. Principal expenditures for tangible fixed assets in fiscal year 2011 consisted of ¥8.1 billion for the new building housing the Ricoh Technology Center, ¥4.6 billion for the second plant manufacturing polymerized PxP toners and ¥5.6 billion for mold casts used in the manufacturing of MFPs, production printing equipment and printers. Principal expenditures for intangible fixed assets in fiscal year 2011 were ¥7.9 billion for Enterprise Resource Planning (ERP) system, which is aimed to improve the efficiency of sales administration and accounting across the group. Net cash used in investing activities increased in fiscal year 2011 compared to fiscal year 2010 primarily because expenditures for intangible fixed assets increased, which was due mainly to Ricoh’s investment in the ERP system.

 

-63-


Table of Contents

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.

Financing Cashflows

For fiscal year 2011, net cash used in financing activities consisted primarily of ¥87.9 billion to repay outstanding long-term debt securities, ¥87.1 billion to repay outstanding long-term indebtedness, ¥30.7 billion of net decrease in short-term borrowings and ¥23.9 billion to pay dividends, which were partially offset by ¥79.7 billion of proceeds received from the issuance of long-term debt securities and ¥58.6 billion of proceeds received from long-term indebtedness. The Company issued the 9th series of unsecured straight bonds in the amount of ¥40.0 billion and the 10th series of unsecured straight bonds in the amount of ¥20.0 billion in June 2010. Ricoh Leasing Co., Ltd. issued the 13th series of unsecured straight bonds in the amount of ¥20.0 billion in May 2010. Proceeds from the issuance of long-term debt securities totaled ¥79.7 billion net of issuance costs. In December 2010, ¥52.8 billion aggregate principal amount of zero coupon convertible bonds (constituting a portion of the total outstanding principal amount thereof) were redeemed before maturity, upon the exercise of put options granted to the holders of the bonds. Ricoh redeemed bonds issued by IKON by tender offer before maturity in the amount of ¥25.1 billion. Ricoh Leasing Co., Ltd. repaid unsecured straight bonds in the amount of ¥10.0 billion in December 2010 upon maturity. Repayments of long-term debt securities totaled ¥87.9 billion. For long-term indebtedness and short-term borrowings, Ricoh continued its efforts to decrease interest bearing debts worldwide. As a result, repayment of long-term indebtedness totaled ¥87.1 billion, short-term borrowings decreased by ¥30.7 billion net, while proceeds from long-term indebtedness totaled ¥58.6 billion. As compared to fiscal year 2010, net cash used in financing activities decreased in fiscal year 2011 primarily because short-term borrowings decreased by a smaller amount in fiscal year 2011 compared to fiscal year 2010.

For fiscal year 2010, net cash used in financing activities consisted primarily of ¥105.2 billion of net decrease in short-term borrowings, ¥66.5 billion to repay long-term indebtedness, ¥22.8 billion to pay dividends and ¥20.0 billion to repay outstanding long-term debt securities, which were partially offset by ¥55.0 billion of proceeds received from the issuance of 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.

 

-64-


Table of Contents

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.

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, the United Kingdom 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 currency 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.

 

-65-


Table of Contents

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 balances of cash and cash equivalents in the balance sheet and operating cashflows in the cashflow statements.

As of March 31, 2011, Ricoh had ¥179.1 billion in cash and cash equivalents and ¥685.0 billion in aggregate borrowing facilities. Of the ¥685.0 billion in aggregate borrowing facilities, ¥637.4 billion was available to be borrowed by Ricoh as of March 31, 2011. As of March 31, 2011, amount available by bank loans, commercial paper and medium-term notes were ¥294.3 billion, ¥260.0 billion and ¥83.1 billion, respectively. More specifically, Ricoh Leasing Co., Ltd. has a ¥50.0 billion committed credit line with several banks having credit ratings satisfactory to Ricoh. This ¥50.0 billion committed credit line amount is included in the ¥685.0 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 0.25% to 0.30%, interest rates for bank loans ranged from 0.41% to 11.95% and interest rates for long-term debt securities ranged from 0.57% to 7.30% during fiscal year 2011. For fiscal year 2011, 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. Ricoh is also of the opinion its working capital is sufficient for its present requirements.

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, 2011, 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.

 

-66-


Table of Contents

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, 2011. The Company is not subject to any covenants limiting its ability to incur additional indebtedness. For additional detail regarding these securities, see Note [11] to the Consolidated Financial Statements.

Cash Requirements and Commitments

Ricoh believes that its cash and cash equivalents and funds expected to be generated from its operations are sufficient to meet its cash requirements at least through fiscal year 2012. 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, 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 2012 will amount to approximately ¥67.0 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 is obligated to repay long-term indebtedness in the aggregate principal amount of ¥111.0 billion during fiscal year 2012, and in the aggregate principal amount of ¥346.2 billion during fiscal years 2013 through 2015.

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 ¥140.9 billion, as of March 31, 2011. The unfunded amount was recorded as an asset of ¥7.1 billion and a liability of ¥148.0 billion on the consolidated balance sheet of Ricoh as of March 31, 2011. The amounts contributed to pension plans for fiscal years 2009, 2010 and 2011 were ¥14.7 billion, ¥14.5 billion and ¥14.4 billion, respectively.

 

-67-


Table of Contents

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.

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 2009, 2010 and 2011, Ricoh’s consolidated R&D expenditures totaled ¥124.4 billion, ¥109.8 billion and ¥110.8 billion, respectively.

Out of total consolidated R&D expenditures of ¥110.8 billion for fiscal year 2011, ¥81.7 billion was used for R&D activities relating to the Imaging & Solutions segment. Ricoh’s R&D activities in the Imaging & 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.

 

-68-


Table of Contents

Out of total consolidated R&D expenditures of ¥110.8 billion for fiscal year 2011, ¥10.3 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 ¥110.8 billion for fiscal year 2011, ¥2.3 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 ¥110.8 billion for fiscal year 2011, ¥16.5 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 2009, 2010 and 2011, see Note [21] to the Consolidated Financial Statements.

Patents and Licenses

Ricoh owns approximately 37,200 patents as of March 31, 2011, 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.

 

-69-


Table of Contents

The following table lists some of the important patent and licensing agreements which the Company is currently a party to:

 

Counterparty

   Country
and
Region
  

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

Quantum Storage Inc.

   Taiwan    Patent licensing agreement relating to optical disc (the Company as the licensor)    February 22, 2011 to February 22, 2016

D. Trend Information

See “OVERVIEW” above and “Cautionary Statement With Respect to Forward-Looking Statements” in this Annual Report. Also, Ricoh does not expect the impact of the Great East Japan Earthquake that occurred on March 11, 2011 to have any material adverse effect on Ricoh’s fiscal 2012 consolidated results, financial position and cash flows.

 

-70-


Table of Contents

E. Off-Balance Sheet Arrangements

As disclosed in Note [4] 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. 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, until fiscal year 2010, when securitizing assets in this manner, Ricoh did not have any exposed assets or contingent liabilities other than those recognized as subordinated residual interests on Ricoh’s consolidated balance sheets. In fiscal year 2011, Ricoh adopted ASU 2009-16 and ASU 2009-17. As a result of the adoption, Ricoh consolidated these interests as VIEs and recorded their assets and liabilities at their carrying amounts as of the beginning of fiscal year 2011, and offset and eliminated its retained interests.

Please refer to Note [2](u) and [4] to the Consolidated Financial Statements for more details.

In addition to the above, Ricoh acts as a guarantor for some of its employees’ housing loans, whose arrangements are not included on Ricoh’s consolidated balance sheets. As of March 31, 2011, the total amount of such guarantees was ¥72 million.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth Ricoh’s contractual obligations as of March 31, 2011.

 

     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

   ¥ 588,167       ¥ 110,282       ¥ 244,508       ¥ 180,352       ¥ 53,025   

Interest Expense Associated with Long-term Debt Obligations

     18,297         6,149         7,702         3,301         1,145   

Capital (Finance) Lease Obligations

     2,351         814         1,441         96         —     

Operating Lease Obligations

     76,807         21,363         32,667         15,262         7,515   

Purchase Obligations

     32,791         32,791         —           —           —     
                                            

TOTAL

   ¥ 718,413       ¥ 171,399       ¥ 286,318       ¥ 199,011       ¥ 61,685   
                                            

Ricoh expects to contribute ¥12.0 billion to its pension plan during fiscal year 2012 and is currently unable to predict funding requirements for periods beyond fiscal year 2012 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 ¥46.7 billion for fiscal year 2011.

G. Safe Harbor

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

 

-71-


Table of Contents

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Directors and Corporate Auditors of the Company as of June 24, 2011 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 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

June 1994

  

President of Ricoh Europe B.V.

Managing Director

      Apr. 1996   

President and Representative Director

     

June 2005

June 2005

  

Representative Director

President

      June 2005   

Chairman of the Board (Current)

      Apr. 2007   

Chairman (Current)

      Apr. 2011   

Director (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.

Director of Yamaha Motor Co., Ltd.

 

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

Oct. 2004

  

In charge of Imaging Engine Solution Development

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

 

-72-


Table of Contents

Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Zenji Miura

(January 5, 1950)

  

Representative Director

   Apr. 1976   

Joined the Company

      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

      June 2005   

Corporate Executive Vice President

      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

      Apr. 2009   

Deputy General Manager of Global Marketing Taskforce

      June 2009   

General Manager of Global Marketing Support Division

      June 2009   

General Manager of Trade Affairs & Export/Import Administration Division

      Apr. 2011   

Representative Director (Current)

      Apr. 2011   

Deputy President (Current)

  

 

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

  

Corporate Auditor of COCA-COLA WEST COMPANY, LIMITED

 

Takashi Nakamura

(September 2, 1946)

  

Director

   Apr. 1972   

Joined the Company

      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

Jan. 2006

  

Corporate Executive Vice President

CHO (Chief Human Resource Officer) (Current)

      Apr. 2008   

General Manager of Personnel Division

      Apr. 2010   

In charge of Corporate Social Responsibility (Current)

      Apr. 2011   

Deputy President (Current)

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

Corporate Auditor of TOYO KANETSU K.K.

 

-73-


Table of Contents

Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Kazunori Azuma

(February 11, 1949)

  

Director

   Apr. 1971   

Joined the Company

      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

      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)

Hiroshi Kobayashi

(July 2, 1948)

  

Director

   Apr. 1974   

Joined the Company

      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)

      Apr. 2011   

Chairman of Ricoh Innovation, Inc. (Current)

 

-74-


Table of Contents

Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Shiro Sasaki

(December 23, 1949)

  

Director

   Apr. 1972   

Joined the Company

      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

Apr. 2006

Apr. 2006

  

Corporate Senior Vice President

Chairman of Ricoh Europe B.V.

Chairman of NRG Group PLC

     

Apr. 2007

Apr. 2007

  

Chairman of Ricoh Europe, PLC.

Chairman of Ricoh Europe (Netherlands) B.V.

      June 2009   

General Manager of Europe Marketing Group

      June 2010   

Director (Current)

      Apr. 2011   

Corporate Executive Vice President (Current)

      Apr. 2011   

General Manager of Production Printing Business Group (Current)

      Apr. 2011   

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

      Apr. 2011   

Chairman and CEO (Chief Executive Office) of Ricoh Production Print Solutions, LLC (Current)

Yoshimasa Matsuura

(June 23, 1947)

  

Director

   Apr. 1971   

Joined the Company

      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

June 2005

  

Deputy General Manager of MFP Business Group

Corporate Vice President

     

Apr. 2007

Apr. 2007

  

Corporate Senior Vice President

General Manager of MFP Business Group

      Apr. 2008   

General Manager of Controller Development Division

      June 2010   

Director (Current)

      June 2010   

Corporate Executive Vice President (Current)

      July 2010   

General Manager of Business Process Reengineering Group (Current)

Nobuo Inaba

(November 11, 1950)

  

Director

   Apr. 1974   

Joined the Bank of Japan

      June 2001   

Director-General, Information System Services Department

      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)

 

-75-


Table of Contents

Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Kazuo Togashi

(November 28, 1949)

  

Director

   Apr. 1972   

Joined the Company

      Apr. 1998   

President of Ricoh Europe B.V.

      June 2000   

Senior Vice President

      Apr. 2002   

Chairman of Ricoh Europe B.V.

      Apr. 2002   

Chairman of NRG Group PLC

      June 2002   

Executive Vice President

      June 2003   

Managing Director

      June 2005   

Corporate Senior Vice President

      Apr. 2006   

General Manager of International Business Group

      Jan. 2007   

Chairman of Ricoh India Ltd.

      Jan. 2008   

Chairman of Ricoh China Co., Ltd.

      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)

      July 2010   

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

      June 2011   

Director (Current)

      June 2011   

Corporate Executive Vice President (Current)

Eiji Hosoya

(February 24, 1945)

  

Director

   Apr. 1968   

Joined Japanese National Railways

      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

June 2000

  

Executive Vice President of East Japan Railway Company

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)

 

-76-


Table of Contents

Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Mochio Umeda

(August 30, 1960)

  

Director

   Jan. 1988   

Joined Arthur D. Little (Japan) Inc.

      Oct. 1994   

Director of Arthur D. Little, Inc.

     

May 1997

May 1997

  

Founded MUSE Associates, LLC.

President of MUSE Associates, LLC. (Current)

     

Aug. 2000

Aug. 2000

  

Founded Pacifica Fund I, LP.

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

      June 2010   

Director (Current)

Yuji Inoue

(April 4, 1948)

  

Corporate Auditor

   Apr. 1971   

Joined the Company

      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)

Mitsuhiro Shinoda

(November 23, 1953)

  

Corporate Auditor

   Apr. 1978   

Joined the Company

      Oct. 2000   

General Manager of Group Management Department of Corporate Planning Division

      Apr. 2001   

General Manager of Audit Office

      June 2003   

General Manager of Finance Department of Finance and Accounting Division

      Nov. 2004   

General Manager of Internal Management & Control Office of Finance and Accounting Division

      Apr. 2007   

General Manager of Internal Management & Control Division

      July 2010   

General Manager of Management Center Chubu Sales Division of Ricoh Japan Corporation

      June 2011   

Corporate Auditor (Current)

 

-77-


Table of Contents

Name
(Date of Birth)

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Takao Yuhara

(June 7, 1946)

  

Corporate Auditor

   Apr. 1969   

Joined Nippon Chemical Industrial Co., Ltd.

      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)

 

-78-


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 38 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 24, 2011 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.

Zenji Miura

(January 5, 1950)

  

Deputy President

  

See above for his business experience and other information.

  

(Chief Financial Officer)

(Chief Information Officer)

(Chief Strategy Officer)

(Internal Management and Control Division)

     
        
        
        

Takashi Nakamura

(September 2, 1946)

  

Deputy President

  

See above for his business experience and other information.

  

(Chief Human Resource Officer)

(Corporate Social Responsibility)

  

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)

     

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.)

(Chairman of Ricoh Innovations, Inc.)

     

 

-79-


Table of Contents

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.
  

(General Manager of Production Printing Business Group)

     
  

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

     
  

(Chairman and CEO (Chief Executive Officer) of Ricoh Production Print Solutions LLC

     
Yoshimasa Matsuura (June 23, 1947)   

Corporate Executive Vice President

   See above for his business experience and other information.
  

(General Manager of Business Process Reengineering Group)

     

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

(October 28, 1947)

  

Corporate Senior Vice President

(General Manager of Research and Development Group)

   Jan. 1988    Joined the Company
      Jan. 1990    Deputy General Manager of Electronic Devices Division
     

June 2000

Oct. 2000

  

Senior Vice President

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.
      Apr. 2009   

General Manager of Research and Development Group (Current)

Kenji Hatanaka

(July 1, 1946)

  

Corporate Senior Vice President

(General Manager of Japan Marketing Group

   Apr. 1969    Joined the Company
      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
      July 2010    President of Ricoh Japan Corporation (Current)
      July 2010    General Manager of Japan Marketing Group (Current)

 

-80-


Table of Contents

Name

  

Current Position
(Function/Business area)

  

Date

  

Business Experience

Kenichi Kanemaru

(November 19, 1952)

  

Corporate Senior Vice President

(General Manager of Global Procurement Division)

   Apr. 1973   

Joined the Company

      Apr. 1998   

General Manager of Production Strategic Center

     

June 1999

June 2004

  

President of Ricoh UK Products Ltd.

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

      Apr. 2008   

General Manager of Office Machine Division of Production Business Group

      Oct. 2010   

General Manager of Global Procurement taskforce

      Feb. 2011   

General Manager of Global Procurement Division (Current)

Hisashi Takata

(May 20, 1951)

  

Corporate Senior Vice President

(Deputy General Manager of Global Marketing Group)

(Chairman of Ricoh China Co., Ltd.)

(General Manager of China & Emerging Markets Strategy Center of Global Marketing Group)

   Apr. 1974   

Joined the Company

      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

      Nov. 2010   

General Manager of Printer Business Group

      Jan. 2011   

General Manager of China & Emerging Markets Strategy Center of Global Marketing Group (Current)

      Jan. 2011   

General Manager of Service & Support Center of Global Marketing Group

 

-81-


Table of Contents

Name