6-K 1 r6k120213.txt 3RD 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 February 2012 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 February 13, 2012 RICOH COMPANY, LTD. Consolidated Financial Statements For the nine months Ended December 31, 2011 This is an English translation of the Quarterly Securities Report (Shihanki Hokokusho) for the nine months ended December 31, 2011 pursuant to the Japanese Financial Instrument and Exchange Law. Ricoh Company, Ltd. and Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS March 31, 2011 and December 31, 2011
Millions of Yen ------------------------------------------------------------------------------------------------ ASSETS March 31, 2011 December 31, 2011 ------------------------------------------------------------------------------------------------ Current assets: Cash and cash equivalents 179,169 156,699 Time deposits 2,010 2,550 Trade receivables: Notes 46,355 42,244 Accounts 419,351 388,547 Less- Allowance for doubtful receivables (16,560) (16,190) Current maturities of long-term finance receivables, net 208,671 210,730 Inventories: Finished goods 85,800 98,564 Work in process and raw materials 85,233 103,365 Deferred income taxes and other 63,990 54,903 -------------------------------------------------------------------------------------------------- Total current assets 1,074,019 1,041,412 -------------------------------------------------------------------------------------------------- Property, plant and equipment, at cost: Land 44,444 46,016 Buildings 262,523 263,093 Machinery and equipment 737,270 809,526 Construction in progress 5,230 7,690 -------------------------------------------------------------------------------------------------- Total 1,049,467 1,126,325 Less- accumulated depreciation (784,727) (861,383) -------------------------------------------------------------------------------------------------- Net property, plant and equipment 264,740 264,942 -------------------------------------------------------------------------------------------------- Investments and other assets: Long-term finance receivables, net 445,782 453,733 Investment securities 48,909 41,712 Investments in and advances to affiliates 213 377 Goodwill 221,063 182,776 Other intangible assets 130,648 111,531 Lease deposits and other 77,022 96,772 -------------------------------------------------------------------------------------------------- Total investments and other assets 923,637 886,901 -------------------------------------------------------------------------------------------------- Total assets 2,262,396 2,193,255 --------------------------------------------------------------------------------------------------
1
Millions of Yen ------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2011 December 31, 2011 ------------------------------------------------------------------------------------------------ Current liabilities: Short-term borrowings 39,927 145,897 Current maturities of long-term indebtedness 111,096 69,185 Trade payables: Notes 12,216 14,535 Accounts 238,267 219,472 Accrued income taxes 13,414 6,758 Accrued expenses and other 199,780 165,391 ------------------------------------------------------------------------------------------------ Total current liabilities 614,700 621,238 ------------------------------------------------------------------------------------------------ Long-term liabilities: Long-term indebtedness 479,422 537,065 Accrued pension and severance costs 140,975 137,646 Deferred income taxes and other 44,535 37,030 ------------------------------------------------------------------------------------------------ Total long-term liabilities 664,932 711,741 ------------------------------------------------------------------------------------------------ Equity: Ricoh Company, Ltd. shareholders' equity: Common stock 135,364 135,364 Additional paid-in capital 186,083 186,083 Retained earnings 815,970 739,874 Accumulated other comprehensive loss (170,702) (219,519) Treasury stock at cost (36,838) (36,821) ------------------------------------------------------------------------------------------------ Total Ricoh Company, Ltd. shareholders' equity 929,877 804,981 ------------------------------------------------------------------------------------------------ Noncontrolling interests 52,887 55,295 ------------------------------------------------------------------------------------------------ Total equity 982,764 860,276 ------------------------------------------------------------------------------------------------ Total liabilities and equity 2,262,396 2,193,255 ------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of consolidated financial statements. 2 Ricoh Company, Ltd. and Consolidated Subsidiaries CONSOLIDATED STATEMENT OF INCOME For the Nine Months Ended December 31, 2010 and 2011
Millions of Yen ------------------------------------------------------------------------------------------------------- Nine months ended Nine months ended December 31, 2010 December 31, 2011 ------------------------------------------------------------------------------------------------------- Net Sales: Products 685,860 637,648 Post sales and rentals 677,001 680,135 Other revenue 76,190 78,758 --------------------------------------------------------------------------------------------------- Total 1,439,051 1,396,541 --------------------------------------------------------------------------------------------------- Cost of sales: Products 455,759 444,836 Post sales and rentals 323,895 324,211 Other revenue 59,918 58,472 --------------------------------------------------------------------------------------------------- Total 839,572 827,519 --------------------------------------------------------------------------------------------------- Gross profit 599,479 569,022 Selling, general and administrative expenses 545,490 578,175 Loss on impairment of goodwill -- 27,464 --------------------------------------------------------------------------------------------------- Operating income (loss) 53,989 (36,617) --------------------------------------------------------------------------------------------------- Other (income) expenses: Interest and dividend income (2,154) (1,940) Interest expense 5,816 4,883 Foreign currency exchange loss, net 8,206 4,274 Other, net 777 4,104 --------------------------------------------------------------------------------------------------- Total 12,645 11,321 --------------------------------------------------------------------------------------------------- Income (loss) before income taxes and equity in earnings of 41,344 (47,938) affiliates Provision for income taxes: Current 15,216 16,063 Deferred 2,934 (15,219) --------------------------------------------------------------------------------------------------- Total 18,150 844 --------------------------------------------------------------------------------------------------- Equity in earnings of affiliates (15) 17 Consolidated net income (loss) 23,179 (48,765) --------------------------------------------------------------------------------------------------- Net income attributable to noncontrolling interests 2,839 3,370 --------------------------------------------------------------------------------------------------- Net income (loss) attributable to Ricoh Company, Ltd. 20,340 (52,135) --------------------------------------------------------------------------------------------------- Yen Yen --------------------------------------------------------------------------------------------------- Per share of common stock: Net income (loss) attributable to Ricoh Company, Ltd. --------------------------------------------------------------------------------------------------- Basic 28.03 (71.86) Diluted 27.30 (71.86) --------------------------------------------------------------------------------------------------- Cash dividends paid per share 33.00 33.00 --------------------------------------------------------------------------------------------------- Per American Depositary Share, each representing 5 shares of common stock: Net income (loss) attributable to Ricoh Company, Ltd. --------------------------------------------------------------------------------------------------- Basic 140.15 (359.30) Diluted 136.50 (359.30) --------------------------------------------------------------------------------------------------- Cash dividends paid per share 165.00 165.00 ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 3 For the Three Months Ended December 31, 2010 and 2011
Millions of Yen ------------------------------------------------------------------------------------------------------- Three months ended Three months ended December 31, 2010 December 31, 2011 ------------------------------------------------------------------------------------------------------- Net Sales: Products 218,751 202,859 Post sales and rentals 224,545 228,224 Other revenue 24,899 26,573 --------------------------------------------------------------------------------------------------------- Total 468,195 457,656 --------------------------------------------------------------------------------------------------------- Cost of sales: Products 140,772 143,277 Post sales and rentals 111,228 111,899 Other revenue 19,634 19,720 --------------------------------------------------------------------------------------------------------- Total 271,634 274,896 --------------------------------------------------------------------------------------------------------- Gross profit 196,561 182,760 Selling, general and administrative expenses 180,584 190,137 Loss on impairment of goodwill -- 27,464 --------------------------------------------------------------------------------------------------------- Operating income (loss) 15,977 (34,841) --------------------------------------------------------------------------------------------------------- Other (income) expenses: Interest and dividend income (779) (438) Interest expense 1,905 1,465 Foreign currency exchange (gain) loss, net 776 (56) Other, net 796 4,372 --------------------------------------------------------------------------------------------------------- Total 2,698 5,343 --------------------------------------------------------------------------------------------------------- Income (loss) before income taxes and equity in earnings of 13,279 (40,184) affiliates Provision for income taxes: Current 2,443 4,625 Deferred 2,113 (1,239) --------------------------------------------------------------------------------------------------------- Total 4,556 3,386 --------------------------------------------------------------------------------------------------------- Equity in earnings of affiliates (8) 18 Consolidated net income (loss) 8,715 (43,552) --------------------------------------------------------------------------------------------------------- Net income attributable to noncontrolling interest 887 1,220 --------------------------------------------------------------------------------------------------------- Net income (loss) attributable to Ricoh Company, Ltd. 7,828 (44,772) --------------------------------------------------------------------------------------------------------- Yen Yen --------------------------------------------------------------------------------------------------------- Per share of common stock: Net income (loss) attributable to Ricoh Company, Ltd. --------------------------------------------------------------------------------------------------------- Basic 10.79 (61.71) Diluted 10.54 (61.71) --------------------------------------------------------------------------------------------------------- Cash dividends paid per share 16.50 16.50 --------------------------------------------------------------------------------------------------------- Per American Depositary Share, each representing 5 shares of common stock: Net income (loss) attributable to Ricoh Company, Ltd. --------------------------------------------------------------------------------------------------------- Basic 53.95 (308.55) Diluted 52.70 (308.55) --------------------------------------------------------------------------------------------------------- Cash dividends paid per share 82.50 82.50 ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 4 Ricoh Company, Ltd. and Consolidated Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS For the Nine Months Ended December 31, 2010 and 2011
Millions of Yen --------------------------------------------------------------------------------------------------------- Nine months ended Nine months ended December 31, 2010 December 31, 2011 --------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net income (loss) 23,179 (48,765) Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities Depreciation and amortization 69,518 65,968 Equity in earnings of affiliates, net of dividends received 15 (17) Deferred income taxes 2,934 (15,217) Losses on disposals and sales of property, plant and equipment 813 506 Loss on impairment of long-lived assets -- 9,898 Loss on impairment of securities 205 5,024 Loss on impairment of goodwill -- 27,464 Pension and severance costs, less payment 889 (5,478) Changes in assets and liabilities, net of effects from acquisition- Decrease in trade receivables 9,820 16,723 Increase in inventories (29,139) (33,766) (Increase) Decrease in finance receivables 11,903 (13,751) Decrease in trade payables (20,183) (21,847) Decrease in accrued income taxes and accrued expenses and other (6,111) (27,421) Other, net 10,513 14,062 --------------------------------------------------------------------------------------------------------- Net cash used in (provided by) operating activities 74,356 (26,617) --------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment 732 829 Expenditures for property, plant and equipment, including interest capitalized (48,674) (53,871) Expenditures for intangible assets including interest capitalized (12,153) (10,421) Payments for purchases of available-for-sale securities (230) (127) Proceeds from sales of available-for-sale securities 17 32 Increase in time deposits, net (192) (631) Purchase of business, net of cash acquired (477) (15,089) Other, net (3,187) (9,278) --------------------------------------------------------------------------------------------------------- Net cash used in investing activities (64,164) (88,556) --------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term indebtedness 43,691 81,396 Repayment of long-term indebtedness (75,039) (59,102) (Increase) Decrease in short-term borrowings, net (28,110) 103,949 Proceeds from issuance of long-term debt securities 79,741 -- Repayment of long-term debt securities (88,307) (226) Dividends paid (23,943) (23,942) Payment for purchase of treasury stock (138) (20) Other, net (551) (585) --------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (92,656) 101,470 --------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (11,885) (8,767) --------------------------------------------------------------------------------------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (94,349) (22,470) --------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 242,165 179,169 --------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD 147,816 156,699 ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 5 Ricoh Company, Ltd. and Consolidated Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES According to the article 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 nine months ended December 31, 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 December 31. (B) REVENUE RECOGNITION Ricoh generates revenue principally through the sale of equipment, supplies and related services under separate contractual arrangements for each. Ricoh recognizes revenue when (1) it has a firm contract, (2) the product has been shipped to and accepted by the customer or the service has been provided, (3) the sales price is fixed or determinable and (4) amounts are reasonably assured of collection. Products sales are recognized at the time of delivery and installation at the customer location. Service revenues are recognized in accordance with the contract period of each service contract. Revenue from the sale of equipment under sales-type leases is recognized as product sales at the inception of the lease. Other revenue consists primarily of interest income on sales-type leases and direct-financing leases, which are recognized as other revenue over the life of each respective lease using the interest method. Leases not qualifying as sales-type leases or direct financing leases are accounted for as operating leases and related revenue is recognized over the lease term. 6 (C) FOREIGN CURRENCY TRANSLATION For foreign operations with functional currencies other than the Japanese yen, assets and liabilities are translated at the exchange rates in effect at each fiscal year-end, and income and expenses are translated at the average rates of exchange prevailing during each fiscal year. The resulting translation adjustments are included as a part of accumulated other comprehensive income (loss) in Ricoh Company, Ltd. shareholders' equity. All foreign currency transaction gains and losses are included in other income and expenses in the period incurred. (D) CASH EQUIVALENTS Cash and cash equivalents include highly liquid investments with maturities of three months or less at the date of purchase such as time deposits and short-term investment securities which are available-for-sale at any time, present insignificant risk of changes in value due to being readily convertible into cash and have an original maturity of three months or less, such as money management funds and free financial funds. (E) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES As discussed further in Note 8, Ricoh manages its exposure to certain market risks, primarily foreign currency and interest rate risks, through the use of derivative instruments. As a matter of policy, Ricoh does not enter into derivative contracts for trading or speculative purposes. Ricoh recognizes all derivative instruments as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. When Ricoh enters into a derivative contract, it makes a determination as to whether or not for accounting purposes the derivative is part of a hedging relationship. In general, a derivative may be designated as either (1) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"), (2) a hedge of the variability of the expected cash flows associated with an existing asset or liability or a forecasted transaction ("cash flow hedge"), or (3) a foreign currency fair value or cash flow hedge ("foreign currency hedge"). Ricoh formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value, cash flow, or foreign currency hedges to specific assets and liabilities on the consolidated balance sheets or to specific firm commitments or forecasted transactions. For derivative contracts that are designated and qualify as fair value hedges including foreign currency fair value hedges, the derivative instrument is marked-to-market with gains and losses recognized in current period earnings to offset the respective losses and gains recognized on the change in fair value of the hedged item. For derivative contracts that are designated and qualify as cash flow hedges including foreign currency cash flow hedges, the effective portion of gains and losses on these contracts is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period the hedged item or transaction affects earnings. Any hedge ineffectiveness on cash flow hedges is immediately recognized in earnings. For all derivative instruments that are not designated as part of a hedging relationship and for designated derivative instruments that do not qualify for hedge accounting, the contracts are recorded at fair value with the gain or loss recognized in current period earnings. 7 (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). Individual securities classified as available-for-sale securities are reduced to fair market value by a charge to income for other than temporary declines in value. Factors considered in assessing whether an indication of other than temporary impairment exists with respect to available-for-sale securities include: financial condition and near term prospects of issuer and intent and ability of Ricoh to retain its investments for a period of time sufficient to allow for any anticipated recovery in market value. The cost of the securities sold is computed based on the average cost of each security held at the time of sale. Investments in affiliated companies over which Ricoh has the ability to exercise significant influence, but does not hold a controlling financial interest, are accounted for by the equity method. Non-marketable equity securities owned by Ricoh primarily relate to less than 20% owned companies and funds are stated at cost unless indication of impairment exist, which require the investment to be written down to its estimated fair value. (H) INVENTORIES Inventories are mainly stated at the lower of average cost or net realizable values. Inventory costs include raw materials, labor and manufacturing overheads. (I) PROPERTY, PLANT AND EQUIPMENT For the Company and its domestic subsidiaries, depreciation of property, plant and equipment is computed principally by using the declining-balance method over the estimated useful lives. Most of the foreign subsidiaries have adopted the straight-line method for computing depreciation. The depreciation period generally ranges from 5 years to 50 years for buildings and 2 years to 12 years for machinery and equipment. Ordinary maintenance and repairs are charged to expense as incurred. Major replacements and improvements are capitalized. When properties are retired or otherwise disposed of, the property and related accumulated depreciation accounts are relieved of the applicable amounts, and any differences are included in earnings. 8 (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. (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. On April 1, 2007, Ricoh adopted the guidance on accounting for uncertainty in income taxes which requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. Ricoh recognizes interest and penalties 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. 9 (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. Tangible assets and intangible assets of Production Printing business and Digital Camera business are impaired to recoverable amount by Yen 9,898 million which is included in selling and general administrative expenses in the consolidated statement of income, as a result of worsening economic circumstances. Ricoh estimated that the carrying amounts will not be recoverable through future cash flows. The impairment losses are included in the results of Imaging & Solutions and Other segment. (Q) NET INCOME ATTRIBUTABLE TO RICOH COMPANY, LTD. PER SHARE Basic net income attributable to Ricoh Company, Ltd. per share of common stock is calculated by dividing net income attributable to Ricoh Company, Ltd. by the weighted-average number of shares of common stock outstanding during the period. The calculation of diluted net income attributable to Ricoh Company, Ltd. per share of common stock is similar to the calculation of basic net income attributable to Ricoh Company, Ltd. per share, except that the weighted-average number of shares outstanding includes the additional dilution from potential common stock equivalents such as convertible bonds. (R) USE OF ESTIMATES Management of Ricoh has made a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of fair value of financial instruments and contingent assets and liabilities, to prepare these financial statements in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates. Ricoh has identified seven areas where it believes assumptions and estimates are particularly critical to the consolidated financial statements. These are determination of the allowance for doubtful receivables, impairment of securities, impairment of long-lived assets including goodwill, uncertain tax positions, realizability of deferred tax assets, the valuation of assets and liabilities in business combinations and pension accounting. (S) NEW ACCOUNTING STANDARDS NOT YET ADOPTED In June 2011, the FASB issued Accounting Standards Update ("ASU") 2011-05. This ASU requires entities to present comprehensive income in either: (i) one continuous financial statement or (ii) two separate but consecutive statements that display net income and the components of other comprehensive income. Totals and individual components of both net income and other comprehensive income must be included in either presentation. It is effective for fiscal years beginning on or after December 16, 2011 and 10 early adoption is permitted. However, ASU 2011-12 was issued in December 2011 that defers the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of other comprehensive income into net income. The FASB has not yet established a timetable for its reconsideration. This adoption of ASU 2011-05 will not have any effect on Ricoh's consolidated financial position and results of operations. (T) RECLASSIFICATIONS Certain reclassifications have been made to the prior years' financial statements to conform with the current year's presentation. Loss on impairment of securities was included in other, net of cash flows from operating activities in the consolidated statement of cash flows for the nine months ended December 31, 2010, has been reclassified to conform with the current year's presentation. 11 2. SECURITIES Investment securities as of March 31, 2011 and December 31, 2011 consist of the following:
Millions of Yen -------------------------------------------------------------------------------------------------- March 31, 2011 December 31, 2011 -------------------------------------------------------------------------------------------------- Investment securities: Available-for-sale securities 46,938 39,723 Non-marketable equity securities 1,971 1,989 -------------------------------------------------------------------------------------------------- 48,909 41,712 --------------------------------------------------------------------------------------------------
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 December 31, 2011 are as follows:
Millions of Yen --------------------------------------------------------------------------------------------------------------------- March 31, 2011 December 31, 2011 --------------------------------------------------------------------------------------------------------------------- Gross Gross Gross Gross unrealized unrealized unrealized unrealized holding holding holding holding Cost gains losses Fair value Cost gains losses Fair value --------------------------------------------------------------------------------------------------------------------- Noncurrent: Equity securities 40,765 4,655 327 45,093 35,784 2,592 368 38,008 Corporate debt securities 1,802 43 -- 1,845 1,629 86 -- 1,715 --------------------------------------------------------------------------------------------------------------------- 42,567 4,698 327 46,938 37,413 2,678 368 39,723 ---------------------------------------------------------------------------------------------------------------------
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 December 31, 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 ------------------------------------------------------------------------------------------------------ December 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 1,957 286 336 82 2,293 368 ------------------------------------------------------------------------------------------------------
12 Gross unrealized holding losses of available-for-sale securities as of March 31, 2011 and December 31, 2011 consist of 39 and 43 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 December 31, 2011 are as follows: Millions of Yen ------------------ Cost Fair value --------------------------------------------------------- Due after one year through five years 518 514 Over five years 1,111 1,201 --------------------------------------------------------- 1,629 1,715 --------------------------------------------------------- There were no significant proceeds from the sales of available-for-sale securities for the nine months ended December 31, 2010 and 2011. There were no significant realized gains or losses on sales of available-for-sale securities for the nine months ended December 31, 2010 and 2011. There were no significant realized gains or losses on valuation of available-for-sale securities for the nine months ended December 31, 2010. The losses on impairment of available-for-sale securities are Yen 5,024 million and Yen 4,952 million for the nine months ended December 31, 2011 and three months ended December 31, 2011. The losses on impairment are included in other expense in consolidated statement of income. The numbers of impaired available-for-sale securities are 16 and 5 for the nine months ended December 31, 2011 and three months ended December 31, 2011. The cause of the impairment is the decline of the stock markets. Ricoh regards these losses as other-than-temporary impairments because it does not believe that the quoted market price of such securities would recover to its cost basis within the near term, as of December 31, 2011. 3. GOODWILL In accordance with Accounting Standards Codification (ASC) 350, Ricoh performs an annual impairment test of goodwill at December 31, which is the annual goodwill impairment test date, instead of amortizing of goodwill. ASC 350 requires a company to evaluate fair value of each reporting unit including goodwill. In addition, a company is required to perform a reconciliation of the aggregate fair value of reporting units and market capitalization at the goodwill impairment test date. Ricoh uses Discounted Cash Flow (DCF) method as one of income approach for evaluating fair value of each reporting unit. Primarily because Ricoh's business plan which is used for DCF method is not fully available at this time, the annual goodwill impairment test has not been completed yet. However, Ricoh recognized the best estimate of the impairment loss in amount of Yen 27,464 million in the third quarter financial statements. 13 4. INCOME TAXES The estimated annual effective tax rate for fiscal year ending March 31, 2012 was approximately (2) percent as of December 31, 2011. The estimated annual effective tax rate differed from the statutory tax rate of approximately 41 percent, due primarily to the decrease of deferred tax assets in accordance with the corporate tax rate change and the net increase in valuation allowance for deferred tax assets. The corporate tax rate has been changed due to new laws passed by the Japanese government on November 30, 2011. As a result of this law, the statutory tax rate applied when calculating deferred tax assets and liabilities of temporary differences that are expected to be eliminated, after the fiscal year ending March 31, 2013 and 2016 decreased from 40.8% to 38.6% and 35.8% respectively. As a result, "Provision for income taxes" in consolidated statements of income increased by 7,246 million yen in the third quarter ended December 31, 2011. 5. PENSION AND RETIREMENT ALLOWANCE PLANS The net periodic benefit costs of the pension plans consist of the following components:
Millions of Yen --------------------------------------------------------------------------------- Nine months ended Three months ended December 31, 2010 December 31, 2011 --------------------------------------------------------------------------------- Service cost 9,563 9,307 Interest cost 11,031 10,617 Expected return on plan assets (6,446) (6,618) Net amortization 2,277 1,641 --------------------------------------------------------------------------------- Total net periodic pension cost 16,425 14,947 ---------------------------------------------------------------------------------
Millions of Yen --------------------------------------------------------------------------------- Three months ended Three months ended December 31, 2010 December 31, 2011 --------------------------------------------------------------------------------- Service cost 3,220 3,166 Interest cost 3,635 3,496 Expected return on plan assets (2,153) (2,162) Net amortization 747 549 --------------------------------------------------------------------------------- Total net periodic pension cost 5,449 5,049 ---------------------------------------------------------------------------------
6. EQUITY The change in Ricoh shareholders' equity, noncontrolling interests and total equity for the nine months ended December 31, 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. 14
Millions of Yen -------------------------------------------------------------------------------------------------------------------------------- Nine months ended Nine months ended December 31, 2010 December 31, 2011 -------------------------------------------------------------------------------------------------------------------------------- Ricoh Ricoh Shareholders' Noncontrolling Shareholders' Noncontrolling Equity Interests Total Equity Equity Interests Total Equity -------------------------------------------------------------------------------------------------------------------------------- Equity, Beginning of Period 973,341 50,533 1,023,874 929,877 52,887 982,764 -------------------------------------------------------------------------------------------------------------------------------- Cumulative effect of a change in accounting principle - adoption of accounting guidance for a variable interest entity, net of tax (410) (392) (802) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Equity, Beginning of Period as adjusted 972,931 50,141 1,023,072 929,877 52,887 982,764 -------------------------------------------------------------------------------------------------------------------------------- Net income (loss) 20,340 2,839 23,179 (52,135) 3,370 (48,765) Unrealized losses on securities (1,271) (3) (1,274) (1,256) (9) (1,265) Pension liability adjustments 1,540 1 1,541 (808) 8 (800) Unrealized gains (losses) on derivatives (85) (23) (108) (313) 30 (283) Foreign currency translation adjustments (61,852) 310 (61,542) (46,440) (190) (46,630) -------------------------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) (41,328) 3,124 (38,204) (100,952) 3,209 (97,743) -------------------------------------------------------------------------------------------------------------------------------- Cash dividends on Common stock (23,943) -- (23,943) (23,942) -- (23,942) Distributions to Noncontrolling interests -- (650) (650) -- (603) (603) Net changes in Treasury stock (68) -- (68) 17 -- 17 Wholly owned subsidiaries -- -- -- -- (198) (198) Other -- -- -- (19) -- (19) -------------------------------------------------------------------------------------------------------------------------------- Equity, End of Period 907,592 52,615 960,207 804,981 55,295 860,276 --------------------------------------------------------------------------------------------------------------------------------
Comprehensive incomes were Yen 7,382 million (losses) and Yen 43,582 million (losses) for the three months ended December 31, 2010 and 2011, respectively. Comprehensive incomes attributable to Ricoh Company, Ltd. were Yen 8,261 million (losses), and Yen 44,785 million (losses), and comprehensive incomes attributable to noncontrolling interests were Yen 879 million (gains) and Yen 1,203 million (gains) for the three months ended December 31, 2010 and 2011, respectively. 7. DIVIDENDS Cash dividends paid during the nine months ended December 31, 2011 is as follows: Resolved at the General meetings of Shareholders on June 24, 2011 ----------------------------------------------------------------- Total amount of dividends (million of yen) 11,971 Dividend per share of common stock (yen) 16.50 Record date March 31, 2011 Effective date June 27, 2011 Resource for dividend Retained earnings ----------------------------------------------------------------- Resolved at the Board meeting on October 28, 2011 ----------------------------------------------------------------- Total amount of dividends (millions of yen) 11,970 Dividend per share of common stock (yen) 16.50 Record date September 30, 2011 Effective date December 1, 2011 Resource for dividend Retained earnings ----------------------------------------------------------------- 15 8. PER SHARE DATA Ricoh shareholders' equity per share was Yen 1,281.70 and Yen 1,109.55 as of March 31, 2011 and December 31, 2011, respectively. Dividends per share shown in the consolidated statement of income are computed based on dividends paid for the year ended March 31, 2011 and the third quarter ended December 31, 2011. A reconciliation of the numerator and the denominators of the basic and diluted per share computations for net income attributable to Ricoh Company, Ltd. are as follows:
Thousands of shares --------------------------------------------------------------------------------------------- Nine months ended Nine months ended December 31, 2010 December 31, 2011 --------------------------------------------------------------------------------------------- Weighted average number of shares of common stock outstanding 725,570 725,501 Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 17,992 -- --------------------------------------------------------------------------------------------- Diluted shares of common stock outstanding 743,562 725,501 ---------------------------------------------------------------------------------------------
Millions of Yen --------------------------------------------------------------------------------------------- Nine months ended Nine months ended December 31, 2010 December 31, 2011 --------------------------------------------------------------------------------------------- Net income (loss) attributable to Ricoh Company, Ltd. 20,340 (52,135) Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 (38) -- --------------------------------------------------------------------------------------------- Diluted net income (loss) attributable to Ricoh Company, Ltd. 20,302 (52,135) ---------------------------------------------------------------------------------------------
Yen ------------------------------------- Nine months ended Nine months ended December 31, 2010 December 31, 2011 --------------------------------------------------------------------------------------------- Net income (loss) attributable to Ricoh Company, Ltd. per share: Basic: Basic: Net income (loss) attributable to Ricoh Company, Ltd. 28.03 (71.86) Diluted: Diluted: Net income (loss) attributable to Ricoh Company, Ltd. 27.30 (71.86) ---------------------------------------------------------------------------------------------
Thousands of shares --------------------------------------------------------------------------------------------- Three months ended Three months ended December 31, 2010 December 31, 2011 --------------------------------------------------------------------------------------------- Weighted average number of shares of common stock outstanding 725,554 725,500 Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 14,672 -- --------------------------------------------------------------------------------------------- Diluted shares of common stock outstanding 740,226 725,500 ---------------------------------------------------------------------------------------------
16
Millions of Yen --------------------------------------------------------------------------------------------- Three months ended Three months ended December 31, 2010 December 31, 2011 --------------------------------------------------------------------------------------------- Net income (loss) attributable to Ricoh Company, Ltd. 7,828 (44,772) Effect of dilutive securities: Euro Yen Zero Coupon Convertible Bonds - Due December 2011 (25) -- --------------------------------------------------------------------------------------------- Diluted net income attributable to Ricoh Company, Ltd. 7,803 (44,772) ---------------------------------------------------------------------------------------------
Yen --------------------------------------------------------------------------------------------- Three months ended Three months ended December 31, 2010 December 31, 2011 --------------------------------------------------------------------------------------------- Net income (loss) attributable to Ricoh Company, Ltd. per share: Basic: Basic: Net income (loss) attributable to Ricoh Company, Ltd. 10.79 (61.71) Diluted: Diluted: Net income (loss) attributable to Ricoh Company, Ltd. 10.54 (61.71) ---------------------------------------------------------------------------------------------
Euro Yen Zero Coupon Convertible Bonds was excluded as anti-dilutive for the nine months and three months ended December 31, 2011 due to Ricoh incurring a net loss attributable to Ricoh Company, Ltd. 9. 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 17 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 are no Fair Value Hedges derivative instruments effective at December 31, 2011 due to the maturity of hedged instruments or contract. Cash Flow Hedges Changes in the fair value of derivative instruments designated and qualifying as cash flow hedges are included in accumulated other comprehensive income (loss) on the consolidated balance sheets. These amounts are reclassified into earnings as interest on the hedged loans is paid. There is no hedging ineffectiveness nor are net gains or losses excluded from the assessment of hedge effectiveness for the Nine months ended December 31, 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 expenses during the next 12 months approximately Yen 23 million loss of the balance of accumulated other comprehensive income (loss) as of December 31, 2011. Undesignated Derivative Instruments Derivative instruments not designated as hedging instruments are held mainly to reduce the risk relating to the variability in exchange rates on assets and liabilities denominated in foreign currencies. Changes in the fair value of these instruments are included in other (income) expenses in the consolidated statement of income. Contract amounts of derivative instruments at March 31, 2011 and December 31, 2011 are shown in the following tables: Millions of Yen ------------------------------------------------------------------------ March 31, 2011 December 31, 2011 ------------------------------------------------------------------------ Interest rate swap agreements 284,444 315,671 Foreign currency contracts 211,249 178,956 Foreign currency options 3,555 34,657 ------------------------------------------------------------------------ The location and fair value amounts of derivatives in consolidated balance sheet are shown in the following tables: 18 Derivatives designated as hedging instruments
------------------------------------------------------------------------------------------------------------------------------ Current Long-term ------------------------------------------------------------------------------------------------------------------------------ Fair value Fair value ------------------------------------------------------------------------------------------------------------------------------ Balance sheet Balance sheet Location Millions of Yen Location Millions of Yen ------------------------------------------------------------------------------------------------------------------------------ Asset Derivatives March 31, 2011 December 31, 2011 March 31, 2011 December 31, 2011 ------------------------------------------------------------------------------------------------------------------------------ Interest rate swap Deferred income Lease deposits agreements taxes and other 4 -- and other -- -- ------------------------------------------------------------------------------------------------------------------------------ Liability Derivatives March 31, 2011 December 31, 2011 March 31, 2011 December 31, 2011 ------------------------------------------------------------------------------------------------------------------------------ Interest rate swap Accrued expenses Deferred income agreements and other 73 32 taxes and other 2,766 2,520 ------------------------------------------------------------------------------------------------------------------------------
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 ------------------------------------------------------------------------------------------------------------------------------ Asset Derivatives March 31, 2011 December 31, 2011 March 31, 2011 December 31, 2011 ------------------------------------------------------------------------------------------------------------------------------ Foreign currency contracts Deferred income 1,497 1,590 Lease deposits -- 1,767 Foreign currency taxes and other and other options 20 582 -- -- ------------------------------------------------------------------------------------------------------------------------------ Total 1,517 2,172 -- 1,767 ------------------------------------------------------------------------------------------------------------------------------ Liability Derivatives March 31, 2011 December 31, 2011 March 31, 2011 December 31, 2011 ------------------------------------------------------------------------------------------------------------------------------ Interest rate swap agreements 72 10 24 240 Foreign currency contracts Accrued expenses 3,087 1,008 Deferred income 477 27 Foreign currency and other taxes and other options 64 54 -- -- ------------------------------------------------------------------------------------------------------------------------------ Total 3,223 1,072 501 267 ------------------------------------------------------------------------------------------------------------------------------
Total fair value amounts of derivatives Millions of Yen ---------------------------------------------------------------------- Fair value ---------------------------------------------------------------------- March 31, 2011 December 31, 2011 ---------------------------------------------------------------------- Total Asset Derivatives 1,521 3,939 Total Liability Derivatives 6,563 3,891 --------------------------------------------------------------------- 19 The location and amount of gains and losses related to derivatives reported in the consolidated statement of income for the nine months ended December 31, 2010 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen ----------------------------------------------------------------------------------------------------------- Gain or (Loss) Gain or (Loss) Reclassified Recognized in OCI from Accumulated OCI Gain or (Loss) Recognized on Derivative Into Income in Income on Derivative (Effective Portion) (Effective Portion) (Ineffective Portion) ----------------------------------------------------------------------------------------------------------- Amount Location Amount Location Amount ----------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements (496) Interest expense (165) -- -- -----------------------------------------------------------------------------------------------------------
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 and Interest rate swap agreements dividend income 68 Interest expense (90) ----------------------------------------------------------------------------------------
Derivatives not designated as hedging instruments Gain or (Loss) Recognized in Income on Derivative ---------------------------------------------------------------------- Location Millions of Yen ---------------------------------------------------------------------- December 31, 2010 ---------------------------------------------------------------------- Interest rate swap agreements Other, net (133) Foreign currency exchange (gain) Foreign currency contracts loss, net 3,810 Foreign currency exchange (gain) Foreign currency options loss, net 800 ---------------------------------------------------------------------- Total 4,477 ---------------------------------------------------------------------- The location and amount of gains and losses related to derivatives reported in the consolidated statement of for the three months ended December 31, 2010 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen ----------------------------------------------------------------------------------------------------------- Gain or (Loss) Gain or (Loss) Reclassified Recognized in OCI from Accumulated OCI Gain or (Loss) Recognized on Derivative Into Income in Income on Derivative (Effective Portion) (Effective Portion) (Ineffective Portion) ----------------------------------------------------------------------------------------------------------- Amount Location Amount Location Amount ----------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements 98 Interest expense (32) -- -- -----------------------------------------------------------------------------------------------------------
20
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 and Interest rate swap agreements dividend income 13 Interest expense (17) ----------------------------------------------------------------------------------------
Derivatives not designated as hedging instruments Gain or (Loss) Recognized in Income on Derivative ---------------------------------------------------------------------- Location Millions of Yen ---------------------------------------------------------------------- December 31, 2010 ---------------------------------------------------------------------- Interest rate swap agreements Other, net (40) Foreign currency exchange (gain) Foreign currency contracts loss, net 1,544 Foreign currency exchange (gain) Foreign currency options loss, net 1,114 ---------------------------------------------------------------------- Total 2,618 ---------------------------------------------------------------------- The location and amount of gains and losses related to derivatives reported in the consolidated statement of income for the nine months ended December 31, 2011 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen ----------------------------------------------------------------------------------------------------------- Gain or (Loss) Gain or (Loss) Reclassified Recognized in OCI from Accumulated OCI Gain or (Loss) Recognized on Derivative Into Income in Income on Derivative (Effective Portion) (Effective Portion) (Ineffective Portion) ----------------------------------------------------------------------------------------------------------- Amount Location Amount Location Amount ----------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements (353) Interest expense (40) -- -- -----------------------------------------------------------------------------------------------------------
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 and Interest rate swap agreements dividend income -- Interest expense -- ----------------------------------------------------------------------------------------
21 Derivatives not designated as hedging instruments Gain or (Loss) Recognized in Income on Derivative ---------------------------------------------------------------------- Location Millions of Yen ---------------------------------------------------------------------- December 31, 2011 ---------------------------------------------------------------------- Interest rate swap agreements Other, net (153) Foreign currency exchange (gain) Foreign currency contracts loss, net 4,389 Foreign currency exchange (gain) Foreign currency options loss, net 572 ---------------------------------------------------------------------- Total 4,808 ---------------------------------------------------------------------- The location and amount of gains and losses related to derivatives reported in the consolidated statement of income for the three months ended December 31, 2011 are shown in the following tables: Derivatives designated as hedging instruments
Millions of Yen ----------------------------------------------------------------------------------------------------------- Gain or (Loss) Gain or (Loss) Reclassified Recognized in OCI from Accumulated OCI Gain or (Loss) Recognized on Derivative Into Income in Income on Derivative (Effective Portion) (Effective Portion) (Ineffective Portion) ----------------------------------------------------------------------------------------------------------- Amount Location Amount Location Amount ----------------------------------------------------------------------------------------------------------- Cash flow hedge Interest rate swap agreements (291) Interest expense (7) -- -- -----------------------------------------------------------------------------------------------------------
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 and Interest rate swap agreements dividend income -- Interest expense -- ----------------------------------------------------------------------------------------
Derivatives not designated as hedging instruments Gain or (Loss) Recognized in Income on Derivative ---------------------------------------------------------------------- Location Millions of Yen ---------------------------------------------------------------------- December 31, 2011 ---------------------------------------------------------------------- Interest rate swap agreements Other, net 71 Foreign currency exchange (gain) Foreign currency contracts loss, net 928 Foreign currency exchange (gain) Foreign currency options loss, net 146 ---------------------------------------------------------------------- Total 1,145 ---------------------------------------------------------------------- 22 10. COMMITMENTS AND CONTINGENT LIABILITIES Ricoh was contingently liable for certain guarantees including employees housing loans of (Y)60 million as of December 31, 2011. As of December 31, 2011 the Company and certain of its subsidiaries were parties to litigation involving routine matters, such as patent rights. In the opinion of management, the ultimate liability, if any, resulting from such litigation will not materially affect the consolidated financial position or the results of operations of Ricoh. 11. 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 (Y)1,971 million and (Y)1,989 million as of March 31, 2011 and December 31, 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 is estimated by obtaining quotes from brokers or suitable valuation method based on available data. (F) FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY OPTIONS The fair value of foreign currency contracts and foreign currency options is estimated by obtaining quotes from brokers. 23 The estimated fair value of the financial instruments as of March 31, 2011 and December 31, 2011are summarized as follows:
Millions of Yen ------------------------------------------------------------------------------------- March 31, 2011 December 31, 2011 ------------------------------------------------------------------------------------- Carrying Estimated Carrying Estimated amount fair value amount fair value ------------------------------------------------------------------------------------- Investment securities 48,909 48,909 41,712 41,712 Installment loans 72,634 73,769 81,178 82,446 Long-term indebtedness (479,422) (475,116) (537,065) (535,041) Interest rate swap agreements, net (2,931) (2,931) (2,802) (2,802) Foreign currency contracts, net (2,067) (2,067) 2,322 2,322 Foreign currency options, net (44) (44) 528 528 -------------------------------------------------------------------------------------
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. 12. FAIR VALUE MEASUREMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels fair value hierarchy that prioritizes the inputs used to measure fair value is established. The three levels of inputs used to measure fair value are as follows: Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3 - Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. The following tables present the fair-value hierarchy levels of Ricoh's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2011 and December 31, 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 ---------------------------------------------------------------------------- 24 Millions of Yen ---------------------------------------------------------------------------- December 31, 2011 ---------------------------------------------------------------------------- Level 1 Level 2 Level 3 Total ---------------------------------------------------------------------------- Assets: Available-for-sale securities: Domestic equity securities 31,950 -- -- 31,950 Foreign equity securities 6,058 -- -- 6,058 Foreign corporate bonds 1,715 -- -- 1,715 Derivative instruments Interest rate swap agreements -- -- -- -- Foreign currency contracts -- 3,357 -- 3,357 Foreign currency options -- 582 -- 582 ---------------------------------------------------------------------------- Total assets 39,723 3,939 -- 43,662 ---------------------------------------------------------------------------- Liabilities: Derivatives instruments Interest rate swap agreements -- 2,802 -- 2,802 Foreign currency contracts -- 1,035 -- 1,035 Foreign currency options -- 54 -- 54 ---------------------------------------------------------------------------- Total liabilities -- 3,891 -- 3,891 ---------------------------------------------------------------------------- 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. Assets and liabilities measured at fair value on a nonrecurring basis During the nine months ended December 31, 2011, a part of the long-lived assets associated with the Production Printing business with a carrying amount of Yen 9,898 million, and goodwill of the Production Printing business with a carrying amount of Yen 27,464 million were fully impaired. These measurements are classified as level 3 since significant unobservable inputs, such as the conditions of the assets or projections of future cash flows, were considered in the fair value measurements. 25 13. 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 Millions of Yen --------------------------------------------------------------------------------------- Third quarter ended Third quarter ended March 31, 2011 December 31, 2011 --------------------------------------------------------------------------------------- Current maturities of long-term finance receivables, net 8,460 8,510 Long-term finance receivables, net 15,849 15,944 Current maturities of long-term indebtedness 7,044 7,050 Long-term indebtedness 13,197 13,210
14. 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. 26 Financing receivables and allowance for doubtful receivables as of December 31, 2011 are as follows: Millions of Yen ------------------------------------------------------------------------------ December 31, 2011 ------------------------------------------------------------------------------ Installment receivables Lease Installment and receivables loans other Total ------------------------------------------------------------------------------ Allowance for doubtful receivables: Beginning balance 10,527 1,772 2,485 14,784 ------------------------------------------------------------------------------ Charge-offs (1,694) (48) (46) (1,788) Recoveries (2) -- -- (2) Provision 1,613 150 (23) 1,740 Translation adjustment (291) -- (42) (333) Ending balance 10,153 1,874 2,374 14,401 ------------------------------------------------------------------------------ Allowance for doubtful receivables: Individually evaluated 4,040 792 1,176 6,008 Collectively evaluated 6,113 1,082 1,198 8,393 ------------------------------------------------------------------------------ Financing receivables: Individually evaluated 62,817 910 3,566 67,293 Collectively evaluated 530,621 82,142 47,266 660,029 ------------------------------------------------------------------------------ Total:Financing receivables 593,438 83,052 50,832 727,322 ------------------------------------------------------------------------------ (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 December 31, 2011 are as follows: Millions of Yen ------------------------------------------------------------------------------ March 31, 2011 ------------------------------------------------------------------------------ Installment receivables Lease Installment and receivables loans 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 ------------------------------------------------------------------------------ December 31, 2011 ------------------------------------------------------------------------------ Installment receivables Lease Installment and receivables loans other Total ------------------------------------------------------------------------------ Current 587,948 83,023 49,012 719,983 Overdue 5,490 29 1,820 7,339 ------------------------------------------------------------------------------ Total:Financing receivables 593,438 83,052 50,832 727,322 ------------------------------------------------------------------------------ 15. 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 27 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 nine and three months ended December 31, 2010 and 2011, respectively. (A) OPERATING SEGMENT INFORMATION
Millions of Yen -------------------------------------------------------------------------------------------- Nine months ended Nine months ended December 31, 2010 December 31, 2011 -------------------------------------------------------------------------------------------- Segment Sales: Imaging & Solutions 1,264,407 1,225,384 Industrial Products 86,283 77,775 Other 92,508 97,070 Intersegment transaction (4,147) (3,688) -------------------------------------------------------------------------------------------- Total Segment Sales 1,439,051 1,396,541 -------------------------------------------------------------------------------------------- Segment Profit (loss): Imaging & Solutions 108,104 20,624 Industrial Products 775 (2,605) Other (1,533) (3,597) -------------------------------------------------------------------------------------------- Total Segment Profit (loss) 107,346 14,422 -------------------------------------------------------------------------------------------- Reconciling Items: Corporate expenses and Elimination (53,357) (51,039) Interest and dividend income 2,154 1,940 Interest expense (5,816) (4,883) Foreign currency exchange loss, net (8,206) (4,274) Other, net (777) (4,104) -------------------------------------------------------------------------------------------- Income (loss) before Income Taxes and Equity in Earnings of Affiliates 41,344 (47,938) --------------------------------------------------------------------------------------------
Millions of Yen -------------------------------------------------------------------------------------------- Three months ended Three months ended December 31, 2010 December 31, 2011 -------------------------------------------------------------------------------------------- Segment Sales: Imaging & Solutions 413,424 396,279 Industrial Products 27,949 25,061 Other 28,378 37,740 Intersegment transaction (1,556) (1,424) -------------------------------------------------------------------------------------------- Total Segment Sales 468,195 457,656 -------------------------------------------------------------------------------------------- Segment Profit (loss): Imaging & Solutions 35,103 (17,056) Industrial Products (271) (439) Other (1,069) (753) -------------------------------------------------------------------------------------------- Total Segment Profit (loss) 33,763 (18,248) -------------------------------------------------------------------------------------------- Reconciling Items: Corporate expenses and Elimination (17,786) (16,593) Interest and dividend income 779 438 Interest expense (1,905) (1,465) Foreign currency exchange loss, net (776) 56 Other, net (796) (4,372) -------------------------------------------------------------------------------------------- Income (loss) before Income Taxes and Equity in Earnings of Affiliates 13,279 (40,184) --------------------------------------------------------------------------------------------
28 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 ---------------------------------------------------------------------------------------------- Nine months ended Nine months ended December 31, 2010 December 31, 2011 ---------------------------------------------------------------------------------------------- Sales- Japan 649,422 644,880 The Americas 389,424 346,588 Europe 303,531 302,631 Other 96,674 102,442 ---------------------------------------------------------------------------------------------- Consolidated 1,439,051 1,396,541 ----------------------------------------------------------------------------------------------
Millions of Yen ---------------------------------------------------------------------------------------------- Three months ended Three months ended December 31, 2010 December 31, 2011 ---------------------------------------------------------------------------------------------- Sales- Japan 210,357 210,379 The Americas 124,567 112,348 Europe 102,480 100,691 Other 30,791 34,238 ---------------------------------------------------------------------------------------------- Consolidated 468,195 457,656 ----------------------------------------------------------------------------------------------
16. SUPPLEMENTARY INFORMATION TO THE STATEMENT OF INCOME The following amounts were charged to selling, general and administrative expenses for the Nine months and three months ended December 31, 2010 and 2011:
Millions of Yen -------------------------------------------------------------------------------------------- Nine months ended Nine months ended December 31, 2010 December 31, 2011 -------------------------------------------------------------------------------------------- Research and development costs 81,349 89,313 Advertising costs 8,853 8,639 Shipping and handling costs 13,834 17,327 ----------------------------------------------------------------------------------------------
Millions of Yen -------------------------------------------------------------------------------------------- Three months ended Three months ended December 31, 2010 December 31, 2011 -------------------------------------------------------------------------------------------- Research and development costs 27,352 29,806 Advertising costs 3,662 3,156 Shipping and handling costs 4,925 6,116 ----------------------------------------------------------------------------------------------
29