0000317891-11-000010.txt : 20110815 0000317891-11-000010.hdr.sgml : 20110815 20110812210506 ACCESSION NUMBER: 0000317891-11-000010 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20110812 FILED AS OF DATE: 20110815 DATE AS OF CHANGE: 20110812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RICOH CO LTD CENTRAL INDEX KEY: 0000317891 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 000000000 STATE OF INCORPORATION: M0 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-68279 FILM NUMBER: 111032882 BUSINESS ADDRESS: STREET 1: 13-1, GINZA 8-CHOME STREET 2: CHUO-KU CITY: TOKYO 104-8222 JAPAN STATE: M0 ZIP: 00000 BUSINESS PHONE: 81-3-6278-5241 MAIL ADDRESS: STREET 1: 13-1, GINZA 8-CHOME STREET 2: CHUO-KU CITY: TOKYO 104-8222 JAPAN STATE: M0 ZIP: 00000 6-K 1 r6k110812.txt 1ST QUARTERLY SECURITIES REPORT FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 REPORT OF FOREIGN PRIVATE ISSUER Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of August 2011 Commission File Number 2 - 68279 RICOH COMPANY, LTD. ----------------------------------------------- (Translation of Registrant's name into English) 13-1, Ginza 8-Chome, Chuo-ku, Tokyo 104-8222, Japan --------------------------------------------------- (Address of Principal Executive Offices) (Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.) Form 20-F X Form 40-F __ (Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): __ ) (Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): __ ) (Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.) Yes __ No X (If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-__ ) -------------------------------------------------------------------------------- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Ricoh Company, Ltd. ------------------------------ (Registrant) By: /S/ Zenji Miura ------------------------------ Zenji Miura Director, Chief Financial Officer Corporate Executive Vice President August 12, 2011 -------------------------------------------------------------------------------- RICOH COMPANY, LTD. Consolidated Financial Statements for the First Quarter Ended June 30, 2011 This is an English translation of the Quarterly Securities Report (Shihanki Hokokusho) for the first quarter ended June 30, 2011 pursuant to the Japanese Financial Instrument and Exchange Law. Ricoh Company, Ltd. and Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS March 31, 2011 and June 30, 2011
Millions of Yen --------------------- March 31, June 30, ASSETS 2011 2011 ------------------------------------------------------------------------------------------------ Current assets: Cash and cash equivalents 179,169 168,468 Time deposits 2,010 2,244 Trade receivables: Notes 46,355 43,719 Accounts 419,351 411,303 Less- Allowance for doubtful receivables (16,560) (14,776) Current maturities of long-term finance receivables, net 208,671 207,826 Inventories: Finished goods 85,800 97,145 Work in process and raw materials 85,233 89,467 Deferred income taxes and other 63,990 64,734 ------------------------------------------------------------------------------------------------ Total current assets 1,074,019 1,070,130 ------------------------------------------------------------------------------------------------ Property, plant and equipment, at cost: Land 44,444 44,465 Buildings 262,523 267,482 Machinery and equipment 737,270 759,164 Construction in progress 5,230 5,061 ------------------------------------------------------------------------------------------------ Total 1,049,467 1,076,172 Less- accumulated depreciation (784,727) (813,478) ------------------------------------------------------------------------------------------------ Net property, plant and equipment 264,740 262,694 ------------------------------------------------------------------------------------------------ Investments and other assets: Long-term finance receivables, net 445,782 446,879 Investment securities 48,909 47,807 Investments in and advances to affiliates 213 336 Goodwill 221,063 219,603 Other intangible assets 130,648 125,168 Lease deposits and other 77,022 84,487 ------------------------------------------------------------------------------------------------ Total investments and other assets 923,637 924,280 ------------------------------------------------------------------------------------------------ Total assets 2,262,396 2,257,104 ================================================================================================
1
Millions of Yen ---------------------- March 31, June 30, LIABILITIES AND SHAREHOLDERS' EQUITY 2011 2011 ------------------------------------------------------------------------------------------------ Current liabilities: Short-term borrowings 39,927 77,324 Current maturities of long-term indebtedness 111,096 108,672 Trade payables: Notes 12,216 12,557 Accounts 238,267 228,046 Accrued income taxes 13,414 10,396 Accrued expenses and other 199,780 197,878 ------------------------------------------------------------------------------------------------ Total current liabilities 614,700 634,873 ------------------------------------------------------------------------------------------------ Long-term liabilities: Long-term indebtedness 479,422 466,342 Accrued pension and severance costs 140,975 141,961 Deferred income taxes and other 44,535 47,322 ------------------------------------------------------------------------------------------------ Total long-term liabilities 664,932 655,625 ------------------------------------------------------------------------------------------------ Equity: Ricoh Company, Ltd. shareholders' equity: Common stock 135,364 135,364 Additional paid-in capital 186,083 186,083 Retained earnings 815,970 807,440 Accumulated other comprehensive loss (170,702) (178,946) Treasury stock at cost (36,838) (36,834) ------------------------------------------------------------------------------------------------ Total Ricoh Company, Ltd. shareholders' equity 929,877 913,107 ------------------------------------------------------------------------------------------------ Noncontrolling interests 52,887 53,499 ------------------------------------------------------------------------------------------------ Total equity 982,764 966,606 ------------------------------------------------------------------------------------------------ Total liabilities and equity 2,262,396 2,257,104 ================================================================================================
The accompanying notes are an integral part of consolidated financial statements. 2 Ricoh Company, Ltd. and Consolidated Subsidiaries CONSOLIDATED STATEMENT OF INCOME For the First Quarter Ended June 30, 2010 and 2011
Millions of Yen ------------------------------------------ First quarter ended First quarter ended June 30, 2010 June 30, 2011 -------------------------------------------------------------------------------------------------------------- Net Sales: Products 218,672 211,565 Post sales and rentals 238,943 228,758 Other revenue 25,339 25,825 -------------------------------------------------------------------------------------------------------------- Total 482,954 466,148 -------------------------------------------------------------------------------------------------------------- Cost of sales: Products 147,257 147,126 Post sales and rentals 111,690 105,618 Other revenue 19,689 19,308 -------------------------------------------------------------------------------------------------------------- Total 278,636 272,052 -------------------------------------------------------------------------------------------------------------- Gross profit 204,318 194,096 Selling, general and administrative expenses 182,471 184,089 -------------------------------------------------------------------------------------------------------------- Operating income 21,847 10,007 -------------------------------------------------------------------------------------------------------------- Other (income) expenses: Interest and dividend income (597) (608) Interest expense 1,854 1,460 Foreign currency exchange (gain) loss, net 5,276 507 Other, net (178) 125 -------------------------------------------------------------------------------------------------------------- Total 6,355 1,484 -------------------------------------------------------------------------------------------------------------- Income before income taxes and equity in earnings of affiliates 15,492 8,523 Provision for income taxes: Current 9,026 6,835 Deferred (1,730) (2,941) -------------------------------------------------------------------------------------------------------------- Total 7,296 3,894 -------------------------------------------------------------------------------------------------------------- Equity in earnings of affiliates (7) (8) Consolidated net income 8,189 4,621 -------------------------------------------------------------------------------------------------------------- Net income attributable to noncontrolling interests 856 1,175 -------------------------------------------------------------------------------------------------------------- Net income attributable to Ricoh Company, Ltd. 7,333 3,446 ============================================================================================================== Yen Yen ------------------------------------------ Per share of common stock: Net income attributable to Ricoh Company, Ltd. -------------------------------------------------------------------------------------------------------------- Basic 10.11 4.75 Diluted 9.83 4.74 -------------------------------------------------------------------------------------------------------------- Cash dividends paid per share 16.50 16.50 ============================================================================================================== Per American Depositary Share, each representing 5 shares of common stock: Net income attributable to Ricoh Company, Ltd. -------------------------------------------------------------------------------------------------------------- Basic 50.55 23.75 Diluted 49.15 23.70 -------------------------------------------------------------------------------------------------------------- Cash dividends paid per share 82.50 82.50 ==============================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 3 Ricoh Company, Ltd. and Consolidated Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS For the First Quarter Ended June 30, 2010 and 2011
Millions of Yen --------------------------------------- First Quarter ended First Quarter ended June 30, 2010 June 30, 2011 ------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net income 8,189 4,621 Adjustments to reconcile consolidated net income to net cash provided by operating activities Depreciation and amortization 22,412 22,176 Equity in earnings of affiliates, net of dividends received 7 8 Deferred income taxes (1,730) (2,942) Losses on disposals and sales of property, plant and equipment 443 100 Pension and severance costs, less payment 1,692 711 Changes in assets and liabilities, net of effects from acquisition- Decrease in trade receivables 16,795 8,667 Increase in inventories (11,333) (17,623) Decrease (Increase) in finance receivables 7,320 (2,351) Decrease in trade payables (26,347) (9,853) Increase (Decrease) in accrued income taxes and accrued expenses and other 21,579 (1,322) Other, net 2,387 3,509 ------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 41,414 5,701 ------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment 16 137 Expenditures for property, plant and equipment, including interest capitalized (15,803) (16,642) Expenditures for intangible asset (3,511) (3,252) Payments for purchases of available-for-sale securities (57) (59) Proceeds from sales of available-for-sale securities 4 10 Increase in time deposits, net (243) (266) Other, net (1,272) (4,787) ------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (20,866) (24,859) ------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term indebtedness 15,971 2,569 Repayment of long-term indebtedness (23,693) (17,358) Increase(Decrease) in short-term borrowings, net (27,314) 38,242 Proceeds from issuance of long-term debt securities 79,741 -- Repayment of long-term debt securities -- (237) Dividends paid (11,972) (11,971) Payment for purchase of treasury stock (29) (5) Other, net (301) (301) ------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 32,403 10,939 ------------------------------------------------------------------------------------------------------------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (8,839) (2,482) ------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 44,112 (10,701) ------------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 242,165 179,169 ------------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD 286,277 168,468 ==================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 4 Ricoh Company, Ltd. and Consolidated Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES According to the article 93 of the "Regulations Regarding Terms, Forms and Preparation of Interim Consolidated Financial Statements" (Cabinet office Ordinance No.64, 2007), the accompanying consolidated financial statements of Ricoh (Ricoh Company, Ltd. and its consolidated subsidiaries) have been prepared in conformity with U.S. generally accepted accounting principles. Significant accounting and reporting policies are summarized below: The accompanying consolidated financial statements for the first quarter ended June 30, 2011 are presented in Japanese yen, the functional currency of the Company and its domestic subsidiaries. The books of the Company and its domestic subsidiaries are maintained in conformity with Japanese accounting principles and practices, while foreign subsidiaries maintain their books in conformity with the standards of their country of domicile. The accompanying consolidated financial statements reflect necessary adjustments, not recorded in the books, to present them in conformity with U.S. generally accepted accounting principles. (A) PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. The accounts of variable interest entity are included in the consolidated financial statements, if applicable. Investments in entities in which Ricoh has the ability to exercise significant influence over the entities' operating and financial policies (generally 20% to 50% ownership) are accounted for on an equity basis. All significant inter-company balances and transactions have been eliminated in consolidation. The accounts of certain consolidated subsidiaries have been included on the basis of fiscal periods ended within three months prior to June 30. (B) REVENUE RECOGNITION Ricoh generates revenue principally through the sale of equipment, supplies and related services under separate contractual arrangements for each. Ricoh recognizes revenue when (1) it has a firm contract, (2) the product has been shipped to and accepted by the customer or the service has been provided, (3) the sales price is fixed or determinable and (4) amounts are reasonably assured of collection. Products sales are recognized at the time of delivery and installation at the customer location. Equipment revenues are based on established prices by product type and model and are net of discounts. A sales return is accepted only when the equipment is defective and does not meet Ricoh's product performance specifications. Other than installation, there are no customer acceptance clauses in the sales contract. Post sales and rentals result primarily from maintenance contracts that are normally entered into at the time the equipment is sold. Standard service fee prices are established depending on equipment classification and include a cost value for the estimated services to be performed based on historical experience plus a profit margin thereon. As a matter of policy, Ricoh does not discount such prices. On a monthly basis, maintenance service revenues are earned and recognized by Ricoh and billed to the customer in accordance 5 with the contract and include a fixed monthly fee plus a variable amount based on usage. The length of the contract ranges up to five-years, however, most contracts are cancelable at any time by the customer upon a short notice period. Leases not qualifying as sales-type leases or direct financing leases are accounted for as operating leases and related revenue is recognized over the lease term. Ricoh enters into arrangements with multiple elements, which may include any combination of products, equipment, installation and maintenance. Ricoh allocates revenue to each element based on its relative fair value if such element meets the criteria for treatment as a separate unit of accounting, the delivered item in a multiple element arrangement should be considered a separate unit of accounting if all of the following criteria are met: (1) a delivered item has value to customers on a stand-alone basis, (2) there is objective and reliable evidence of fair value of an undelivered item, and (3) the delivery of the undelivered item must be probable and controlled by Ricoh if the arrangement includes the right of return. The price charged when the element is sold separately generally determines fair value. Otherwise, revenue is deferred until the undelivered elements are fulfilled as a single unit of accounting. Revenue from the sale of equipment under sales-type leases is recognized as product sales at the inception of the lease. Other revenue consists primarily of interest income on sales-type leases and direct-financing leases, which are recognized as other revenue over the life of each respective lease using the interest method. (C) FOREIGN CURRENCY TRANSLATION For foreign operations with functional currencies other than the Japanese yen, assets and liabilities are translated at the exchange rates in effect at each fiscal year-end, and income and expenses are translated at the average rates of exchange prevailing during each fiscal year. The resulting translation adjustments are included as a part of accumulated other comprehensive income (loss) in equity. All foreign currency transaction gains and losses are included in other income and expenses in the period incurred. (D) CASH EQUIVALENTS Cash and cash equivalents include highly liquid investments with maturities of three months or less at the date of purchase such as time deposits and short-term investment securities which are available-for-sale at any time, present insignificant risk of changes in value due to being readily convertible into cash and have an original maturity of three months or less, such as money management funds and free financial funds. (E) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES As discussed further in Note 8, Ricoh manages its exposure to certain market risks, primarily foreign currency and interest rate risks, through the use of derivative instruments. As a matter of policy, Ricoh does not enter into derivative contracts for trading or speculative purposes. Ricoh recognizes all derivative instruments as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. When Ricoh enters into a derivative contract, it makes a determination as to whether or not for accounting purposes the derivative is part of a hedging relationship. In general, a derivative may be designated as either (1) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"), (2) a hedge of the variability of the expected cash flows associated with an existing asset or liability or a forecasted transaction ("cash flow hedge"), or (3) a foreign currency fair value or cash flow hedge ("foreign currency hedge"). Ricoh formally documents all relationships between hedging instruments and hedged items, as well as its 6 risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value, cash flow, or foreign currency hedges to specific assets and liabilities on the consolidated balance sheets or to specific firm commitments or forecasted transactions. For derivative contracts that are designated and qualify as fair value hedges including foreign currency fair value hedges, the derivative instrument is marked-to-market with gains and losses recognized in current period earnings to offset the respective losses and gains recognized on the change in fair value of the hedged item. For derivative contracts that are designated and qualify as cash flow hedges including foreign currency cash flow hedges, the effective portion of gains and losses on these contracts is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period the hedged item or transaction affects earnings. Any hedge ineffectiveness on cash flow hedges is immediately recognized in earnings. For all derivative instruments that are not designated as part of a hedging relationship and for designated derivative instruments that do not qualify for hedge accounting, the contracts are recorded at fair value with the gain or loss recognized in current period earnings. (F) ALLOWANCE FOR DOUBTFUL TRADE RECEIVABLES AND FINANCE RECEIVABLES Ricoh records allowances for doubtful receivables that are based upon historical experience and specific customer collection issues. The estimated amount of probable credit losses in its existing receivables is determined from write-off history adjusted to reflect current economic conditions and specific allowances for receivables including nonperforming leases, impaired loans or other accounts for which Ricoh has concluded it will be unable to collect all amounts due according to original terms of the lease or loan agreement. Account balances net of expected recovery from available collateral are charged-off against the allowances when collection is considered remote. (G) SECURITIES Ricoh's investments in debt and marketable equity securities are classified as available-for-sale securities. Available-for-sale securities are reported at fair value with unrealized gains and losses, net of related taxes, reported in accumulated other comprehensive income (loss). Available-for-sale securities, which mature or are expected to be sold in one year, are classified as current assets. Individual securities classified as available-for-sale securities are reduced to fair market value by a charge to income for other than temporary declines in value. Factors considered in assessing whether an indication of other than temporary impairment exists with respect to available-for-sale securities include: financial condition and near term prospects of issuer and intent and ability of Ricoh to retain its investments for a period of time sufficient to allow for any anticipated recovery in market value. The cost of the securities sold is computed based on the average cost of each security held at the time of sale. Investments in affiliated companies over which Ricoh has the ability to exercise significant influence, but does not hold a controlling financial interest, are accounted for by the equity method. Non-marketable equity securities owned by Ricoh primarily relate to less than 20% owned companies and funds are stated at cost unless indication of impairment exist, which require the investment to be written down to its estimated fair value. 7 (H) INVENTORIES Inventories are mainly stated at the lower of average cost or net realizable values. Inventory costs include raw materials, labor and manufacturing overheads. (I) PROPERTY, PLANT AND EQUIPMENT For the Company and its domestic subsidiaries, depreciation of property, plant and equipment is computed principally by using the declining-balance method over the estimated useful lives. Most of the foreign subsidiaries have adopted the straight-line method for computing depreciation. The depreciation period generally ranges from 5 years to 50 years for buildings and 2 years to 12 years for machinery and equipment. Ordinary maintenance and repairs are charged to expense as incurred. Major replacements and improvements are capitalized. When properties are retired or otherwise disposed of, the property and related accumulated depreciation accounts are relieved of the applicable amounts, and any differences are included in earnings. (J) CAPITALIZED SOFTWARE COSTS Ricoh capitalizes certain internal and external costs incurred to acquire or create internal use software during the application development stage as well as upgrades and enhancements that result in additional functionality. The capitalized software is amortized on a straight line basis generally from 3 years to 5 years. (K) GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is not amortized and is required to be tested at least annually for impairment. Acquired intangible assets with a definite useful life are amortized over their respective estimated useful lives and reviewed for impairment when an indication of impairment is identified. Other intangible assets with definite useful lives, consisting primarily of software, customer relationships and trademarks are amortized on a straight line basis over 1 year to 20 years. Any acquired intangible assets determined to have an indefinite useful life are not amortized, but instead are tested annually for impairment based on its fair value until its life would be determined to no longer be indefinite. In performing the test, Ricoh utilizes the two-step approach prescribed. The first step requires a comparison of the carrying amount of the reporting units to the fair value of these units. If the carrying amount of a reporting unit exceeds its fair value, Ricoh will perform the second step of the goodwill impairment test to measure the amount of impairment loss, if any. (L) PENSION AND RETIREMENT ALLOWANCES PLANS Ricoh recognizes the overfunded or underfunded status of the defined benefit plans as an asset or liability in the consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax. The expected long-term rate of return on plan assets used for pension accounting is determined based on the historical long-term rate of return on plan assets. The discount rate is determined based on the rates of return of high-quality fixed-income investments currently available and expected to be available during the period to maturity of the pension benefits. 8 (M) INCOME TAXES Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Ricoh recognizes interest and penalties related to unrecognized tax benefits in provision for income taxes in the consolidated statements of income. (N) RESEARCH AND DEVELOPMENT EXPENSES AND ADVERTISING COSTS Research and development expenses and advertising costs are expensed as incurred. (O) SHIPPING AND HANDLING COSTS Shipping and handling costs, which mainly include transportation to customers, are included in selling, general and administrative expenses in the consolidated statements of income. (P) IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS Long-lived assets and acquired intangible assets with a definite life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is assessed by comparing the carrying amount of an asset or asset group to the expected future undiscounted net cash flows of the asset or asset group. If an asset or asset group is considered to be impaired, the impairment charge to be recognized is measured as the amount by which the carrying amount of the asset or asset group exceeds fair value. Long-lived assets meeting the criteria to be considered as held for sale are reported at the lower of their carrying amount or fair value less costs to sell. (Q) NET INCOME ATTRIBUTABLE TO RICOH COMPANY, LTD. PER SHARE Basic net income attributable to Ricoh Company, Ltd. per share of common stock is calculated by dividing net income attributable to Ricoh Company, Ltd. by the weighted-average number of shares of common stock outstanding during the period. The calculation of diluted net income attributable to Ricoh Company, Ltd. per share of common stock is similar to the calculation of basic net income attributable to Ricoh Company, Ltd. per share, except that the weighted-average number of shares outstanding includes the additional dilution from potential common stock equivalents such as convertible bonds. (R) USE OF ESTIMATES Management of Ricoh has made a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of fair value of financial instruments and contingent assets and liabilities, to prepare these financial statements in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates. Ricoh has identified seven areas where it believes assumptions and estimates are particularly critical to the consolidated financial statements. These are determination of the allowance for doubtful receivables, impairment of securities, impairment of long-lived assets including goodwill, uncertain tax positions, 9 realizability of deferred tax assets, the valuation of assets and liabilities in business combinations and pension accounting. (S) NEW ACCOUNTING STANDARDS NOT YET ADOPTED In June 2011, the FASB issued Accounting Standards Update ("ASU") 2011-05. This ASU requires entities to present comprehensive income in either: (i) one continuous financial statement or (ii) two separate but consecutive statements that display net income and the components of other comprehensive income. Totals and individual components of both net income and other comprehensive income must be included in either presentation. It is effective for fiscal years beginning on or after December 16, 2011 and early adoption is permitted. This adoption of ASU 2011-05 will not have any effect on Ricoh's consolidated financial position and results of operations. 10 2. SECURITIES Investment securities as of March 31, 2011 and June 30, 2011 consist of the following: Millions of Yen ----------------------------- March 31, 2011 June 30, 2011 -------------------------------------------------------------------------------- Investment securities: Available-for-sale securities 46,938 45,789 Non-marketable equity securities 1,971 2,018 -------------------------------------------------------------------------------- 48,909 47,807 ================================================================================ The noncurrent security types of available-for-sale securities, and the respective cost, gross unrealized holding gains, gross unrealized holding losses and fair value as of March 31, 2011 and June 30, 2011 are as follows:
Millions of Yen ----------------------------------------------------------------------------------- March 31, 2011 June 30, 2011 ----------------------------------------- ----------------------------------------- Gross Gross Gross Gross unrealized unrealized unrealized unrealized holding holding Fair holding holding Fair Cost gains losses value Cost gains losses value ---------------------------------------------------------------------------------------------------------- Noncurrent: Equity securities 40,765 4,655 327 45,093 40,842 4,175 1,020 43,997 Corporate debt securities 1,802 43 -- 1,845 1,733 59 -- 1,792 ---------------------------------------------------------------------------------------------------------- 42,567 4,698 327 46,938 42,575 4,234 1,020 45,789 ==========================================================================================================
Gross unrealized holding losses and the fair value of available-for-sale securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2011 and June 30, 2011 are as follows:
Millions of Yen ---------------------------------------------------------------------------------- March 31, 2011 ---------------------------------------------------------------------------------- Less than 12 months 12 months or longer Total --------------------------- ---------------------------- ------------------------- Gross Gross Gross unrealized unrealized unrealized holding holding holding Fair value losses Fair value losses Fair value losses -------------------------------------------------------------------------------------------------------------- Noncurrent: Available-for-sale: Equity securities 1,341 261 238 66 1,579 327 ==============================================================================================================
Millions of Yen ---------------------------------------------------------------------------------- June 30, 2011 ---------------------------------------------------------------------------------- Less than 12 months 12 months or longer Total --------------------------- ---------------------------- ------------------------- Gross Gross Gross unrealized unrealized unrealized holding holding holding Fair value losses Fair value losses Fair value losses -------------------------------------------------------------------------------------------------------------- Noncurrent: Available-for-sale: Equity securities 33,308 742 1,194 278 34,502 1,020 ==============================================================================================================
11 Gross unrealized holding losses of available-for-sale securities as of March 31, 2011 and June 30, 2011 consist of 39 and 41 kinds of securities. Ricoh judged the decline in fair value of investment securities at period end to be temporary, with considering such factors as financial and operating conditions of issuer, the industry in which the issuer operates and other relevant factors. The contractual maturities of debt securities classified as available-for-sale as of June 30, 2011 are as follows: Millions of Yen --------------------- Cost Fair value ------------------------------------------------------------------------------ Due after one year through five years 614 624 Over five years 1,119 1,168 ------------------------------------------------------------------------------ 1,733 1,792 ============================================================================== There were no significant proceeds from the sales of available-for-sale securities for the first quarter ended June 30, 2010 and 2011, respectively. There were no significant realized gains or losses on sales of available-for-sale securities for the first quarter ended June 30, 2010 and 2011. There were no significant realized gains or losses on valuation of available-for-sale securities for the first quarter ended June 30, 2010 and 2011. 3. INCOME TAXES The estimated annual effective tax rate for fiscal year ending March 31, 2012 was approximately 46 percent as of June 30, 2011. The estimated rate differed from the approximately 41 percent statutory tax rate due primarily to the net increase in valuation allowance for deferred tax assets. 4. PENSION AND RETIREMENT ALLOWANCE PLANS The net periodic benefit costs of the pension plans consist of the following components:
Millions of Yen ------------------------------------------ First quarter ended First quarter ended June 30, 2010 June 30, 2011 -------------------------------------------------------------------------------------------------------------- Service cost 3,184 3,039 Interest cost 3,764 3,568 Expected return on plan assets (2,206) (2,238) Net amortization 775 550 -------------------------------------------------------------------------------------------------------------- Total net periodic pension cost 5,517 4,919 ==============================================================================================================
12 5. EQUITY The change in Ricoh shareholders' equity, noncontrolling interests and total equity for the first quarter ended June 30, 2010 and 2011 is as follow: Ricoh adopted ASU 2009-17 on April 1, 2010. The adoption of this ASU resulted in adjustments to change in Ricoh shareholders' equity, noncontrolling interests and total equity as of April 1, 2010.
Millions of Yen ----------------------------------------------------------------------------------- First quarter ended June 30, 2010 First quarter ended June 30, 2011 ---------------------------------------- ---------------------------------------- Ricoh Ricoh Shareholders' Noncontrolling Total Shareholders' Noncontrolling Total Equity Interests Equity Equity Interests Equity ---------------------------------------------------------------------------------------------------------------------- Equity, Beginning of Period 973,341 50,533 1,023,874 929,877 52,887 982,764 ---------------------------------------------------------------------------------------------------------------------- Cumulative effect of a change in accounting principle - adoption of accounting guidance for a variable interest entity, net of tax (410) (392) (802) -- -- -- ---------------------------------------------------------------------------------------------------------------------- Equity, Beginning of Period as adjusted 972,931 50,141 1,023,072 929,877 52,887 982,764 ---------------------------------------------------------------------------------------------------------------------- Net income 7,333 856 8,189 3,446 1,175 4,621 Unrealized losses on securities (2,098) (6) (2,104) (696) (1) (697) Pension liability adjustments 145 (4) 141 782 3 785 Unrealized losses on derivatives (444) (18) (462) (522) (7) (529) Foreign currency translation adjustments (40,008) 340 (39,668) (7,808) (55) (7,863) ---------------------------------------------------------------------------------------------------------------------- Comprehensive income(loss) (35,072) 1,168 (33,904) (4,798) 1,115 (3,683) ---------------------------------------------------------------------------------------------------------------------- Cash dividends on Common stock (11,972) -- (11,972) (11,971) -- (11,971) Distributions to Noncontrolling interests -- (331) (331) -- (305) (305) Net changes in treasury stock (24) -- (24) 4 -- 4 Wholly owned subsidiaries -- (198) (198) Other -- -- -- (5) -- (5) ---------------------------------------------------------------------------------------------------------------------- Equity, End of Period 925,863 50,978 976,841 913,107 53,499 966,606 ======================================================================================================================
6. DIVIDENDS Cash dividends paid during the first quarter ended June 30, 2010 and 2011 are as follows: Resolved at the General meetings of Shareholders on June 25, 2010 ----------------------------------------------------------------------------- Total amount of dividends (million of yen) 11,972 Dividend per share of common stock (yen) 16.50 Record date March 31, 2010 Effective date June 28, 2011 Resource for dividend Retained earnings ============================================================================= Resolved at the General meetings of Shareholders on June 24, 2011 ----------------------------------------------------------------------------- Total amount of dividends (million of yen) 11,971 Dividend per share of common stock (yen) 16.50 Record date March 31, 2011 Effective date June 27, 2011 Resource for dividend Retained earnings ============================================================================= 13 7. PER SHARE DATA Ricoh shareholders' equity per share was Yen 1281.70 and Yen 1258.59 as of March 31, 2011 and June 30, 2011, respectively. Dividends per share shown in the consolidated statement of income are computed based on dividends paid for the first quarter ended June 30, 2010 and 2011. Reconciliations of the numerator and the denominators of the basic and diluted per share computations for net income attributable to Ricoh Company, Ltd. are as follows:
Thousands of shares --------------------------------------- First quarter ended First quarter ended June 30, 2010 June 30, 2011 ------------------------------------------------------------------------------------------------------ Weighted average number of shares of common stock outstanding 725,580 725,503 Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 19,741 793 ------------------------------------------------------------------------------------------------------ Diluted shares of common stock outstanding 745,321 726,296 ======================================================================================================
Millions of Yen --------------------------------------- First quarter ended First quarter ended June 30, 2010 June 30, 2011 ------------------------------------------------------------------------------------------------------ Net income attributable to Ricoh Company, Ltd. 7,333 3,446 Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 (6) 0 ------------------------------------------------------------------------------------------------------ Diluted net income attributable to Ricoh Company, Ltd. 7,327 3,446 ======================================================================================================
Yen --------------------------------------- First quarter ended First quarter ended June 30, 2010 June 30, 2011 ------------------------------------------------------------------------------------------------------ Net income attributable to Ricoh Company, Ltd. per share: Basic: Basic: Net income attributable to Ricoh Company, Ltd. 10.11 4.75 Diluted: Diluted: Net income attributable to Ricoh Company, Ltd. 9.83 4.74 ======================================================================================================
14 8. DERIVATIVE FINANCIAL INSTRUMENTS Risk Management Policy Ricoh enters into various derivative financial instrument contracts in the normal course of business in connection with the management of its assets and liabilities. Ricoh uses derivative instruments to reduce risk and protect market value of assets and liabilities in conformity with the Ricoh's policy. Ricoh does not use derivative financial instruments for trading or speculative purposes, nor is it a party to leveraged derivatives. All derivative instruments are exposed to credit risk arising from the inability of counterparties to meet the terms of the derivative contracts. However, Ricoh does not expect any counterparties to fail to meet their obligations because these counterparties are financial institutions with satisfactory credit ratings. Ricoh utilizes a number of counterparties to minimize the concentration of credit risk. Foreign Exchange Risk Management Ricoh conducts business on a global basis and holds assets and liabilities denominated in foreign currencies. Ricoh enters into foreign exchange contracts and foreign currency options to hedge against the potentially adverse impacts of foreign currency fluctuations on these assets and liabilities denominated in foreign currencies. Interest Rate Risk Management Ricoh enters into interest rate swap agreements to hedge against the potential adverse impacts of changes in fair value or cash flow fluctuations on interest of its outstanding debt. Fair Value Hedges Changes in the fair value of derivative instruments and the related hedged items designated and qualifying as fair value hedges are included in other (income) expenses in the consolidated statements of income. There is no hedging ineffectiveness nor are net gains or losses excluded from the assessment of hedge effectiveness for the first quarter ended June 30, 2011 as the critical terms of the interest rate swap match the terms of the hedged debt obligations. Cash Flow Hedges Changes in the fair value of derivative instruments designated and qualifying as cash flow hedges are included in accumulated other comprehensive income (loss) on the consolidated balance sheets. These amounts are reclassified into earnings as interest on the hedged loans is paid. There is no hedging ineffectiveness nor are net gains or losses excluded from the assessment of hedge effectiveness for the first quarter ended June 30, 2011 as the critical terms of the interest rate swap match the terms of the hedged debt obligations. Ricoh expects that it will reclassify into earnings through other (income) expenses during the next 12 months approximately Yen 30 million of the balance of accumulated other comprehensive income as of June 30, 2011. Undesignated Derivative Instruments Derivative instruments not designated as hedging instruments are held to reduce the risk relating to the variability in exchange rates on assets and liabilities denominated in foreign currencies. Changes in the fair value of these instruments are included in other (income) expenses in the consolidated statement of income. 15 Contract amounts of derivative instruments at March 31, 2011 and June 30, 2011 are shown in the following tables: Millions of Yen ------------------------------------------------------------------------------- March 31, June 30, 2011 2011 ------------------------------------------------------------------------------- Interest rate swap agreements 284,444 27,880 Foreign currency contracts 211,249 16,147 Foreign currency options 3,555 33,409 =============================================================================== The location and fair value amounts of derivatives in consolidated balance sheet are shown in the following tables: Derivatives designated as hedging instruments
Current Long-term ------------------------------------- ------------------------------------ Fair value Fair value ------------------------------------- ------------------------------------ Balance sheet Balance sheet Location Millions of Yen Location Millions of Yen -------------------------------------------------------------------------------------------------------------- March 31, June 30, March 31, June 30, Asset Derivatives 2011 2011 2011 2011 -------------------------------------------------------------------------------------------------------------- Interest rate swap agreements Deferred income Lease deposits taxes and other Yen 4 Yen -- and other Yen -- Yen -- ============================================================================================================== March 31, June 30, March 31, June 30, Liability Derivatives 2011 2011 2011 2011 -------------------------------------------------------------------------------------------------------------- Interest rate swap agreements Accrued expenses Deferred income and other Yen 73 Yen 74 taxes and other Yen 2,766 Yen 2,893 ==============================================================================================================
Derivatives not designated as hedging instruments
Current Long-term ------------------------------------ ------------------------------------ Fair value Fair value ------------------------------------ ------------------------------------ Balance sheet Balance sheet Location Millions of Yen Location Millions of Yen ------------------------------------------------------------------------------------------------------------- March 31, June 30, March 31, June 30, Asset Derivatives 2011 2011 2011 2011 ------------------------------------------------------------------------------------------------------------- Interest rate swap agreements Yen -- Yen -- Yen -- Yen -- Foreign currency contracts Deferred income Lease deposits taxes and other 1,497 3,615 and other -- 434 Foreign currency options 20 229 -- -- ------------------------------------------------------------------------------------------------------------- Total Yen 1,517 Yen 3,844 Yen -- Yen 434 ============================================================================================================= March 31, June 30, March 31, June 30, Liability Derivatives 2011 2011 2011 2011 ------------------------------------------------------------------------------------------------------------- Interest rate swap agreements Yen 72 Yen 53 Yen 24 Yen 205 Foreign currency contracts Accrued expenses Deferred income and other 3,087 1,195 taxes and other 477 131 Foreign currency options 64 197 -- -- ------------------------------------------------------------------------------------------------------------- Total Yen 3,223 Yen 1,445 Yen 501 Yen 336 =============================================================================================================
16 Total fair value amounts of derivatives Millions of Yen ------------------- Fair value --------------------------------------------------------------------------- March 31, June 30, 2011 2011 --------------------------------------------------------------------------- Total Asset Derivatives Yen 1,521 Yen 4,278 Total Liability Derivatives Yen 6,563 Yen 4,748 --------------------------------------------------------------------------- The location and amount of gains and losses related to derivatives reported in the consolidated statement of income for the first quarter ended June 30, 2010 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen -------------------------------------------------------------------------------------------- Gain or (Loss) Recognized in OCI Gain or (Loss) Reclassified from on Derivative Accumulated OCI into Income Gain or (Loss) Recognized in Income on (Effective Portion) (Effective Portion) Derivative (Ineffective Portion) -------------------------------------------------------------------------------------------- Amount Location Amount Location Amount --------------------------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements (480) Interest expense (35) -- -- ===========================================================================================================================
Millions of Yen ------------------------------------------------------------------ Gain or (Loss) Recognized Gain or (Loss) on Hedged Item in Income on Derivative Recognized in Income ------------------------------------------------------------------ Location Amount Location Amount ------------------------------------------------------------------------------------------------------ Fair value hedge Interest rate swap agreements Interest and dividend income 30 Interest expense (39) ======================================================================================================
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative ----------------------------------------------------------- Location Millions of Yen --------------- June 30, 2010 ------------------------------------------------------------------------------------------ Interest rate swap agreements Other, net Yen 92 Foreign currency contracts Foreign currency exchange (gain) loss, net 4,452 Foreign currency options Foreign currency exchange (gain) loss, net 730 ------------------------------------------------------------------------------------------ Total Yen 5,274 ==========================================================================================
17 The location and amount of gains and losses related to derivatives reported in the consolidated statement of income for the first quarter ended June 30, 2011 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen -------------------------------------------------------------------------------------------- Gain or (Loss) Recognized in OCI Gain or (Loss) Reclassified from on Derivative Accumulated OCI into Income Gain or (Loss) Recognized in Income on (Effective Portion) (Effective Portion) Derivative (Ineffective Portion) -------------------------------------------------------------------------------------------- Amount Location Amount Location Amount --------------------------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements (588) Interest expense (66) -- -- ===========================================================================================================================
Millions of Yen ------------------------------------------------------------------ Gain or (Loss) Recognized Gain or (Loss) on Hedged Item in Income on Derivative Recognized in Income ------------------------------------ ----------------------------- Location Amount Location Amount ------------------------------------------------------------------------------------------------------ Fair value hedge Interest rate swap agreements Interest and dividend income -- Interest expense -- ======================================================================================================
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative ----------------------------------------------------------- Location Millions of Yen --------------- June 30, 2011 ------------------------------------------------------------------------------------------ Interest rate swap agreements Other, net Yen (162) Foreign currency contracts Foreign currency exchange (gain) loss, net 4,790 Foreign currency options Foreign currency exchange (gain) loss, net 76 ------------------------------------------------------------------------------------------ Total Yen 4,704 ==========================================================================================
9. COMMITMENTS AND CONTINGENT LIABILITIES Ricoh was contingently liable for certain guarantees including employees housing loans of Yen 71 million as of June 30, 2011. As of June 30, 2011 the Company and certain of its subsidiaries were parties to litigation involving routine matters, such as patent rights. In the opinion of management, the ultimate liability, if any, resulting from 18 such litigation will not materially affect the consolidated financial position or the results of operations of Ricoh. 10. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (A) CASH AND CASH EQUIVALENTS, TIME DEPOSITS, TRADE RECEIVABLES, SHORT-TERM BORROWINGS, CURRENT MATURITIES OF LONG-TERM INDEBTEDNESS, TRADE PAYABLES AND ACCRUED EXPENSES The carrying amounts approximate fair values because of the short maturities of these instruments. (B) INVESTMENT SECURITIES The fair value of the investment securities is principally based on quoted market price. Ricoh have not estimated the fair value of non-marketable equity securities, as it is not practicable. Because there were no quoted market prices for non-marketable equity securities and each security had different nature and characteristics, reasonable estimates of fair values could not be made without incurring excessive costs. The carrying amounts of non-marketable equity securities were Yen 1,971 million and Yen 2,018 million as of March 31, 2011 and June 30, 2011, respectively. (C) INSTALLMENT LOANS The fair value of installment loans is based on the present value of future cash flows using the current interest rate for similar instruments of comparable maturity. (D) LONG-TERM INDEBTEDNESS The fair value of each of the long-term indebtedness instruments is based on the present value of future cash flows associated with each instrument discounted using the current borrowing rate for similar instruments of comparable maturity. (E) INTEREST RATE SWAP AGREEMENTS, FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY OPTIONS The fair value of interest rate swap agreements, foreign currency contracts and foreign currency options are estimated by obtaining quotes from brokers. The estimated fair value of the financial instruments as of March 31, 2011 and June 30, 2011 is summarized as follows: Millions of Yen ----------------------------------------- March 31, 2011 June 30, 2011 -------------------- -------------------- Carrying Estimated Carrying Estimated amount fair value amount fair value ------------------------------------------------------------------------------ Investment securities 48,909 48,909 47,807 47,807 Installment loans 72,634 73,769 73,964 75,120 Long-term indebtedness (479,422) (475,116)(466,342) (463,246) Interest rate swap agreements, net (2,931) (2,931) (3,225) (3,225) Foreign currency contracts, net (2,067) (2,067) 2,723 2,723 Foreign currency options, net (44) (44) 32 32 ============================================================================== 19 Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. 11. FAIR VALUE MEASUREMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-level fair value hierarchy that prioritizes the inputs used to measure fair value is established. The three levels of inputs used to measure fair value are as follows: Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3 - Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. The following tables present the fair-value hierarchy levels of Ricoh's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2011 and June 30, 2011.
Millions of Yen ------------------------------ March 31, 2011 ------------------------------ Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------- Assets: Available-for-sale securities: Domestic equity securities 38,243 -- -- 38,243 Foreign equity securities 6,850 -- -- 6,850 Foreign corporate bonds 1,845 -- -- 1,845 Derivative instruments Interest rate swap agreements -- 4 -- 4 Foreign currency contracts -- 1,497 -- 1,497 Foreign currency options -- 20 -- 20 ------------------------------------------------------------------------- Total assets 46,938 1,521 -- 48,459 ========================================================================= Liabilities: Derivatives instruments Interest rate swap agreements -- 2,935 -- 2,935 Foreign currency contracts -- 3,564 -- 3,564 Foreign currency options -- 64 -- 64 ------------------------------------------------------------------------- Total liabilities -- 6,563 -- 6,563 =========================================================================
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Millions of Yen ------------------------------ June 30, 2011 ------------------------------ Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------- Assets: Available-for-sale securities: Domestic equity securities 37,527 -- -- 37,527 Foreign equity securities 6,470 -- -- 6,470 Foreign corporate bonds 1,792 -- -- 1,792 Derivative instruments Interest rate swap agreements -- -- -- -- Foreign currency contracts -- 4,049 -- 4,049 Foreign currency options -- 229 -- 229 ------------------------------------------------------------------------- Total assets 45,789 4,278 -- 50,067 ========================================================================= Liabilities: Derivatives instruments Interest rate swap agreements -- 3,225 -- 3,225 Foreign currency contracts -- 1,326 -- 1,326 Foreign currency options -- 197 -- 197 ------------------------------------------------------------------------- Total liabilities -- 4,748 -- 4,748 =========================================================================
Available-for-sale securities Available-for-sale securities classified Level 1 in the fair value hierarchy contains marketable securities and bonds. Marketable securities and bonds are valued using a market approach based on the quoted market prices of identical instruments in active markets. Derivative instruments Ricoh uses foreign exchange contracts, foreign currency options and interest rate swap agreements to manage exposure to the variability of cash flow. These derivative instruments are classified as Level 2 in the fair value hierarchy, since they are valued using observable market data such as LIBOR-based yield curves. 12. VARIABLE INTEREST ENTITY Ricoh sold certain finance lease receivables in prior years through revolving securitization transactions, which were structured as special purpose entities ("SPE"). The value assigned to undivided interests retained in these transactions was based on the fair value of retained interests as of a transfer of these receivables. Ricoh's retained interests were considered as variable interest, because Ricoh's retained interests were subordinate to the investors' interests and had the liability with received the potential losses. And, Ricoh was considered as primary beneficiary, because Ricoh was special servicer for the program. As a result, Ricoh consolidated the interests as VIE and recorded the assets and liabilities. Adoption of the new accounting standards did not have a material effect on Ricoh's results of operation. The main impact of adopting the new accounting standards on Ricoh's consolidated financial position is as follows:
Millions of Yen ----------------------------- March 31, 2011 June 30, 2011 --------------------------------------------------------------------------------------- Current maturities of long-term finance receivables, net 8,460 8,476 Long-term finance receivables, net 15,849 15,879 Current maturities of long-term indebtedness 7,044 7,048 Long-term indebtedness 13,197 13,204 =======================================================================================
21 13. CREDIT QUALITY OF FINANCING RECEIVABLES AND THE ALLOWANCE FOR DOUBTFUL RECEIVABLES (A) FINANCING RECEIVABLES AND ALLOWANCE FOR DOUBTFUL RECEIVABLES The financial subsidiaries of the Company have financing receivables and Ricoh classifies them into three categories; "lease receivables", "installment loans" and "installment receivables and other". These receivables consist of a large number of smaller-balance homogenous loans, lease receivables and installment receivables. Financing receivables classified as "lease receivables" and "installment receivables and other" are resulting from sale and lease transactions of mainly office equipment. Financing receivables classified as "installment loans" are resulting from financial services. Ricoh continuously monitors overdue financing receivables, which Ricoh considers as uncollectible risk receivables. For financing receivables with specific customer collection issues, Ricoh individually evaluates their collectability in order to determine the amount of allowance for doubtful receivables. For other financing receivables, Ricoh categorizes these receivables into groups by their nature and characteristics. Ricoh collectively evaluates the collectability by each group, using its historical experience of write-off and determines the amount of allowance for doubtful receivables. Financing receivables and allowance for doubtful receivables as of June 30, 2011 are as follows:
Millions of Yen --------------------------------------------------- Jun 30, 2011 --------------------------------------------------- Installment Lease Installment receivables receivables loans and other Total ------------------------------------------------------------------------------------------------- Allowance for doubtful receivables: Beginning balance 10,527 1,772 2,485 14,784 ------------------------------------------------------------------------------------------------- Charge-offs (425) (4) (19) (448) Recoveries (54) 0 0 (54) Provision 2,570 58 86 2,714 Translation adjustment (35) -- (19) (54) Ending balance 12,583 1,826 2,533 16,942 ------------------------------------------------------------------------------------------------- Allowance for doubtful receivables: Individually evaluated 6,148 743 1,318 8,209 Collectively evaluated 6,435 1,083 1,215 8,733 ------------------------------------------------------------------------------------------------- Financing receivables: Individually evaluated 75,931 885 4,079 80,895 Collectively evaluated 517,393 74,905 46,449 638,747 ------------------------------------------------------------------------------------------------- Total: Financing receivables 593,324 75,790 50,528 719,642 =================================================================================================
(B) AGE ANALYSIS Ricoh ascribes the fact of past due to credit quality indicators and classifies financing receivables into Overdue and Current. Analysis of the age of the recorded financing receivables as of March 31, 2011and June 30, 2011 are as follows: 22
Millions of Yen --------------------------------------------------- March 31, 2011 --------------------------------------------------- Installment Lease Installment receivables receivables loans and other Total ------------------------------------------------------------------------------------------------- Current 584,913 74,373 48,544 707,830 Overdue 7,433 33 1,661 9,127 ------------------------------------------------------------------------------------------------- Total: Financing receivables 592,346 74,406 50,205 716,957 =================================================================================================
Millions of Yen --------------------------------------------------- Jun 30, 2011 --------------------------------------------------- Installment Lease Installment receivables receivables loans and other Total ------------------------------------------------------------------------------------------------- Current 587,906 75,765 48,821 712,492 Overdue 5,418 25 1,707 7,150 ------------------------------------------------------------------------------------------------- Total: Financing receivables 593,324 75,790 50,528 719,642 =================================================================================================
23 14. SEGMENT INFORMATION Ricoh's operating segments are comprised of Imaging & Solutions, including copiers and related supplies, communications and information systems, Industrial Products, including thermal media and semiconductors, and Other, including digital cameras. Segment Profit (loss) is determined by subtracting cost of sales and selling, general and administrative expenses from sales, and is used by Ricoh's management in deciding how to allocate resources and in assessing performance. Segment Profit (loss) excludes certain corporate expenses, such as costs related to human resources, legal relations, investor relations, public relations, corporate planning and environmental activities. The following tables present certain information regarding Ricoh's operating segments and by geographic areas for the first quarter ended June 30, 2010 and 2011. (A) OPERATING SEGMENT INFORMATION
Millions of Yen ---------------------------------------- First quarter ended First quarter ended June 30, 2010 June 30, 2011 ------------------------------------------------------------------------------------------ Segment Sales: Imaging & Solutions 424,689 412,105 Industrial Products 29,091 26,210 Other 30,360 28,899 Intersegment transaction (1,186) (1,066) ------------------------------------------------------------------------------------------ Total Segment Sales 482,954 466,148 ========================================================================================== Segment Profit (loss): Imaging & Solutions 37,918 26,860 Industrial Products 484 (482) Other (128) (515) ------------------------------------------------------------------------------------------ Total Segment Profit (loss) 38,274 25,863 ========================================================================================== Reconciling Items: Corporate expenses and Elimination (16,427) (15,856) Interest and dividend income 597 608 Interest expense (1,854) (1,460) Foreign currency exchange loss, net (5,276) (507) Other, net 178 (125) ------------------------------------------------------------------------------------------ Income before Income Taxes and Equity in Earnings of Affiliates 15,492 8,523 ==========================================================================================
Intersegment sales represent sales of Industrial Products segment to Imaging & Solutions segment. (B) GEOGRAPHIC INFORMATION Sales which are attributed to countries based on location of customers are as follows:
Millions of Yen ---------------------------------------- First quarter ended First quarter ended June 30, 2010 June 30, 2011 ------------------------------------------------------------------------------------------ Sales- Japan 212,916 215,147 The Americas 133,410 115,569 Europe 103,117 102,494 Other 33,511 32,938 ------------------------------------------------------------------------------------------ Consolidated 482,954 466,148 ==========================================================================================
24 15. SUPPLEMENTARY INFORMATION TO THE STATEMENT OF INCOME The following amounts were charged to selling, general and administrative expenses for the first quarter ended June 30, 2010 and 2011:
Millions of Yen ---------------------------------------- First quarter ended First quarter ended June 30, 2010 June 30, 2011 ------------------------------------------------------------------------------------------ Research and development costs 25,670 27,683 Advertising costs 2,197 2,373 Shipping and handling costs 4,204 4,936 ==========================================================================================
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