UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
(Amendment 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 1, 2013
KEMET Corporation
(Exact name of registrant as specified in charter)
Delaware |
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001-15491 |
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57-0923789 |
(State of Incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
2835 Kemet Way, Simpsonville, SC |
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29681 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (864) 963-6300
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.01 Completion of Acquisition or Disposition of Assets
On February 7, 2013, KEMET Corporation (the Company) filed a Current Report on Form 8-K (the Original Form 8-K) reporting the completion by its wholly-owned subsidiary, KEMET Electronics Corporation, of the acquisition of approximately 34% economic interest with a 51% voting common stock interest in NEC TOKIN Corporation (NEC TOKIN). This Current Report on Form 8-K/A is being filed to include audited annual and unaudited interim historical financial statements of NEC TOKIN and unaudited pro forma financial information of the Company which were omitted from the Original Form 8-K pursuant to Items 9.01(a)(4) and 9.01(b)(2) of Form 8-K.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
The audited consolidated balance sheet of NEC TOKIN and subsidiaries as of March 31, 2012 and related consolidated statements of operations, changes in shareholders equity, and cash flows for the year then ended, and the notes related thereto and the independent auditors report thereon, are filed hereto as Exhibit 99.1 and are incorporated into this Item 9.01(a) by reference.
The unaudited condensed consolidated balance sheets of NEC TOKIN and subsidiaries as of September 30, 2012 and March 31, 2012, and the related unaudited condensed consolidated statements of operations and cash flows for the six month periods ended September 30, 2012 and 2011, and the unaudited notes related thereto, are filed hereto as Exhibit 99.2 and are incorporated into this Item 9.01(a) by reference.
(b) Unaudited Pro Forma Financial Information
The required unaudited pro forma condensed combined financial information as of and for the six month period ended September 30, 2012 and for the year ended March 31, 2012 is filed as Exhibit 99.3 hereto and is incorporated into this Item 9.01(b) by reference.
(c) Not applicable
(d) Exhibits
The following exhibits are filed herewith:
Exhibit No. |
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Description of Exhibit |
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23.1 |
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Consent of KPMG AZSA LLC |
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99.1 |
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Audited consolidated balance sheet of NEC TOKIN and subsidiaries as of March 31, 2012 and related consolidated statements of operations, changes in shareholders equity, and cash flows for the year then ended, and the notes related thereto and the independent auditors report thereon |
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99.2 |
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Unaudited condensed consolidated balance sheets of NEC TOKIN and subsidiaries as of September 30, 2012 and March 31, 2012, and related unaudited condensed consolidated statements of operations, and cash flows for the six month periods ended September 30, 2012 and 2011, and the unaudited notes related thereto |
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99.3 |
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Unaudited pro forma condensed combined financial information as of and for the six month period ended September 30, 2012 and for the year ended March 31, 2012 |
Signature
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: March 25, 2013 |
KEMET Corporation | |
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By: |
/s/ William M. Lowe, Jr. |
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William M. Lowe, Jr. |
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Executive Vice President and |
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Chief Financial Officer |
INDEX TO EXHIBITS
Exhibit No. |
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Description of Exhibit |
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23.1 |
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Consent of KPMG AZSA LLC |
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99.1 |
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Audited consolidated balance sheet of NEC TOKIN and subsidiaries as of March 31, 2012 and related consolidated statements of operations, changes in shareholders equity, and cash flows for the year then ended, and the notes related thereto and the independent auditors report thereon |
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99.2 |
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Unaudited condensed consolidated balance sheets of NEC TOKIN and subsidiaries as of September 30, 2012 and March 31, 2012, and related unaudited condensed consolidated statements of operations, and cash flows for the six month periods ended September 30, 2012 and 2011, and the unaudited notes related thereto |
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99.3 |
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Unaudited pro forma condensed combined financial information as of and for the six month period ended September 30, 2012 and for the year ended March 31, 2012 |
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
NEC TOKIN Corporation:
We consent to the incorporation by reference in the following Registration Statements of KEMET Corporation:
(1) |
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Registration Statement (Form S-3 No. 33-98912) |
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(2) |
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Registration Statement (Form S-8 No. 333-123308) |
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(3) |
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Registration Statement (Form S-8 No. 33-96226) |
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(4) |
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Registration Statement (Form S-8 No. 333-67849) |
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(5) |
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Registration Statement (Form S-3 No. 333-170073) |
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(6) |
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Registration Statement (Form S-3 No. 333-172628) |
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(7) |
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Registration Statement (Form S-4 No. 333-170147) |
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(8) |
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Registration Statement (Form S-8 No. 333-176317) |
of our report dated March 21, 2013, with respect to the consolidated balance sheet of NEC TOKIN Corporation (the Company) and subsidiaries (together with the Company, the Group) as of March 31, 2012 and the related consolidated statements of operations, changes in shareholders equity and cash flows for the year then ended, which report appears in the Form 8-K/A of KEMET Corporation dated March 25, 2013.
Our report contains emphasis of matter paragraphs that state: the Company entered into a stock purchase agreement to issue new shares of common stock, representing an approximate 34% capital stock equity interest and 51% common stock voting interest, to KEMET Electronics Corporation for cash consideration of US$50 million. The transaction was completed on February 1, 2013. These consolidated financial statements do not reflect any adjustments to the assets and liabilities that might subsequently be necessary as a result of this transaction; the Company restated its previously issued consolidated financial statements as of and for the year ended March 31, 2012 prepared in accordance with the Company Act of Japan (Japanese GAAP) to correct misstatements identified subsequent to the issuance of such statutory report prepared in Japanese; the Group has had significant transactions with related parties; and beginning April 1, 2011, the Group changed its method of depreciation to use the straight-line method for all property, plant and equipment.
/s/ KPMG AZSA LLC |
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Tokyo, Japan |
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March 22, 2013 |
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Exhibit 99.1
NEC TOKIN CORPORATION
Consolidated Financial Statements
March 31, 2012
(With Independent Auditors Report Thereon)
NEC TOKIN CORPORATION
Table of Contents
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Page |
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Independent Auditors Report |
3 |
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Consolidated Balance Sheet |
5 |
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Consolidated Statement of Operations |
7 |
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Consolidated Statement of Changes in Shareholders Equity |
8 |
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Consolidated Statement of Cash Flows |
9 |
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Notes to Consolidated Financial Statements |
10 |
Independent Auditors Report
The Board of Directors
NEC TOKIN Corporation
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of NEC TOKIN Corporation (the Company) and subsidiaries (the Group), which comprise the consolidated balance sheet as of March 31, 2012, and the related consolidated statements of operations, changes in shareholders equity, and cash flows for the year then ended and the related notes to the consolidated financial statements.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NEC TOKIN Corporation and subsidiaries as of March 31, 2012, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in Japan.
Emphasis of Matters
As more fully described in Note 1, on March 12, 2012, the Company entered into a stock purchase agreement to issue new shares of common stock, representing an approximate 34% capital stock equity interest and 51% common stock voting interest, to KEMET Electronics Corporation for cash consideration of US$50 million. The transaction was completed on February 1, 2013.
These consolidated financial statements do not reflect any adjustments to the assets and liabilities that might subsequently be necessary as a result of this transaction.
As more fully described in Note 1, the Company restated its previously issued consolidated financial statements as of and for the year ended March 31, 2012 prepared in accordance with the Company Act of Japan (Japanese GAAP) to correct misstatements identified subsequent to the issuance of such statutory report prepared in Japanese.
As more fully described in Note 4, the Group has had significant transactions with related parties.
As more fully described in Note 2(5)(a), beginning April 1, 2011, the Group changed its method of depreciation to use the straight-line method for all property, plant and equipment.
Accounting principles and practices generally accepted in Japan vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 12 to the consolidated financial statements.
/s/ KPMG AZSA LLC |
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Tokyo, Japan |
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March 21, 2013 |
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NEC TOKIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2012
See accompanying notes to consolidated financial statements
NEC TOKIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
MARCH 31, 2012
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March 31, 2012 |
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Millions of Yen |
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(Unaudited) |
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Liabilities and shareholders equity |
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Current liabilities: |
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Accounts and notes payable |
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5,736 |
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61,897 |
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Other payable |
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3,764 |
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40,617 |
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Short-term borrowings |
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24,350 |
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262,760 |
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Current installments of long-term debt |
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455 |
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4,910 |
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Provision for bonuses |
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959 |
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10,349 |
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Accrued expenses |
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1,234 |
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13,316 |
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Provision for business structure improvement |
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309 |
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3,334 |
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Income taxes payable (note 5) |
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276 |
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2,978 |
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Other current liabilities |
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307 |
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3,314 |
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Total current liabilities |
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37,390 |
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403,475 |
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Long-term liabilities: |
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Long-term debt, excluding current installments |
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401 |
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4,327 |
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Provision for retirement benefits (note 6) |
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5,550 |
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59,890 |
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Deferred income taxes (note 5) |
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1,862 |
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20,093 |
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Other non-current liabilities |
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1,274 |
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13,748 |
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Total long-term liabilities |
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9,087 |
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98,058 |
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Total liabilities |
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46,477 |
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501,533 |
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Shareholders equity: |
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Capital stock |
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Common stock, no par value (1,100,000 thousands shares authorized and 265,516 thousand shares issued and outstanding) |
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31,990 |
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345,203 |
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Convertible preferred stock, no par value (300,000 thousands shares authorized, 270,934 thousand shares issued and outstanding) (note 1) |
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Capital surplus |
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30,063 |
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324,409 |
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Accumulated deficit |
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(54,335 |
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(586,328 |
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Accumulated other comprehensive loss |
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(2,625 |
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(28,326 |
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Total shareholders equity |
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5,093 |
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54,958 |
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Total liabilities and shareholders equity |
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51,570 |
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556,491 |
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See accompanying notes to consolidated financial statements
NEC TOKIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2012
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Year ended March 31, 2012 |
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Millions of Yen |
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(Unaudited) |
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Net sales |
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51,204 |
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552,541 |
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Cost of sales |
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(45,012 |
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(485,723 |
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Gross profit |
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6,192 |
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66,818 |
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Selling, general and administrative expenses (note 8) |
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(10,172 |
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(109,766 |
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Operating loss |
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(3,980 |
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(42,948 |
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Other income (expenses) (notes 7 and 9) |
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Interest income |
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56 |
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604 |
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Interest expense |
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(259 |
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(2,795 |
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Foreign currency exchange loss |
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(211 |
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(2,277 |
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Equity earnings from investments in affiliates |
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347 |
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3,744 |
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Loss on impairment of long-lived assets |
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(1,120 |
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(12,086 |
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Natural disaster related settlement received from insurance company |
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17,953 |
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193,730 |
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Loss suffered from natural disaster |
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(9,840 |
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(106,183 |
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Restructuring charges |
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(2,530 |
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(27,301 |
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Other |
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(212 |
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(2,287 |
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Other income, net |
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4,184 |
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45,149 |
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Income before income taxes |
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204 |
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2,201 |
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Provision for income taxes (note 5) |
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Current |
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(409 |
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(4,414 |
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Deferred |
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(2,702 |
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(29,157 |
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Total provision for income taxes |
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(3,111 |
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(33,571 |
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Net loss |
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(2,907 |
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(31,370 |
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Yen |
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(Unaudited) |
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Net loss per share (note 10) |
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(10.95 |
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(0.12 |
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See accompanying notes to consolidated financial statements
NEC TOKIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
YEAR ENDED MARCH 31, 2012
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Millions of Yen |
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Accumulated other |
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Common |
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Convertible |
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Capital |
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Accumulated |
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Unrealized |
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Deferred gain |
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Foreign |
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Total |
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Balance at April 1, 2011 |
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31,990 |
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30,063 |
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(51,428 |
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(36 |
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(4 |
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(2,713 |
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7,872 |
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Net loss |
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(2,907 |
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(2,907 |
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Net change during the year |
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38 |
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4 |
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86 |
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128 |
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Balance at March 31, 2012 |
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31,990 |
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30,063 |
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(54,335 |
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2 |
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(2,627 |
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5,093 |
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(Unaudited) |
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Accumulated other |
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Common |
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Convertible |
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Capital |
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Accumulated |
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Unrealized |
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Deferred gain |
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Foreign |
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Total |
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Balance at April 1, 2011 |
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345,203 |
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324,409 |
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(554,958 |
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(388 |
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(43 |
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(29,276 |
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84,947 |
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Net loss |
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(31,370 |
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(31,370 |
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Net change during the year |
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410 |
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43 |
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928 |
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1,381 |
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Balance at March 31, 2012 |
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345,203 |
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324,409 |
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(586,328 |
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22 |
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(28,348 |
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54,958 |
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See accompanying notes to consolidated financial statements
NEC TOKIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 2012
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Year ended March 31, 2012 |
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Millions of Yen |
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(Unaudited) |
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Cash flows from operating activities: |
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Income before income taxes |
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204 |
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2,201 |
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Adjustments to reconcile income before income taxes to net cash provided by operating activities: |
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Depreciation |
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4,538 |
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48,969 |
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Loss on impairment of long-lived assets |
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1,120 |
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12,086 |
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Equity earnings from investments in affiliates |
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(347 |
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(3,744 |
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Foreign currency exchange loss |
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98 |
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1,058 |
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Loss suffered from natural disaster |
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8,311 |
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89,684 |
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Income taxes paid |
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(718 |
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(7,748 |
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Changes in operating assets and liabilities: |
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Accounts and notes receivable, net |
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1,705 |
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18,399 |
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Inventories |
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(223 |
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(2,406 |
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Accounts and notes payable |
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(489 |
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(5,277 |
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Provision for retirement benefits |
|
546 |
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5,892 |
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Accrued expenses |
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(264 |
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(2,849 |
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Other payable |
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2,201 |
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23,751 |
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Provision for business structure improvement |
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118 |
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1,273 |
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Other current assets |
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662 |
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7,144 |
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Other current liabilities |
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(406 |
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(4,381 |
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Other, net |
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18 |
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193 |
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Net cash provided by operating activities |
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17,074 |
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184,245 |
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Cash flows from investing activities: |
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Purchases of property, plant and equipment |
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(6,937 |
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(74,857 |
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Proceeds from sales of property, plant and equipment |
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166 |
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1,791 |
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Purchase of software |
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(363 |
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(3,917 |
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Proceeds from time deposits |
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19 |
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205 |
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Net cash used in investing activities |
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(7,115 |
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(76,778 |
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Cash flows from financing activities: |
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Increase in short-term borrowings, net |
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8,060 |
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86,975 |
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Proceeds from issuance of long-term debt |
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759 |
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8,190 |
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Payments of long-term debt |
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(8,606 |
) |
(92,867 |
) |
Repayment of capital lease obligation |
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(108 |
) |
(1,165 |
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Net cash provided by financing activities |
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105 |
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1,133 |
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Effect of exchange rate changes on cash and cash equivalents |
|
456 |
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4,921 |
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Net increase in cash and cash equivalents |
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10,520 |
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113,521 |
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Cash and cash equivalents at beginning of year |
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3,899 |
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42,074 |
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Cash and cash equivalents at end of year (note 11) |
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14,419 |
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155,595 |
|
See accompanying notes to consolidated financial statements
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
1. Nature of Business and Basis of Presenting Consolidated Financial Statements
Nature of the Business:
NEC TOKIN Corporation (the Company) was established in Japan in 1938 and is engaged in production and distribution of tantalum capacitors, proadlizer, miniature relays, transmitting communication devices, IC cards and IC tags, magnetic devices, piezoelectric devices and sensors.
On March 12, 2012 the Company entered into a stock purchase agreement (Stock Purchase Agreement) to issue 276.4 million new shares of common stock, representing a 34% and 51% post acquisition capital stock interest and common stock voting interest, respectively, to KEMET Electronics Corporation (KEC), a wholly owned subsidiary of KEMET Corporation, for cash consideration of US$ 50 million. The transaction was completed on February 1, 2013. The accompanying consolidated financial statements of the Company do not reflect any adjustments to the assets and liabilities that might subsequently be necessary as a result of this transaction.
As part of this Stock Purchase Agreement, the Company issued 270.9 million new non-voting convertible preferred stock to NEC Corporation (NEC) and NEC Capital Solutions Limited (NECAP) for no cash consideration.
In connection with the entry into the Stock Purchase Agreement, the Company entered into a Stockholders Agreement (the Stockholders Agreement) with KEC and NEC, which provides for restrictions on transfers of the Companys capital stock, certain tag-along and first refusal rights on transfer for KEC, restrictions on NECs ability to convert the preferred stock of the Company held by it, certain management services to be provided to the Company by KEC and certain board representation rights. The Stockholders Agreement also contemplates a loan from NEC to the Company in connection with the Companys rebuilding of its operations in Thailand as a result of flooding that occurred in 2011.
Concurrent with the entry of the Stock Purchase Agreement, NEC and NECAP entered into an option arrangement (Option Agreement) with KEC whereby KEC may purchase an additional 15% capital stock interest, while retaining a 51% common stock voting interest in the Company, from the Company for US$50 million by providing notice on or before August 31, 2014. Upon providing such notice, KEC may also then purchase by May 31, 2018 all outstanding capital stock of the Company from NEC and NECAP for a purchase price based on a formula specified in the Option Agreement. Also, beginning August 1, 2014 to May 31, 2018, NEC and NECAP may require KEC to purchase all outstanding capital stock of the Company for a purchase price based on a formula specified in the Option Agreement.
Basis for Presenting Consolidated Financial Statements:
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Company Act of Japan and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (Japanese GAAP).
The accompanying consolidated financial statements have been reorganized and translated into English (with some expanded descriptions and the added inclusion of consolidated statement of cash flows) from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP. Some supplementary information included in the statutory Japanese language consolidated financial statements, but not considered necessary for fair presentation, is not presented in the accompanying consolidated financial statements.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are unaudited and are included solely for the convenience of readers and have been made at the rate of 92.67 yen to 1 U.S. dollar, the approximate rate of exchange rate at March 1, 2013. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
The Company has restated its previously issued consolidated financial statements as of and for the year ended March 31, 2012 prepared in accordance with the Companies Act of Japan (Japanese GAAP) to correct certain misstatements identified subsequent to the issuance of such statutory report prepared in Japanese. Such adjustments resulted in an increase in accumulated deficit by 611 million yen, a decrease in accumulated other comprehensive loss by 77 million yen and a decrease in accounts and
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
notes receivable by 534 million yen at March 31, 2012, and increases in other expense (under other income (expenses)) and net loss by 57 million yen for the year ended March 31, 2012.
2. Summary of Significant Accounting Policies
(1) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 13 significant subsidiaries (collectively, the Group). All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for investments over which it has significant influence but not a controlling financial interest using the equity method of accounting. Such investments include 3 affiliated companies.
(2) Business Combination
In October 2003, the Business Accounting Council (the BAC) issued a Statement of Opinion, Accounting for Business Combinations, and in December 2005, the Accounting Standards Board of Japan (the ASBJ) issued ASBJ Statement No. 7, Accounting Standard for Business Divestitures and ASBJ Guidance No. 10, Guidance for Accounting Standard for Business Combinations and Business Divestitures. The accounting standard for business combinations allowed companies to apply the pooling of interests method of accounting only when certain specific criteria were met such that the business combination was essentially regarded as a uniting-of-interests. For business combinations that did not meet the uniting-of-interests criteria, the business combination was considered to be an acquisition and the purchase method of accounting was required. This standard also prescribed the accounting for combinations of entities under common control and for formation of joint ventures.
In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No. 21, Accounting Standard for Business Combinations. Major accounting changes under the revised accounting standard are as follows: (1) The revised standard requires accounting for business combinations only by the purchase method. As a result, the pooling of interests method of accounting is no longer allowed. (2) The previous accounting standard accounts for research and development costs to be charged to income as incurred. Under the revised standard, in-process research and development (IPR&D) acquired in a business combination is capitalized as an intangible asset. (3) The previous accounting standard accounts for a bargain purchase gain (negative goodwill) to be systematically amortized over a period not exceeding 20 years. Under the revised standard, the acquirer recognizes the bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after a review of the procedures used in the purchase allocation. This standard was applicable to business combinations undertaken on or after April 1, 2010. The Company adopted this accounting standard effective from April 1, 2010.
(3) Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and exposed to insignificant risk of changes in value. Cash equivalents include time deposits, all of which mature or become due within three months of the date of acquisition. Refer to note 11 for reconciliation between Cash on hand and in banks as presented on the consolidated balance sheet and Cash and cash equivalents as presented on the statement of cash flows.
(4) Valuation of Inventories
Inventories are stated at the lower of cost or market, determined by the first-in, first-out method.
(5) Method of Depreciation and Amortization
(a) Property, plant and equipment
Property, plant and equipment are stated at acquisition cost. Depreciation is computed by using the straight line method based on the following primary estimated useful lives:
Buildings and structures 8 to 38 years
Machinery, equipment and vehicles 4 to 10 years
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
Beginning April 1, 2011, the Company and certain subsidiaries changed their depreciation method and revised the useful lives of a portion of assets based on actual utilization. Prior to April 1, 2011, the Company and certain consolidated subsidiaries depreciated property, plant and equipment using the declining-method.
Beginning April 1, 2011, the Company and its consolidated subsidiaries uniformly adopted the straight line method and such assets are depreciated over their estimated useful lives. The Company believes that the straight line method better reflects the pattern of consumption of the future benefits to be derived from those assets being depreciated and provides a better matching of cost and revenues over the assets estimated useful lives.
Compared with the previous fiscal year, the changes in depreciation method and revision of useful lives of some assets had caused a decrease in depreciation expense by 145 million yen, a decrease in operating loss by 145 million yen, and an increase in income before income taxes by 145 million yen, and a decrease in net loss by 68 million yen for the year ended March 31, 2012.
Under the Accounting Standard for Accounting Changes and Error Corrections(ASBJ Statement No.24, December 4, 2009) and the Guidance on Accounting Standard for Accounting Changes and Error Corrections (ASBJ Guidance No.24, December 4, 2009), which has been applied to accounting changes and corrections of prior period errors from the year ended March 31, 2012, it is impractical to determine whether the change in depreciation method is a change in accounting policy or a change in estimate, hence prospective application is accepted and prior period results is not necessarily restated.
(b) Intangible assets
Intangible assets are being amortized using the straight line method and the range of useful lives for the Companys primary intangible assets, software for internal use, ranged from 3 to 5 years.
(6) Impairment of Long-lived Assets
Accounting Standards for Impairment of Long-lived Assets require that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the book value of an asset or asset group may not be recoverable. The impairment losses are recognized when the book value of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continuing use and eventual disposition of the asset or asset group. The impairment losses are measured as the amount by which the book value of the asset exceeds its recoverable amount, which is the higher of the value in use or the net realizable value. Restoration of previously recognized impairment losses is prohibited.
(7) Investments in Securities
Marketable available-for-sale securities, which are not classified as non-marketable or held-to-maturity securities, are reported at fair value with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average cost method. For other than temporary declines in fair value, non-marketable available-for-sale securities are reduced to net realizable value by a charge to income.
Declines in fair value of available-for-sale securities are analyzed to determine if the decline is temporary or other than temporary. When other than temporary declines occur, the investment is reduced to its fair value and the amount of the reduction is reported as a loss. Any subsequent increases in other than temporary declines in fair value will not be realized until the securities are sold.
(8) Derivative Financial Instruments
Derivative financial instruments other than those which meet the hedge criteria are measured at fair value. Gain or loss on such derivative instruments is recognized in earnings.
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
(9) Hedge Accounting
(a) Method of hedge accounting
For certain qualified hedges, the Company applies the deferred hedge method, in which gains or losses on the hedging instruments that are measured at fair value are deferred as asset or liability until the gains and losses on the hedged items are recognized. The exception method is applied to interest rate swap contracts with conditions virtually identical in terms of notional principal, condition of receipt and payment of the interest and the contractual term of the hedged asset or liability. Such interest rate swaps are not required to be fair valued. The net amount of actual receipt and payment is adjusted to the interest of the related hedged assets or liabilities.
(b) Hedging instruments and hedged items
Hedging instruments are interest rate swap and foreign currency forward contracts. Hedged items are that have risk of losses due to fluctuation in interest rates and foreign currency exchange rates, and that fluctuation is avoided by fixing cash flow.
(c) Hedging policy
The objective of hedging policy is to manage its exposure to fluctuations in interest rates and foreign currency exchange rates on assets and liabilities.
(d) Method of assessing hedging instruments effectiveness
Hedging instruments effectiveness is assessed by comparing accumulated cash flow fluctuations from the hedged item and the hedging instrument during a contract period. However, an assessment of effectiveness will be omitted, if the principal terms of the hedging instruments and the hedged items, such as related notional amount and contract terms, are identical and the variability in cash flows is completely offset in a contract period.
(10) Method of Accounting for Significant Allowances and Accruals
(a) Allowance for doubtful accounts
The allowance for doubtful accounts is provided against potential losses on collections at an amount determined using a historical bad debt loss ratio with the addition of an amount individually estimated on the collectability of receivables that are expected to be uncollectible due to bad financial condition or insolvency of the debtor.
(b) Provision for bonuses
Provision for bonuses is calculated based on an estimated amount of future bonus payments attributable to employees services for the period.
(c) Provision for retirement benefits
Provision for retirement benefits is recorded for employees pension and severance payments based on the projected benefit obligation and the estimated fair value of plan assets as of the fiscal year end. The transition obligation is amortized on a straight line basis mainly over 15 years. Past service costs are amortized on a straight line basis over the employees estimated average remaining service periods. Actuarial gains and losses are amortized on a straight line basis over the employees estimated average remaining service periods, starting in the following year after incurrence.
(d) Provision for business structure improvement
Provision for business structure improvement has been made for the amount of the estimated losses and expenses to be incurred mainly in connection to streamlining of personnel and closure and relocation of offices.
(11) Asset Retirement Obligations
In March 2008, the ASBJ issued Accounting StandardASBJ Statement No. 18, Accounting Standard for Asset Retirement Obligations and ASBJ Guidance No. 21, Guidance on Accounting Standard for Asset Retirement Obligations. The new standard and related implementation guidance require companies to recognize asset retirement obligations as liabilities and the corresponding asset retirement costs as tangible fixed assets.
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
From the fiscal year ended March 31, 2011, the Company and domestic subsidiary companies adopted ASBJ Statement No. 18 and ASBJ Guidance No.21. This has resulted in insignificant effects on the Companys operating income, or income before income taxes.
(12) Research and Development Cost
Research and development costs are charged to income as incurred.
(13) Accounting for Leases (Lessee Accounting)
Finance leases, for those in which the ownership of leased property is ultimately transferred to the Group at the end of the lease term, are accounted for using the same depreciation method applied to property, plant and equipment owned by the Group.
Finance leases, in which the ownership of leased property is not ultimately transferred to the lessee at the end of the lease term, are depreciated on the straight line method over the period of lease with no residual value. Any finance lease transactions for a lessee executed prior to the beginning of the year ended March 31, 2009, the first year of application of ASBJ Statement No. 13, Accounting Standard for Lease Transactions, where ownership of the leased asset is not transferred to the lessee are accounted for as operating lease transactions.
(14) Income Taxes
The provision for income taxes is computed based on the pretax income reported in the accompanying consolidated statement of operations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of net operating loss carry forwards and temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowance is provided to reduce deferred tax assets to an amount that is considered realizable.
(15) Accounting for Consumption Tax
Income and expenses are recorded net of consumption taxes.
(16) Recent Accounting Pronouncements under Japanese GAAP
In December 2009, the ASBJ issued ASBJ Statement No. 24, Accounting Standard for Accounting Changes and Error Corrections and ASBJ Guidance No. 24, Guidance on Accounting Standard for Accounting Changes and Error Corrections. Accounting treatment under this standard and guidance are as follows;
(a) Changes in accounting policies
When a new accounting policy is applied with revision of accounting standards, a new policy is applied retrospectively unless the revised accounting standards include specific transitional provisions. When the revised accounting standards include specific transitional provisions, an entity shall comply with the specific transitional provisions.
(b) Changes in presentations
When the presentation of financial statements is changed, prior period financial statements are reclassified in accordance with the new presentation.
(c) Changes in accounting estimates
A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods.
(d) Corrections of prior period errors
When an error in prior period financial statements is discovered, those statements are restated. This accounting standard and the guidance are applicable to accounting changes and corrections of prior period errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011.
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
On May 17, 2012, the ASBJ issued ASBJ Statement No. 26, Accounting Standard for Retirement Benefits and ASBJ Guidance No. 25, Guidance on Accounting Standard for Retirement Benefits, which replaced the Accounting Standard for Retirement Benefits that had been issued by the BAC in 1998 with effective date of April 1, 2000 and the other related practical guidance, being followed by partial amendments from time to time through 2009. Major changes are as follows:
(a) Treatment in the balance sheet
Under the current requirements, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are not recognized in the balance sheet, and the difference between retirement benefit obligations and plan assets (hereinafter, deficit or surplus), adjusted by such unrecognized amounts, are recognized as a liability or asset. Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss shall be recognized within shareholders equity (accumulated other comprehensive income), after adjusting for tax effects, and the deficit or surplus shall be recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).
(b) Treatment in the statement of income and the statement of comprehensive income
The revised accounting standard would not change how to recognize actuarial gains and losses and past service costs in profit or loss. Those amounts would be recognized in profit or loss over a certain period not longer than the expected average remaining working lives of the employees. However, actuarial gains and losses and past service costs that arose in the current period and yet to be recognized in profit or loss shall be included in accumulated other comprehensive income and actuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the current period shall be treated as reclassification adjustments. This accounting standard and the guidance are effective for the end of annual periods beginning on or after April 1, 2013 with earlier application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required.
3. Inventories
Inventories consist of the following as of March 31, 2012:
|
|
Millions of Yen |
|
(Unaudited) |
|
Raw materials |
|
1,654 |
|
17,848 |
|
Work in process |
|
1,555 |
|
16,780 |
|
Finished goods |
|
1,824 |
|
19,683 |
|
Supplies |
|
247 |
|
2,665 |
|
Total |
|
5,280 |
|
56,976 |
|
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
4. Related-Party Transactions
Transactions of the Group with related-parties for the year ended March 31, 2012 are as follows:
|
|
Millions of Yen |
|
(Unaudited) |
|
Sales transactions with NT Sales Co., Ltd. (**) |
|
8,091 |
|
87,310 |
|
The balances due to or due from related-parties at March 31, 2012 are as follows:
|
|
Millions of Yen |
|
(Unaudited) |
|
Short-term loans from NEC Corporation (*) |
|
21,728 |
|
234,466 |
|
Accounts receivable to NT Sales Co., Ltd. (**) |
|
866 |
|
9,345 |
|
* The Company has unsecured revolving short-term loans from NEC Corporation, its parent company. The loans are made at terms and conditions determined with reference to current market rates and standards.
** The Company sells parts and materials to NT Sales Co., Ltd., its equity-method affiliate, within ordinary course of business of an arms length basis.
5. Income Taxes
Components of deferred tax assets and liabilities at March 31, 2012 are as follows:
|
|
Millions of Yen |
|
(Unaudited) |
|
Deferred tax assets |
|
|
|
|
|
Inventories |
|
90 |
|
971 |
|
Provision for bonuses |
|
396 |
|
4,273 |
|
Accrued expenses |
|
843 |
|
9,097 |
|
Provision for retirement benefits |
|
1,953 |
|
21,075 |
|
Property, plant and equipment |
|
1,852 |
|
19,985 |
|
Investments in securities |
|
477 |
|
5,147 |
|
Net operating loss carry forwards |
|
18,908 |
|
204,036 |
|
Other |
|
507 |
|
5,471 |
|
Total gross deferred tax assets |
|
25,026 |
|
270,055 |
|
Less: Valuation allowance |
|
(24,894 |
) |
(268,631 |
) |
Deferred tax assets |
|
132 |
|
1,424 |
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
Unrealized losses on lands |
|
(359 |
) |
(3,874 |
) |
Equity investments - planned distribution |
|
(1,498 |
) |
(16,165 |
) |
Other |
|
(5 |
) |
(54 |
) |
Deferred tax liabilities |
|
(1,862 |
) |
(20,093 |
) |
Net deferred tax assets (liabilities) |
|
(1,730 |
) |
(18,669 |
) |
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
Reconciliation between the income tax expenses that would result from applying statutory tax rate to pretax income and the reported amount of income tax expenses for the year ended March 31, 2012 is as follows:
|
|
Millions of Yen |
|
(Unaudited) |
|
Computed expected tax expenses |
|
83 |
|
896 |
|
Increase in income taxes resulting from: |
|
|
|
|
|
Expenses not deductible for income tax purposes such as entertainment expenses etc |
|
151 |
|
1,629 |
|
Change of valuation allowance |
|
5,681 |
|
61,304 |
|
Tax exempt income from insurance settlement proceeds |
|
(2,893 |
) |
(31,218 |
) |
Effect of enacted changes in tax law and rates in Japan |
|
(208 |
) |
(2,245 |
) |
Payment of transfer price |
|
137 |
|
1,478 |
|
Foreign income tax differential |
|
(942 |
) |
(10,165 |
) |
Taxes on undistributed earnings |
|
1,001 |
|
10,802 |
|
Other |
|
101 |
|
1,090 |
|
Actual income tax expenses |
|
3,111 |
|
33,571 |
|
Amendments to the Japanese tax regulations were enacted into law on November 30, 2011. As a result of these amendments, the statutory income tax rate will be reduced from approximately 40% to 38% effective from the year beginning April 1, 2012, and to approximately 35% effective from the year beginning April 1, 2015 and thereafter. Consequently, the statutory income tax rate utilized for deferred tax assets and liabilities expected to be settled or realized in the period from April 1, 2012 to March 31, 2015 is approximately 38% and for periods subsequent to March 31, 2015 the rate is approximately 35%. The adjustments of deferred tax assets and liabilities for this change in the tax rate amounted to 208 million yen reduction of deferred tax liabilities, and have been reflected in income taxes in the consolidated statement of operations for the year ended March 31, 2012.
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
6. Accrued Employee Severance and Retirement Benefits
The Group has various defined benefit plans and defined contribution plans. Defined benefit plans include the defined benefit pension plans and the lump-sum severance payment plans. Additional retirement benefits are paid in certain circumstances.
Retirement benefit obligations at March 31, 2012 are as follows:
|
|
Millions of Yen |
|
(Unaudited) |
|
Projected benefit obligations |
|
14,082 |
|
151,959 |
|
Plan assets |
|
(6,801 |
) |
(73,389 |
) |
Unfunded retirement benefit obligations |
|
7,281 |
|
78,570 |
|
Unrecognized transitional obligation |
|
(1,003 |
) |
(10,823 |
) |
Unrecognized actuarial gains and losses |
|
(1,199 |
) |
(12,938 |
) |
Unrecognized past service costs |
|
471 |
|
5,081 |
|
Provision for retirement benefits |
|
5,550 |
|
59,890 |
|
Retirement benefit expenses for the year ended March 31, 2012 are as follows:
|
|
Millions of Yen |
|
(Unaudited) |
|
Service cost |
|
753 |
|
8,126 |
|
Interest cost |
|
272 |
|
2,935 |
|
Expected return on plan assets |
|
(165 |
) |
(1,781 |
) |
Amortization of transitional obligation |
|
364 |
|
3,928 |
|
Amortization of actuarial gains and losses |
|
198 |
|
2,137 |
|
Amortization of past service costs |
|
(35 |
) |
(378 |
) |
Contributions paid for defined contribution pension plans |
|
101 |
|
1,090 |
|
Retirement benefit expenses |
|
1,488 |
|
16,057 |
|
Basis for calculation of retirement benefit obligations for the year ended March 31, 2012 is as follows:
Allocation method for projected retirement benefit cost |
|
Straight line method |
|
|
|
Discount rate |
|
Mainly 2.0% |
|
|
|
Expected rate of return on plan assets |
|
Mainly 2.5% |
|
|
|
Period for amortization of transitional obligation |
|
Mainly 15 years |
|
|
|
Period for amortization of past service costs |
|
Mainly 15 years (Past service costs are amortized on a straight line basis over certain years within employees average remaining service periods as incurred.) |
|
|
|
Period for amortization of actuarial gains and losses |
|
Mainly 15 years (Actuarial gains and losses are amortized on a straight line basis over certain years within employees average remaining service periods, starting from the following year after incurred.) |
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
7. Loss on Impairment of Long-Lived Assets
Summary of assets or asset groups for which losses on impairment of long-lived assets were recognized for the year ended March 31, 2012 is as follows:
Usage |
|
Idle assets |
|
|
|
Type |
|
Buildings and structures |
|
|
|
Location |
|
Nyuzen town in Toyama prefecture Japan; Xiamen city in China |
|
|
|
Amount |
|
1,120 million yen |
|
|
|
Background |
|
Above listed are treated as idle assets because the future usage is no longer expected due to obsolescence. Impairment losses include 17 million yen from buildings and structures, 961 million yen from machinery, equipment and vehicles, 89 million yen from construction in progress, and 53 million yen from other property, plant and equipment.
The Company groups assets for business use based on company units, or business units where two or more business units exist.
The Company groups idle assets where no future use is expected are grouped into a single asset group. Recoverable amounts for idle assets are measured based on net realizable value. The land are measured based on the value appraised by a real estate appraiser, and the other property, plant and equipment are measured by referring to market values. |
8. Research and Development Expenses
Research and development expenses for the year ended March 31, 2012 is as follows:
|
|
Millions of Yen |
|
(Unaudited) |
|
Research and development expenses (included in selling, general and administrative expenses) |
|
1,533 |
|
16,543 |
|
9. Other Income (Expenses)
(1) Natural disaster related settlement received from insurance company
NEC Tokin Electronics (Thailand) Co., Ltd., a manufacturing subsidiary in Thailand suffered great damages from a deluge in the year ended March 31, 2012. Natural disaster related settlement received from insurance company of 17,953 million yen for the year ended March 31, 2012 was insurance proceeds on the deluge losses related to damaged fixed assets and inventories.
(2) Loss suffered from natural disaster
Loss suffered from natural disaster of 9,750 million yen for the year ended March 31, 2012 was incurred on the deluge in Thailand, and mainly consisted of devaluation losses of damaged tangible assets and inventories. The remaining amount of the loss amounting to 90 million yen was caused by a series of aftershocks following the Great East Japan Earthquake.
(3) Restructuring charges
For the year ended March 31, 2012, the Company conducted business restructuring, and recorded losses of 2,530 million yen on shutdown of certain establishments and early retirement costs of employees.
NEC TOKIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
10. Net loss per Share
Net loss per share is computed based on the weighted-average number of common shares outstanding during the years. The Company issued convertible preferred stock on March 12, 2012, which is potentially convertible to 270,934 thousand shares of common stock. However, as the Company recorded a loss for the year ended March 31, 2012, diluted net income per share is not disclosed.
11. Supplemental Information to Consolidated Statement of Cash Flows
Cash and cash equivalents at March 31, 2012 for statement of cash flow purposes are reconciled to the accounts reported in the consolidated balance sheet as follows:
|
|
Millions of Yen |
|
(Unaudited) |
|
Cash on hand and in banks |
|
14,454 |
|
155,973 |
|
Time deposits with maturities of more than three months |
|
(35 |
) |
(378 |
) |
Cash and cash equivalents |
|
14,419 |
|
155,595 |
|
Supplemental non-cash transactions included in investing and financing activities for the year ended March 31, 2012 are as follows:
|
|
Millions of Yen |
|
(Unaudited) |
|
Acquisition of lease assets and obligations under finance leases |
|
23 |
|
248 |
|
12. Significant Differences Between Japanese GAAP and U.S. Generally Accepted Accounting Principles (U.S. GAAP)
Japanese GAAP differs in certain respects from U.S. GAAP. The significant differences between Japanese GAAP and U.S. GAAP as they pertain to the Group are described below, which also includes reconciliations of net loss and shareholders equity under Japanese GAAP with the corresponding amounts under U.S. GAAP, along with a summary consolidated statement of comprehensive loss, a summary consolidated balance sheet and a summary consolidated statement of changes in shareholders equity under U.S. GAAP.
Net loss reconciliation
|
|
|
|
Year ended March 31, 2012 |
| ||
|
|
note |
|
Millions of Yen |
|
(Unaudited) |
|
Net loss under Japanese GAAP |
|
|
|
(2,907 |
) |
(31,370 |
) |
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
Depreciation of property, plant and equipment |
|
(b) |
|
(1,629 |
) |
(17,579 |
) |
Impairment loss on long-lived assets |
|
(c) |
|
965 |
|
10,413 |
|
Employees retirement benefits |
|
(d) |
|
544 |
|
5,870 |
|
Accrued vacation |
|
(e) |
|
(19 |
) |
(205 |
) |
Loss contingency on guarantee fee / Restructuring costs |
|
(f) |
|
15 |
|
162 |
|
Other |
|
(g) |
|
33 |
|
358 |
|
Income tax adjustments |
|
(h) |
|
2,177 |
|
23,492 |
|
Net loss under U.S. GAAP |
|
|
|
(821 |
) |
(8,859 |
) |
Net loss per share under U.S. GAAP
|
|
Year ended March 31, 2012 |
| ||
|
|
Yen (except shares |
|
(Unaudited) |
|
Net loss attributable to the Companys common shareholders - basic |
|
(3.09 |
) |
(0.03 |
) |
|
|
|
|
|
|
Net loss attributable to the Companys common shareholders - diluted |
|
(3.09 |
) |
(0.03 |
) |
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted (in thousands) |
|
265,516 |
|
|
|
The potential common stock upon conversion of the convertible preferred stock of 270,934 thousand shares issued March 12, 2012, was excluded from the computation of diluted net loss per share, as including such potentially dilutive shares would have an anti-dilutive effect to the net loss per share as the Group recorded a net loss for the fiscal year ended March 31, 2012. Such convertible preferred stock is considered a participating security under U.S. GAAP. However, because there is no contractual obligation for the preferred shareholders to fund losses of the Company, such losses have not been allocated to the preferred shareholders for purposes of determining basic net loss per share attributable to common shareholders.
Summary U.S. GAAP consolidated statement of comprehensive loss
|
|
Year ended March 31, 2012 |
| ||
|
|
Millions of Yen |
|
(Unaudited) |
|
Net loss under U.S. GAAP |
|
(821 |
) |
(8,859 |
) |
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
Unrealized gain on securities |
|
38 |
|
410 |
|
Provision for retirement benefits |
|
(742 |
) |
(8,007 |
) |
Foreign currency translation |
|
(110 |
) |
(1,187 |
) |
Comprehensive loss under U.S. GAAP |
|
(1,635 |
) |
(17,643 |
) |
Shareholders equity reconciliation
|
|
March 31, 2012 |
| ||||
|
|
note |
|
Millions of Yen |
|
(Unaudited) |
|
Shareholders equity under Japanese GAAP |
|
|
|
5,093 |
|
54,958 |
|
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
Business combination adjustments |
|
(a) |
|
1,317 |
|
14,212 |
|
Accumulated depreciation |
|
(b) |
|
925 |
|
9,982 |
|
Carrying value adjustments due to reversal of impairment loss on long-lived assets |
|
(c) |
|
1,813 |
|
19,564 |
|
Employees retirement benefits |
|
(d) |
|
(3,249 |
) |
(35,060 |
) |
Accrued vacation |
|
(e) |
|
(402 |
) |
(4,338 |
) |
Loss contingency on guarantee fee / Restructuring liabilities |
|
(f) |
|
162 |
|
1,748 |
|
Other |
|
(g) |
|
133 |
|
1,435 |
|
Income tax adjustments |
|
(h) |
|
(765 |
) |
(8,255 |
) |
Shareholders equity under U.S. GAAP |
|
|
|
5,027 |
|
54,246 |
|
Summary U.S. GAAP consolidated statement of changes in shareholders equity
|
|
Year ended March 31, 2012 |
| ||
|
|
Millions of Yen |
|
(Unaudited) |
|
Shareholders equity at beginning of year |
|
6,662 |
|
71,889 |
|
Total comprehensive loss |
|
(1,635 |
) |
(17,643 |
) |
Shareholders equity at ending of year |
|
5,027 |
|
54,246 |
|
Summary U.S. GAAP Consolidated Balance Sheet
|
|
March 31, 2012 |
| ||
|
|
Millions of Yen |
|
(Unaudited) |
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash on hand and in banks |
|
14,396 |
|
155,347 |
|
Accounts and notes receivable, net |
|
6,225 |
|
67,174 |
|
Inventories |
|
5,435 |
|
58,649 |
|
Other current assets |
|
1,050 |
|
11,329 |
|
Total current assets |
|
27,106 |
|
292,499 |
|
Property, plant and equipment, net |
|
25,001 |
|
269,786 |
|
Total investments and other non-current assets |
|
3,695 |
|
39,873 |
|
Total assets |
|
55,802 |
|
602,158 |
|
|
|
|
|
|
|
Liabilities and shareholders equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Short term borrowings and current installments of long-term debt |
|
24,806 |
|
267,681 |
|
Other current liabilities |
|
12,873 |
|
138,912 |
|
Total current liabilities |
|
37,679 |
|
406,593 |
|
Long-term debt, excluding current installments |
|
401 |
|
4,327 |
|
Provisions for retirement benefits |
|
8,799 |
|
94,950 |
|
Deferred income tax liabilities |
|
2,623 |
|
28,305 |
|
Other non-current liabilities |
|
1,273 |
|
13,737 |
|
Total liabilities |
|
50,775 |
|
547,912 |
|
Shareholders equity: |
|
|
|
|
|
Capital stock |
|
31,990 |
|
345,203 |
|
Capital surplus (i) |
|
62,281 |
|
672,073 |
|
Accumulated deficit (i) |
|
(85,283 |
) |
(920,287 |
) |
Accumulated other comprehensive loss |
|
(3,961 |
) |
(42,743 |
) |
Total shareholders equity |
|
5,027 |
|
54,246 |
|
Commitments and Contingencies (j) |
|
|
|
|
|
Total liabilities and shareholders equity |
|
55,802 |
|
602,158 |
|
Cash flows reconciliation
There were no significant differences between Japanese GAAP and U.S. GAAP for purposes of presenting or reconciling the statement of cash flows for the year ended March 31, 2012.
Notes:
(a) Business combination adjustments
Under Japanese GAAP, the BAC issued a Statement of Opinion, Accounting for Business Combinations in October 2003, which was effective for fiscal years beginning on or after April 1, 2006, on a prospective basis. Before this pronouncement, there was no authoritative accounting standard addressing accounting for business combinations; therefore, companies followed common business practices dictated by the Commercial Code of Japan (the Code), or known as the Code of Companies Act.
Under the purchase method generally applied by Japanese companies, goodwill is measured as the excess of acquisition cost over carrying values of the individual assets acquired and liabilities assumed at the acquisition date. Subsequently, the goodwill is amortized on a straight line basis over a number of years that may vary, depending on the nature of the acquired business.
Under U.S. GAAP, all business combinations (excluding combinations of entities under common control) are accounted for using the acquisition method as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, Business Combinations. ASC 805 requires that the net assets, tangible and identifiable intangible assets less liabilities of the acquired company be recorded at fair value, with the difference between the cost of an acquired company and the fair value of the acquired net assets recorded as goodwill. Also, after the adoption of ASC 350, IntangiblesGoodwill and Other, goodwill and recognized indefinite-lived intangible assets in a business combination are not amortized, but are tested for impairment at least annually, as well as on an interim basis if events or changes in circumstances indicate that the goodwill or indefinite-lived intangible assets might be impaired. Separate intangible assets that are not deemed to have an indefinite life are amortized over their expected economic life and also tested for impairment.
There was no new business combination during the year ended March 31, 2012. Also, goodwill arising from past business combination was fully amortized prior to the year ended March 31, 2012 under Japanese GAAP; therefore, no goodwill balance remains on the balance sheet as of March 31, 2012 under Japanese GAAP.
Historically, the Company entered into various business combinations and accounted for such transactions in accordance with common business practices dictated by the Commercial Code of Japan. For U.S. GAAP purposes, the Company retroactively applied a purchase price allocation at the time of each transaction to reflect the fair value adjustments to acquired assets and liabilities, including the determination of identifiable intangible assets and goodwill. Except for the acquired value of the land, impact of such fair value adjustments to acquired assets, intangible assets and liabilities subsequently diminished through depreciation and amortization, or disposition and impairment, resulting in no adjustment to the balance sheet as of March 31, 2012.
(b) Depreciation of property, plant and equipment
Under Japanese GAAP, an entity is required to depreciate property and equipment over the useful life of each asset under the declining-balance method unless it is deemed unreasonable.
Based on FASB ASC 360, Property, Plant and Equipment, the cost of a productive facility is one of the costs of the services it renders during its useful economic life. U.S. GAAP requires that this cost be spread over the expected useful life of the facility in such a way as to allocate it as equitably as possible to the periods during which services are obtained from the use of the facility.
The following table presents a reconciliation of property, plant and equipment from Japanese GAAP to U.S. GAAP as of March 31, 2012:
|
|
March 31, 2012 |
| ||||||
|
|
Millions of Yen |
|
Thousands of |
| ||||
|
|
Gross carrying |
|
Accumulated |
|
Gross carrying |
|
Accumulated |
|
Balance under Japanese GAAP |
|
106,028 |
|
(85,207 |
) |
1,144,146 |
|
(919,467 |
) |
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
|
|
Change in depreciation |
|
70 |
|
855 |
|
755 |
|
9,227 |
|
Reversal of impairment loss recognized under Japanese GAAP |
|
1,813 |
|
|
|
19,564 |
|
|
|
Step up in asset value related to historical business combination |
|
1,317 |
|
|
|
14,212 |
|
|
|
Gross up of basis reduction allowed under Japanese GAAP |
|
204 |
|
(79 |
) |
2,201 |
|
(852 |
) |
Total adjustments |
|
3,404 |
|
776 |
|
36,732 |
|
8,375 |
|
Balance at under U.S. GAAP |
|
109,432 |
|
(84,431 |
) |
1,180,878 |
|
(911,092 |
) |
(c) Impairment loss on long-lived assets
Under Japanese GAAP, the Company groups assets for business use based on company units, or business units, when two or more business units exist. In addition, the Company groups idle assets, including temporarily idle assets, where no future use is expected into a single asset group.
Under U.S. GAAP, for purposes of recognition and measurement of an impairment loss, long-lived assets shall be grouped with other assets and liabilities at the smallest unit of which identifiable cash flows can be determined. Further, under U.S. GAAP, long-lived asset that has been temporarily idle shall not be accounted for as if abandoned.
Therefore, the impairment losses related to the Companys temporarily idle land which had been recognized under Japanese GAAP is reversed back under U.S. GAAP. When the temporarily idle land are grouped with other assets and liabilities at the smallest unit of which identifiable cash flows can be determined, as required under U.S. GAAP, the carrying amount of its temporarily idle assets are deemed recoverable.
(d) Employees retirement benefits
Under U.S. GAAP, the differences between the fair value of the plan assets and the projected benefit obligation of pension or post retirement plans are required to be recognized on the balance sheet. Actuarial gains or losses are permitted to be either recorded as gains or losses in the period incurred within the income statement or deferred through the use of the corridor approach, or in any systematic methods that result in faster recognition than the corridor approach.
Under Japanese GAAP, the differences between the fair value of the plan assets and the projected benefit obligation of pension or post retirement plans are not required to be recognized on the balance sheet. Actuarial gains or losses are recognized immediately or allocated over a certain number of years within the average remaining service period starting from the period in which they were incurred or a period after. Use of the corridor approach is not permitted.
Basis for actuarial determination of projected retirement benefit obligations (PBO), such as allocation method for projected retirement benefit cost and discount rate, are different between Japanese GAAP and U.S. GAAP, which has been adjusted accordingly.
The following table presents a reconciliation of the provision for retirement benefits under Japanese GAAP with those under U.S. GAAP as of March 31, 2012:
|
|
March 31, 2012 |
| ||
|
|
Millions of Yen |
|
Thousands of |
|
Balance under Japanese GAAP |
|
5,550 |
|
59,890 |
|
U.S. GAAP adjustments: |
|
|
|
|
|
Reversal of initial recognition of actuarial losses, past service costs and transitional obligations under U.S. GAAP |
|
1,727 |
|
18,636 |
|
Effect of changes in PBO assumptions |
|
1,522 |
|
16,424 |
|
Total adjustments |
|
3,249 |
|
35,060 |
|
Balance under U.S. GAAP |
|
8,799 |
|
94,950 |
|
(e) Accrued vacation
Under U.S. GAAP, an employer shall accrue a liability for employees compensation for future absences, such as vacations, if certain conditions are met. Such liabilities are accrued in the periods in which the benefits are earned. Japanese GAAP does not specifically require a company to accrue a liability for future compensated absence.
(f) Loss contingency on guarantee fee / Restructuring liabilities
Under U.S. GAAP, provision for restructuring cost are recognized only when certain criteria is met and upon the company incurring actual liability, whereas under Japanese GAAP, there are no detailed guidelines concerning restructuring provision. Provisions related to estimated loss from future product sales and future and estimated job-placement assistance costs for terminated employees, which were recognized under Japanese GAAP were adjusted for U.S. GAAP reporting purposes.
(g) Other
Others included in the net loss and shareholders equity reconciliations consist of U.S. GAAP adjustments related to inventory valuation, allowance for doubtful accounts, fixed assets basis reduction and timing of revenue recognition.
(h) Income taxes adjustments
Adjustment for uncertainty in income taxes
Under U.S. GAAP, FASB ASC Topic 740, Income Taxes (which includes the former FASB Interpretation No.48, Accounting for Uncertainty in Income Taxes) provides guidance for accounting for uncertainty in income taxes. An entity should initially recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold must initially and subsequently be measured as the largest amount of tax benefits that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. There is no similar or equivalent guidance under Japanese GAAP.
The Companys foreign subsidiary received letters from the tax authority during years 2011 and 2010, where the tax authority instructed revision of tax computations. Under Japanese GAAP, additional tax expenses are recorded upon payment, and the Company recorded such tax expenses totaling 137 million yen for the year ended March 31, 2012.
Under U.S. GAAP, following the above accounting guidance, the Company recognized tax liabilities when the tax position met the more-likely-than-not recognition threshold. The accrued tax expenses of 44 million yen for the year ended March 31, 2012 was offset by the reversal benefit of the additional taxes paid amounting to 137 million yen that was accrued for the year ended March 31, 2011. As a result, tax benefit of 93 million yen was recorded for the year ended March 31, 2012. The reconciling amounts were a decrease of net loss by 93 million yen and a decrease of shareholders equity by 44 million yen, respectively.
Adjustment for valuation allowance on deferred tax assets
The adjustment mainly relates to the changes in the valuation allowance on deferred tax assets determined under U.S. GAAP. Under Japanese GAAP, there is prescriptive guidance for determining the realizability of deferred tax assets whereas realizability of deferred tax assets under U.S. GAAP is judgmental based on weighing of positive and negative consideration factors. The reconciling amount was a decrease of net loss by 1,538 million yen and there was no effect to shareholders equity.
Deferred taxes on investments in equity investees-treatment of undistributed profit
Under Japanese GAAP, with respect to profits related to investments in equity method investees, deferred taxes are not recognized unless a parent company has a clear intention to sell the investment in the subsidiary or it satisfies all requirements to be treated as tax deductible expense in the foreseeable future. Deferred tax liability on undistributed profit is generally recognized when the parent company plans to recover it by dividend income. Under U.S. GAAP, deferred taxes are generally recognized on temporary differences related to investments in equity investees. The amount of deferred tax liabilities on undistributed profit is 184 million yen as of March 31, 2012. The reconciling amounts were an increase of net loss by 88 million yen and a decrease of shareholders equity by 184 million yen, respectively.
Tax effects on reconciling items to U.S. GAAP
The adjustment mainly relates to tax effects of the adjustments for U.S. GAAP purposes prior to consideration of valuation allowance for deferred tax assets. The reconciling amounts were a decrease of net loss by 634 million yen and a decrease of shareholders equity by 537 million yen, respectively.
The following table presents reconciliations of net deferred tax assets/(liabilities) under Japanese GAAP with those under U.S. GAAP as of March 31, 2012:
|
|
March 31, 2012 |
| ||||||||
|
|
Millions of Yen |
| ||||||||
|
|
Deferred income tax |
|
Deferred income tax |
|
Deferred income tax |
|
Deferred income tax |
|
Net deferred tax |
|
Balance under Japanese GAAP |
|
100 |
|
32 |
|
(0 |
) |
(1,862 |
) |
(1,730 |
) |
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes on investments in equity investees-treatment of undistributed profit |
|
|
|
|
|
|
|
(184 |
) |
(184 |
) |
Recognition of deferred income taxes related to U.S. GAAP adjustments |
|
7 |
|
38 |
|
(5 |
) |
(577 |
) |
(537 |
) |
Total adjustments |
|
7 |
|
38 |
|
(5 |
) |
(761 |
) |
(721 |
) |
Balance under U.S. GAAP |
|
107 |
|
70 |
|
(5 |
) |
(2,623 |
) |
(2,451 |
) |
|
|
March 31, 2012 |
| ||||||||
|
|
Thousands of U.S. Dollars (note 1) |
| ||||||||
|
|
Deferred income tax |
|
Deferred income tax |
|
Deferred income tax |
|
Deferred income tax |
|
Net deferred tax |
|
Balance under Japanese GAAP |
|
1,079 |
|
345 |
|
(0 |
) |
(20,093 |
) |
(18,669 |
) |
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes on investments in equity investees-treatment of undistributed profit |
|
|
|
|
|
|
|
(1,986 |
) |
(1,986 |
) |
Recognition of deferred income taxes related to U.S. GAAP adjustments |
|
76 |
|
410 |
|
(54 |
) |
(6,226 |
) |
(5,794 |
) |
Total adjustments |
|
76 |
|
410 |
|
(54 |
) |
(8,212 |
) |
(7,780 |
) |
Balance under U.S. GAAP |
|
1,155 |
|
755 |
|
(54 |
) |
(28,305 |
) |
(26,449 |
) |
(i) Sale of Subsidiary to NEC Corporation
On April 1, 2010, NEC Energy Device, Ltd, a wholly owned subsidiary of the Company, was sold to NEC Corporation. The excess of the sale price over carrying value of the net assets sold was accounted for a gain on sale in the Companys consolidated statement of operations under Japanese GAAP. Under U.S. GAAP, such excess sale price is accounted for as capital contribution to NEC Corporation, and no gain is recognized under U.S. GAAP. Consequently, capital surplus and the accumulated deficit reported in the summary consolidated balance sheet under U.S. GAAP is greater than those in the consolidated balance sheet under Japanese GAAP by 5,262 million yen.
(j) Commitments and Contingencies
In connection with the Stock Purchase Agreement and Option Agreement described in note 1, the Company entered into an agreement (Stockholders Agreement) with KEC and NEC which stipulates, among other things, certain management services to be provided to the Company by KEC (or an affiliate of KEC) and certain board representation rights. The Stockholders Agreement also contemplates an additional loan from NEC to the Company for the rebuilding of its operations in Thailand as a result of the 2011 flooding.
Exhibit 99.2
NEC TOKIN CORPORATION
Interim Condensed Consolidated Financial Statements
As of September 30, 2012 and March 31, 2012, and
For the Six-months period ended September 30, 2012 and 2011
UNAUDITED
NEC TOKIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 2012 AND MARCH 31, 2012
|
|
|
|
|
|
Thousands of |
|
|
|
|
|
U.S. Dollars |
| ||
|
|
Millions of Yen |
|
(note 1) |
| ||
|
|
September 30, |
|
March 31, |
|
September 30, |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash on hand and in banks (note 6) |
|
5,251 |
|
14,454 |
|
56,663 |
|
Accounts and notes receivable |
|
6,731 |
|
6,338 |
|
72,634 |
|
Inventories (note 2) |
|
5,926 |
|
5,280 |
|
63,947 |
|
Deferred income taxes |
|
84 |
|
100 |
|
906 |
|
Other current assets |
|
1,842 |
|
944 |
|
19,878 |
|
Allowance for doubtful accounts |
|
(22 |
) |
(23 |
) |
(237 |
) |
Total current assets |
|
19,812 |
|
27,093 |
|
213,791 |
|
Property, plant and equipment |
|
109,808 |
|
106,028 |
|
1,184,936 |
|
Less: Accumulated depreciation |
|
(83,812 |
) |
(85,207 |
) |
(904,414 |
) |
Property, plant and equipment, net |
|
25,996 |
|
20,821 |
|
280,522 |
|
Investments and other non-current assets: |
|
|
|
|
|
|
|
Investments and other non-current assets |
|
3,649 |
|
3,625 |
|
39,377 |
|
Deferred income taxes |
|
43 |
|
32 |
|
464 |
|
Allowance for doubtful accounts |
|
(1 |
) |
(1 |
) |
(11 |
) |
Total investments and other non-current assets |
|
3,691 |
|
3,656 |
|
39,830 |
|
Total assets |
|
49,499 |
|
51,570 |
|
534,143 |
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts and notes payable |
|
5,234 |
|
5,736 |
|
56,480 |
|
Short-term borrowings |
|
25,337 |
|
24,350 |
|
273,411 |
|
Current installments of long-term debt |
|
87 |
|
455 |
|
939 |
|
Accrued expenses |
|
1,333 |
|
1,234 |
|
14,384 |
|
Income taxes payable |
|
216 |
|
276 |
|
2,331 |
|
Other current liabilities |
|
5,819 |
|
5,339 |
|
62,793 |
|
Total current liabilities |
|
38,026 |
|
37,390 |
|
410,338 |
|
Long-term liabilities: |
|
|
|
|
|
|
|
Long-term debt, excluding current installments |
|
971 |
|
401 |
|
10,478 |
|
Provision for retirement benefits |
|
4,563 |
|
5,550 |
|
49,239 |
|
Deferred income taxes |
|
1,596 |
|
1,862 |
|
17,222 |
|
Other non-current liabilities |
|
1,240 |
|
1,274 |
|
13,382 |
|
Total long-term liabilities |
|
8,370 |
|
9,087 |
|
90,321 |
|
Total liabilities |
|
46,396 |
|
46,477 |
|
500,659 |
|
Shareholders equity: |
|
|
|
|
|
|
|
Capital stock |
|
|
|
|
|
|
|
Common stock, no par value (1,100,000 thousands shares authorized and 265,516 thousand shares issued and outstanding) |
|
31,990 |
|
31,990 |
|
345,203 |
|
Convertible preferred stock, no par value (300,000 thousands shares authorized, 270,934 thousand shares issued and outstanding) |
|
|
|
|
|
|
|
Capital surplus |
|
30,063 |
|
30,063 |
|
324,409 |
|
Accumulated deficit |
|
(55,171 |
) |
(54,335 |
) |
(595,349 |
) |
Accumulated other comprehensive loss |
|
(3,779 |
) |
(2,625 |
) |
(40,779 |
) |
Total shareholders equity |
|
3,103 |
|
5,093 |
|
33,484 |
|
Total liabilities and shareholders equity |
|
49,499 |
|
51,570 |
|
534,143 |
|
See accompanying notes to unaudited condensed consolidated financial statements
NEC TOKIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
|
|
Six months ended September 30 |
| ||||
|
|
Millions of Yen |
|
Thousands of |
| ||
|
|
2012 |
|
2011 |
|
2012 |
|
|
|
|
|
|
|
|
|
Net sales |
|
20,350 |
|
31,250 |
|
219,596 |
|
Cost of sales |
|
(17,812 |
) |
(27,009 |
) |
(192,209 |
) |
Selling, general and administrative expenses (note 3) |
|
(4,441 |
) |
(5,527 |
) |
(47,923 |
) |
Operating loss |
|
(1,903 |
) |
(1,286 |
) |
(20,536 |
) |
Other income (expenses) (note 4) |
|
|
|
|
|
|
|
Interest income |
|
18 |
|
15 |
|
194 |
|
Interest expense |
|
(79 |
) |
(164 |
) |
(852 |
) |
Natural disaster related settlement received from insurance company |
|
1,033 |
|
|
|
11,147 |
|
Other income (expense), net |
|
145 |
|
(347 |
) |
1,565 |
|
Loss before income taxes |
|
(786 |
) |
(1,782 |
) |
(8,482 |
) |
Provision for income taxes |
|
(52 |
) |
(283 |
) |
(561 |
) |
Net loss |
|
(838 |
) |
(2,065 |
) |
(9,043 |
) |
|
|
|
|
|
|
|
|
|
|
Yen |
|
U.S. Dollars |
| ||
Net loss per share (note 5) |
|
(3.16 |
) |
(7.78 |
) |
(0.03 |
) |
See accompanying notes to unaudited condensed consolidated financial statements
NEC TOKIN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
|
|
Six months ended September 30 |
| ||||
|
|
Millions of Yen |
|
Thousands of |
| ||
|
|
2012 |
|
2011 |
|
2012 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
Loss before income taxes |
|
(786 |
) |
(1,782 |
) |
(8,482 |
) |
Adjustments to reconcile loss before income taxes to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation |
|
2,153 |
|
2,567 |
|
23,233 |
|
Loss on impairment of long-lived assets |
|
14 |
|
2 |
|
151 |
|
Equity earnings from investments in affiliates |
|
(120 |
) |
(191 |
) |
(1,295 |
) |
Foreign currency exchange loss |
|
(1,180 |
) |
(39 |
) |
(12,733 |
) |
Income taxes-paid |
|
(405 |
) |
(524 |
) |
(4,370 |
) |
Changes in operating assets and liabilities |
|
(5,841 |
) |
219 |
|
(63,030 |
) |
Other, net |
|
193 |
|
143 |
|
2,082 |
|
Net cash provided by (used in) operating activities |
|
(5,972 |
) |
395 |
|
(64,444 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
(4,697 |
) |
(3,512 |
) |
(50,686 |
) |
Proceeds from sales of property, plant and equipment |
|
10 |
|
69 |
|
108 |
|
Purchase of software |
|
(168 |
) |
(184 |
) |
(1,813 |
) |
Proceeds from time deposits |
|
|
|
(21 |
) |
|
|
Payments of time deposits |
|
21 |
|
40 |
|
227 |
|
Net cash used in investing activities |
|
(4,834 |
) |
(3,608 |
) |
(52,164 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
Increase in short-term borrowings, net |
|
1,640 |
|
1,931 |
|
17,697 |
|
Proceeds from issuance of long-term debt |
|
632 |
|
759 |
|
6,820 |
|
Payments of long-term debt |
|
(411 |
) |
(536 |
) |
(4,435 |
) |
Repayment of capital lease obligation |
|
(56 |
) |
(55 |
) |
(604 |
) |
Net cash provided by financing activities |
|
1,805 |
|
2,099 |
|
19,478 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
(183 |
) |
(231 |
) |
(1,974 |
) |
Net decrease in cash and cash equivalents |
|
(9,184 |
) |
(1,345 |
) |
(99,104 |
) |
Cash and cash equivalents at beginning of period |
|
14,419 |
|
3,900 |
|
155,595 |
|
Cash and cash equivalents at end of period (note 6) |
|
5,235 |
|
2,555 |
|
56,491 |
|
See accompanying notes to unaudited condensed consolidated financial statements
1. Basis of Presenting Unaudited Condensed Consolidated Financial Statements
The condensed consolidated financial statements as of and for the six months ended September 30, 2012 and 2011 contained herein are unaudited and have been prepared from the books and records of NEC TOKIN Corporation and its subsidiaries (the Company). In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The condensed consolidated financial statements have been prepared in accordance with Accounting Standard for Quarterly Financial Reporting in Japan, and therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles in Japan. The March 31, 2012 condensed consolidated balance sheet was derived from audited consolidated financial statements of the Company. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited financial statements and notes for the fiscal year ended March 31, 2012.
Net sales and operating results for the six months ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. In consolidation, all significant intercompany amounts and transactions have been eliminated.
The significant accounting policies followed by the Company, including changes, are presented in the Companys audited financial statements and notes for the fiscal year ended March 31, 2012, except for accounting procedures specific to the preparation of quarterly condensed consolidated financial statements.
On March 12, 2012 the Company entered into a stock purchase agreement (Stock Purchase Agreement) to issue 276.4 million new shares of common stock, representing a 34% and 51% post acquisition capital stock interest and common stock voting interest, respectively, to KEMET Electronics Corporation (KEC), a wholly owned subsidiary of KEMET Corporation, for cash consideration of US$ 50 million. The transaction was completed on February 1, 2013. The accompanying unaudited condensed consolidated financial statements of the Company do not reflect any adjustments to the assets and liabilities that might subsequently be necessary as a result of this transaction.
Change in Significant Accounting Policies
As more fully described in the Companys audited consolidated financial statements and note 2(5)(a) for the year ended March 31, 2012, beginning April 1, 2011, the Company changed its method of deprecation to use the straight line method for all property, plant and equipment. The changes in depreciation method and revision of useful lives of some assets had caused decreases in depreciation expense, operating loss, loss before income taxes and net loss by 72 million yen for the six months ended September 30, 2011 compared to the previous fiscal period.
Accounting procedures specific to the preparation of quarterly consolidated financial statements:
Calculation of tax expenses:
After adjustment on individual significant items, tax expenses are calculated by multiplying income before income taxes by effective tax rate, which is estimated reasonably by using tax effect accounting for the six months ending September 30, 2011 and 2012.
The condensed consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are unaudited and are included solely for the convenience of readers and have been made at the rate of 92.67 yen to 1 U.S. dollar, the approximate rate of exchange rate at March 1, 2013. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
The Company has restated its previously issued consolidated financial statements as of and for the year ended March 31, 2012 prepared in accordance with the Companies Act of Japan (Japanese GAAP) to correct certain misstatements identified subsequent to the issuance of such statutory report prepared in Japanese. Such adjustments resulted in an increase in accumulated deficit by 611 million yen, a decrease in accumulated other comprehensive loss by 77 million yen and a decrease in accounts and notes receivable by 534 million yen at March 31, 2012.
2. Inventories
Inventories consist of the following as of September 30, 2012 and March, 2012:
|
|
Millions of Yen |
|
Thousands of |
| ||
|
|
September 30, |
|
March 31, |
|
September 30, |
|
Raw materials |
|
1,836 |
|
1,654 |
|
19,812 |
|
Work in process |
|
1,611 |
|
1,555 |
|
17,384 |
|
Finished goods |
|
2,215 |
|
1,824 |
|
23,902 |
|
Supplies |
|
264 |
|
247 |
|
2,849 |
|
Total |
|
5,926 |
|
5,280 |
|
63,947 |
|
3. Research and Development Expenses
Research and development expenses for the six months ended September 30, 2012 and 2011 are as follows:
|
|
Six months ended September 30 |
| ||||
|
|
Millions of Yen |
|
Thousands of |
| ||
|
|
2012 |
|
2011 |
|
2012 |
|
Research and development expenses (included in selling, general and administrative expenses) |
|
622 |
|
849 |
|
6,712 |
|
4. Other Income (Expenses)
Natural disaster related settlement received from insurance company
NEC Tokin Electronics (Thailand) Co., Ltd., a manufacturing subsidiary in Thailand suffered great damages from a deluge in the year ended March 31, 2012. Natural disaster related settlement received from insurance company of 1,033 million yen for the six months ended September 30, 2012 was insurance proceeds on the deluge losses.
5. Net loss per Share
Net loss per share is computed based on the weighted-average number of common shares outstanding during the years. The Company issued convertible preferred stock on March 12, 2012, which is potentially convertible to 270,934 thousand shares of common stock. However, as the Company recorded a loss for the six months ended September 30, 2011 and September 30, 2012, diluted net loss per share is not disclosed.
6. Supplemental Information to Consolidated Statement of Cash Flows
Cash and cash equivalents at September 30, 2012 for statement of cash flow purposes are reconciled to the amounts reported in the condensed consolidated balance sheet as follows:
|
|
September 30, 2012 |
| ||
|
|
Millions of Yen |
|
Thousands of |
|
Cash on hand and in banks |
|
5,251 |
|
56,663 |
|
Time deposits with maturities of more than three months |
|
(16 |
) |
(172 |
) |
Cash and cash equivalents |
|
5,235 |
|
56,491 |
|
7. Significant Differences Between Japanese GAAP and U.S. Generally Accepted Accounting Principles (U.S. GAAP)
Japanese GAAP differs in certain respects from U.S. GAAP. The significant differences between Japanese GAAP and U.S. GAAP as they pertain to the Group are described below, which also includes unaudited reconciliations of net loss and shareholders equity under Japanese GAAP with the corresponding amounts under U.S. GAAP, along with unaudited summary condensed consolidated statements of comprehensive loss, unaudited summary condensed consolidated balance sheets, and summary unaudited condensed consolidated statements of changes in shareholders equity under U.S. GAAP.
Net loss reconciliations (Unaudited)
|
|
Six months ended September 30 |
| ||||
|
|
Millions of Yen |
|
Thousands of |
| ||
|
|
2012 |
|
2011 |
|
2012 |
|
Net loss under Japanese GAAP |
|
(838 |
) |
(2,065 |
) |
(9,043 |
) |
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
Depreciation of property, plant and equipment |
|
97 |
|
(329 |
) |
1,047 |
|
Impairment loss on long-lived assets |
|
(135 |
) |
|
|
(1,457 |
) |
Employees retirement benefits |
|
283 |
|
276 |
|
3,054 |
|
Accrued vacation |
|
74 |
|
|
|
799 |
|
Loss contingency on guarantee fee /Restructuring reserves |
|
(148 |
) |
(112 |
) |
(1,597 |
) |
Other |
|
(38 |
) |
20 |
|
(411 |
) |
Income tax adjustments |
|
(24 |
) |
212 |
|
(259 |
) |
Net loss under U.S. GAAP |
|
(729 |
) |
(1,998 |
) |
(7,867 |
) |
For details of the reconciliation items between Japanese GAAP and U.S. GAAP, refer to note 12 of the consolidated financial statements for the fiscal year ended March 31, 2012.
Net loss per share under U.S. GAAP (Unaudited)
|
|
Six months ended September 30 |
| ||||
|
|
Yen (except shares outstanding) |
|
U.S. Dollars |
| ||
|
|
2012 |
|
2011 |
|
2012 |
|
Net loss attributable to the Companys common shareholders basic |
|
(2.75 |
) |
(7.52 |
) |
(0.03 |
) |
Net loss attributable to the Companys common shareholders diluted |
|
(2.75 |
) |
(7.52 |
) |
(0.03 |
) |
Weighted average shares outstanding - basic and diluted (in thousands) |
|
265,516 |
|
265,516 |
|
|
|
The potential common stocks upon conversion of the convertible preferred stock of 270,934 thousand shares issued March 12, 2012, was excluded from the computation of diluted net loss per share, as including such potentially dilutive shares would have an anti-dilutive effect to the net loss per share as the Group recorded a net loss for the six months ended September 30, 2012. Such convertible preferred stock is considered a participating security under U.S. GAAP. However, because there is no contractual obligation for the preferred shareholders to fund losses of the Company, such losses have not been allocated to the preferred shareholders for purposes of determining basic net loss per share attributable to common shareholders.
For details of the reconciliation items between Japanese GAAP and U.S. GAAP, refer to note 12 to the consolidated financial statements for the fiscal year ended March 31, 2012.
Summary U.S. GAAP condensed consolidated statements of comprehensive loss (Unaudited)
|
|
Six months ended September 30 |
| ||||
|
|
Millions of Yen |
|
Thousands of |
| ||
|
|
2012 |
|
2011 |
|
2012 |
|
Net loss under U.S. GAAP |
|
(729 |
) |
(1,998 |
) |
(7,867 |
) |
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
Unrealized gain (loss) on securities |
|
(27 |
) |
30 |
|
(291 |
) |
Foreign currency translation |
|
(1,164 |
) |
(1,453 |
) |
(12,560 |
) |
Comprehensive loss under U.S. GAAP |
|
(1,920 |
) |
(3,421 |
) |
(20,718 |
) |
For details of the reconciliation items between Japanese GAAP and U.S. GAAP, refer to note 12 of the consolidated financial statements for the fiscal year ended March 31, 2012.
Shareholders equity reconciliations (Unaudited)
|
|
Millions of Yen |
|
Thousands of |
| ||
|
|
September 30, |
|
March 31, |
|
September 30, |
|
Shareholders equity under Japanese GAAP |
|
3,103 |
|
5,093 |
|
33,484 |
|
U.S. GAAP adjustments: |
|
|
|
|
|
|
|
Business combination related adjustments |
|
1,268 |
|
1,317 |
|
13,683 |
|
Accumulated depreciation |
|
1,034 |
|
925 |
|
11,158 |
|
Carrying value adjustments due to reversal of impairment loss on long-lived assets |
|
1,678 |
|
1,813 |
|
18,107 |
|
Employees retirement benefits |
|
(2,965 |
) |
(3,249 |
) |
(31,995 |
) |
Accrued vacation |
|
(328 |
) |
(402 |
) |
(3,539 |
) |
Loss contingency on guarantee fee / Restructuring liabilities |
|
15 |
|
162 |
|
162 |
|
Other |
|
91 |
|
133 |
|
981 |
|
Deferred income tax adjustments |
|
(789 |
) |
(765 |
) |
(8,514 |
) |
Shareholders equity under U.S. GAAP |
|
3,107 |
|
5,027 |
|
33,527 |
|
For details of the reconciliation items between Japanese GAAP and U.S. GAAP, refer to note 12 of the consolidated financial statements for the fiscal year ended March 31, 2012.
Summary U.S. GAAP condensed consolidated statements of changes in shareholders equity (Unaudited)
|
|
Six months ended September 30 |
| ||||
|
|
Millions of Yen |
|
Thousands of |
| ||
|
|
2012 |
|
2011 |
|
2012 |
|
Shareholders equity at beginning of period |
|
5,027 |
|
6,662 |
|
54,245 |
|
Total comprehensive loss |
|
(1,920 |
) |
(3,421 |
) |
(20,718 |
) |
Shareholders equity at ending of period |
|
3,107 |
|
3,241 |
|
33,527 |
|
For details of the reconciliation items between Japanese GAAP and U.S. GAAP, refer to note 12 of the consolidated financial statements for the fiscal year ended March 31, 2012.
Summary U.S. GAAP Consolidated Balance Sheets (Unaudited)
|
|
Millions of Yen |
|
(Unaudited) |
| ||
|
|
September 30, |
|
March 31, |
|
September 30, |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash on hand and in banks |
|
5,249 |
|
14,396 |
|
56,642 |
|
Accounts and notes receivable, net |
|
6,633 |
|
6,225 |
|
71,577 |
|
Inventories |
|
6,031 |
|
5,435 |
|
65,080 |
|
Other current assets |
|
1,875 |
|
1,050 |
|
20,233 |
|
Total current assets |
|
19,788 |
|
27,106 |
|
213,532 |
|
Property, plant and equipment, net |
|
30,102 |
|
25,001 |
|
324,830 |
|
Total investments and other non-current assets |
|
3,715 |
|
3,695 |
|
40,088 |
|
Total assets |
|
53,605 |
|
55,802 |
|
578,450 |
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Short term borrowings and current installments of long-term debt |
|
25,425 |
|
24,806 |
|
274,361 |
|
Other current liabilities |
|
12,995 |
|
12,873 |
|
140,229 |
|
Total current liabilities |
|
38,420 |
|
37,679 |
|
414,590 |
|
Long-term debt, excluding current installments |
|
971 |
|
401 |
|
10,478 |
|
Provisions for retirement benefits |
|
7,528 |
|
8,799 |
|
81,234 |
|
Deferred income tax liabilities |
|
2,338 |
|
2,623 |
|
25,229 |
|
Other non-current liabilities |
|
1,241 |
|
1,273 |
|
13,392 |
|
Total liabilities |
|
50,498 |
|
50,775 |
|
544,923 |
|
Shareholders equity: |
|
|
|
|
|
|
|
Capital stock |
|
31,990 |
|
31,990 |
|
345,203 |
|
Capital surplus |
|
62,281 |
|
62,281 |
|
672,073 |
|
Accumulated deficit |
|
(86,012 |
) |
(85,283 |
) |
(928,154 |
) |
Accumulated other comprehensive loss |
|
(5,152 |
) |
(3,961 |
) |
(55,595 |
) |
Total shareholders equity |
|
3,107 |
|
5,027 |
|
33,527 |
|
Total liabilities and shareholders equity |
|
53,605 |
|
55,802 |
|
578,450 |
|
Cash flows reconciliation (Unaudited)
There were no significant differences between Japanese GAAP and U.S. GAAP for purposes of presenting or reconciling the statement of cash flows for the six months ended September 30, 2012 and 2011.
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements are presented in accordance with U.S. GAAP and have been derived by applying pro forma adjustments to the historical combined financial statements of KEMET Corporation (KEMET or the Company). The following unaudited pro forma condensed combined financial statements give effect to the following transactions, as if they occurred on April 1, 2011 for the unaudited pro forma condensed consolidated statements of operations (for the fiscal year ended March 31, 2012 and the six-month period ended September 30, 2012) and as if they occurred on September 30, 2012 for the unaudited pro forma condensed consolidated balance sheet (as of September 30, 2012):
· the acquisition by KEMET Electronics Corporation (KEC), a wholly-owned subsidiary of the Company, of a 34% economic interest (51% voting interest) in NEC TOKIN Corporation (NEC TOKIN), a manufacturer of tantalum capacitors, electro-magnetic, electro-mechanical, access devices and piezoelectric ceramics from NEC Corporation of Japan (NEC) in exchange for cash consideration of $50.0 million (the NEC TOKIN Investment); and
· KECs contemporaneous entry into an options agreement with NEC pursuant to which (i) KEC acquired certain option rights to acquire additional economic and/or voting interests in NEC TOKIN (the Call Options) and (ii) NEC acquired certain option rights to put its remaining voting and economic interests in NEC TOKIN to KEC (the Put Option).
The NEC TOKIN Investment will be accounted for as an equity method investment under the provisions of Accounting Standards Codification (ASC) 323, Investments Equity Method and Joint Ventures, (ASC 323). The equity method of accounting is based on ASC 323 and uses the fair value concepts defined in ASC 820, Fair Value Measurement (ASC 820). ASC 323 requires, among other things, the measurement of the equity method investment initially at cost in accordance with ASC 805, Business Combinations. Under ASC 323, the difference between the cost of an investment and the amount of underlying equity in net assets of an investee shall be accounted for as if the investee were a consolidated subsidiary. Under the equity method, an investor shall recognize its share of the earnings or losses of an investee in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend. An investor shall adjust the carrying amount of an investment for its share of the earnings or losses of the investee after the date of investment and shall report the recognized earnings or losses in income. An investors share of the earnings or losses of an investee shall be based on the shares of common stock and in-substance common stock held by that investor. The amount of the adjustment of the carrying amount shall be included in the determination of net income by the investor, and such amount shall reflect adjustments similar to those made in preparing consolidated statements.
The unaudited pro forma condensed combined financial statements reflect the application of pro forma adjustments that are preliminary and are based upon available information and certain assumptions, described in the accompanying notes thereto, that management believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements have been prepared by management and are not necessarily indicative of the financial position or results of operations that would have been realized had the transactions occurred as of the dates indicated, nor is it meant to be indicative of any anticipated financial position or future results of operations that KEMET will experience going forward.
The following unaudited pro forma condensed combined balance sheet as of September 30, 2012 and unaudited pro forma condensed combined statement of operations for the six months ended September 30, 2012, are based upon and derived from and should be read in conjunction with the historical unaudited financial statements of KEMET and historical unaudited financial statements of NEC TOKIN. The following unaudited pro forma condensed combined statement of operations for the fiscal year ended March 31, 2012 is based upon and derived from and should be read in conjunction with the historical audited financial statements of KEMET and NEC TOKIN. The audited combined historical financial statements of KEMET as of March 31, 2012 and for the fiscal year ended March 31, 2012, are included in its Annual Report on Form 10-K. The unaudited combined historical financial statements of KEMET as of September 30, 2012 and for the six months ended September 30, 2012, are included in its Quarterly Report on Form 10-Q.
The audited consolidated historical financial statements of NEC TOKIN as of March 31, 2012 and for the year ended March 31, 2012, prepared in accordance with Japanese GAAP, including a reconciliation to U.S. GAAP, are
included herein. The unaudited consolidated historical financial statements of NEC TOKIN as of September 30, 2012 and for the six month periods ended September 30, 2012 and 2011, prepared in accordance with Japanese GAAP, including a reconciliation to U.S. GAAP, are included herein.
The following pro forma adjustments include amounts translated from Japanese Yen to U.S. dollars, using the following exchange rates:
|
|
Japanese Yen to |
|
February 1, 2013 |
|
0.0108 |
|
September 30, 2012 |
|
0.0128 |
|
Six month period ended September 30, 2012 |
|
0.0126 |
|
Year ended March 31, 2012 |
|
0.0127 |
|
KEMET CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Balance Sheet
as of September 30, 2012
(Amounts in thousands except per share data)
|
|
Equity Investment in |
| |||||||
|
|
Historical |
|
NEC TOKIN |
|
Pro Forma |
| |||
|
|
KEMET |
|
(Note 1) |
|
Consolidated |
| |||
ASSETS |
|
|
|
|
|
|
| |||
Current assets: |
|
|
|
|
|
|
| |||
Cash and cash equivalents |
|
$ |
160,495 |
|
$ |
(54,481 |
)(a) |
$ |
106,014 |
|
Accounts receivables, net |
|
99,160 |
|
|
|
99,160 |
| |||
Inventories, net |
|
224,773 |
|
|
|
224,773 |
| |||
Prepaid expenses and other |
|
41,041 |
|
|
|
41,041 |
| |||
Deferred income taxes |
|
5,658 |
|
|
|
5,658 |
| |||
Total current assets |
|
531,127 |
|
(54,481 |
) |
476,646 |
| |||
Property, plant and equipment, net of accumulated depreciation of $773,184 |
|
316,182 |
|
|
|
316,182 |
| |||
Goodwill |
|
35,584 |
|
|
|
35,584 |
| |||
Intangible assets, net |
|
40,102 |
|
|
|
40,102 |
| |||
Investment in NEC TOKIN |
|
|
|
54,481 |
(a) |
54,481 |
| |||
Options to acquire remaining interest in NEC TOKIN |
|
|
|
|
|
|
| |||
Other assets |
|
17,802 |
|
|
|
17,802 |
| |||
Total assets |
|
$ |
940,797 |
|
$ |
|
|
$ |
940,797 |
|
|
|
|
|
|
|
|
| |||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
| |||
Current liabilities: |
|
|
|
|
|
|
| |||
Current portion of long-term debt |
|
$ |
1,576 |
|
$ |
|
|
$ |
1,576 |
|
Accounts payable |
|
82,156 |
|
|
|
82,156 |
| |||
Accrued expenses |
|
88,623 |
|
|
|
88,623 |
| |||
Income taxes payable |
|
622 |
|
|
|
622 |
| |||
Total current liabilities |
|
172,977 |
|
|
|
172,977 |
| |||
Long-term debt, less current portion |
|
359,621 |
|
|
|
359,621 |
| |||
Other non-current obligations |
|
90,098 |
|
|
|
90,098 |
| |||
NEC put option |
|
|
|
|
|
|
| |||
Deferred income taxes |
|
4,788 |
|
|
|
4,788 |
| |||
|
|
|
|
|
|
|
| |||
Stockholders equity: |
|
|
|
|
|
|
| |||
Preferred stock, par value $0.01, authorized 10,000 shares, none issued |
|
|
|
|
|
|
| |||
Common stock, par value $0.01, authorized 175,000 shares, issued 46,508 shares at September 30, 2012 |
|
465 |
|
|
|
465 |
| |||
Additional paid-in capital |
|
466,906 |
|
|
|
466,906 |
| |||
Retained deficit |
|
(123,727 |
) |
|
|
(123,727 |
) | |||
Accumulated other comprehensive income |
|
6,658 |
|
|
|
6,658 |
| |||
Treasury stock, at cost (1,600 shares at September 30, 2012) |
|
(36,989 |
) |
|
|
$ |
(36,989 |
) | ||
Total stockholders equity |
|
313,313 |
|
|
|
313,313 |
| |||
|
|
|
|
|
|
|
| |||
Total liabilities and stockholders equity |
|
$ |
940,797 |
|
$ |
|
|
$ |
940,797 |
|
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
KEMET CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Six Months Ended September 30, 2012
(Amounts in thousands except per share data)
|
|
Historical |
|
Equity |
|
Pro Forma |
| |||
Net sales |
|
$ |
439,623 |
|
$ |
|
|
$ |
439,623 |
|
|
|
|
|
|
|
|
| |||
Operating costs and expenses: |
|
|
|
|
|
|
| |||
Cost of sales |
|
374,374 |
|
|
|
374,374 |
| |||
Selling, general and administrative expenses |
|
55,238 |
|
|
|
55,238 |
| |||
Research and development |
|
14,566 |
|
|
|
14,566 |
| |||
Restructuring charges |
|
9,786 |
|
|
|
9,786 |
| |||
Goodwill impairment |
|
1,092 |
|
|
|
1,092 |
| |||
Write down of long-lived assets |
|
4,234 |
|
|
|
4,234 |
| |||
Settlement gain on benefit plan |
|
(1,675 |
) |
|
|
(1,675 |
) | |||
Net loss on sales and disposals of assets |
|
73 |
|
|
|
73 |
| |||
Total operating costs and expenses |
|
457,688 |
|
|
|
457,688 |
| |||
|
|
|
|
|
|
|
| |||
Operating loss |
|
(18,065 |
) |
|
|
(18,065 |
) | |||
|
|
|
|
|
|
|
| |||
Other (income) expense: |
|
|
|
|
|
|
| |||
Interest income |
|
(57 |
) |
|
|
(57 |
) | |||
Interest expense |
|
20,593 |
|
|
|
20,593 |
| |||
Other (income) expense, net |
|
515 |
|
|
|
515 |
| |||
|
|
|
|
|
|
|
| |||
Loss before income taxes and equity loss from NEC TOKIN |
|
(39,116 |
) |
|
|
(39,116 |
) | |||
Income tax expense |
|
3,558 |
|
|
|
3,558 |
| |||
Loss before equity loss from NEC TOKIN |
|
(42,674 |
) |
|
|
(42,674 |
) | |||
Equity loss from NEC TOKIN |
|
|
|
(4,519 |
)(b) |
(4,519 |
) | |||
Net loss |
|
$ |
(42,674 |
) |
$ |
(4,519 |
) |
$ |
(47,193 |
) |
|
|
|
|
|
|
|
| |||
Net loss per share: |
|
|
|
|
|
|
| |||
Basic |
|
$ |
(0.95 |
) |
|
|
(1.05 |
) | ||
Diluted |
|
$ |
(0.95 |
) |
|
|
(1.05 |
) | ||
|
|
|
|
|
|
|
| |||
Weighted-average shares outstanding |
|
|
|
|
|
|
| |||
Basic |
|
44,860 |
|
|
|
44,860 |
| |||
Diluted |
|
44,860 |
|
|
|
44,860 |
| |||
|
|
|
|
|
|
|
|
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
KEMET CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Income Statement
for the Year Ended March 31, 2012
(Amounts in thousands except per share data)
|
|
Historical |
|
Equity |
|
Pro Forma |
| |||
Net sales |
|
$ |
984,833 |
|
$ |
|
|
$ |
984,833 |
|
|
|
|
|
|
|
|
| |||
Operating costs and expenses: |
|
|
|
|
|
|
| |||
Cost of sales |
|
775,670 |
|
|
|
775,670 |
| |||
Selling, general and administrative expenses |
|
111,564 |
|
|
|
111,564 |
| |||
Research and development |
|
29,440 |
|
|
|
29,440 |
| |||
Restructuring charges |
|
14,254 |
|
|
|
14,254 |
| |||
Write down of long-lived assets |
|
15,786 |
|
|
|
15,786 |
| |||
Net loss on sales and disposals of assets |
|
318 |
|
|
|
318 |
| |||
Total operating costs and expenses |
|
947,032 |
|
|
|
947,032 |
| |||
|
|
|
|
|
|
|
| |||
Operating income |
|
37,801 |
|
|
|
37,801 |
| |||
|
|
|
|
|
|
|
| |||
Other (income) expense: |
|
|
|
|
|
|
| |||
Interest income |
|
(175 |
) |
|
|
(175 |
) | |||
Interest expense |
|
28,567 |
|
|
|
28,567 |
| |||
Other (income) expense, net |
|
965 |
|
|
|
965 |
| |||
Income before income taxes and equity loss from NEC TOKIN |
|
8,444 |
|
|
|
8,444 |
| |||
Income tax expense |
|
1,752 |
|
|
|
1,752 |
| |||
Loss before equity loss from NEC TOKIN |
|
6,692 |
|
|
|
6,692 |
| |||
Equity loss from NEC TOKIN |
|
|
|
(5,161 |
)(c) |
(5,161 |
) | |||
Net income (loss) |
|
$ |
6,692 |
|
$ |
(5,161 |
) |
$ |
1,531 |
|
|
|
|
|
|
|
|
| |||
Net income per share: |
|
|
|
|
|
|
| |||
Basic |
|
$ |
0.15 |
|
|
|
0.04 |
| ||
Diluted |
|
$ |
0.13 |
|
|
|
0.03 |
| ||
|
|
|
|
|
|
|
| |||
Weighted-average shares outstanding |
|
|
|
|
|
|
| |||
Basic |
|
43,285 |
|
|
|
43,285 |
| |||
Diluted |
|
52,320 |
|
|
|
52,320 |
|
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. The NEC TOKIN Investment
On March 12, 2012, KEMET Electronics Corporation (KEC), a wholly-owned subsidiary of KEMET Corporation (KEMET or the Company) entered into an agreement (the Purchase Agreement) to acquire a 34% economic interest with a 51% voting interest in NEC TOKIN, for cash consideration of $50.0 million, excluding transaction-related costs of $4.5 million for a total investment of $54.5 million.
The investment in NEC TOKIN will be accounted for under the equity method of accounting with the net assets acquired in the purchase forming the basis of the Companys investment in NEC TOKIN. The difference between the Companys acquired net assets and its 34% basis in the total historical net assets of NEC TOKIN is required to be allocated to the fair value of the net assets acquired to determine the amount of income from the equity method investment.
As part of the NEC TOKIN Investment, KEC and NEC entered into an agreement in which KEC acquired two call options that gives KEC the right, but not the obligation, to purchase additional shares of NEC TOKIN at future dates. In addition, NEC acquired a put option that allows NEC to require KEC to purchase the remaining outstanding shares of NEC TOKIN at future dates from its other shareholders if certain conditions, as described in the agreement, are met. At the time of filing this pro forma financial information, the assessment of the fair value of these options was incomplete. Therefore, no pro forma adjustments related to the fair value of these options have been reflected in the pro forma balance sheet or statements of operations. The assessment of fair value for the options will be reported in KEMETs upcoming Form-10K filing for the year ended March 31, 2013.
We have made a preliminary allocation of the aggregate purchase price, which is based upon estimates that we believe are reasonable and are subject to revision as additional information becomes available. The preliminary purchase price allocation is detailed as follows (in thousands except exchange rate and average useful lives):
|
|
|
|
|
|
Average |
|
Impact to equity in |
|
Impact to equity |
| ||||
Purchase price: |
|
|
|
$ |
54,481 |
(a) |
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
| ||||
NEC TOKIN net assets on 1/31/13 in Japanese Yen |
|
5,600,000 |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Exchange rate to USD |
|
0.0108 |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
NEC TOKIN Net assets in USD |
|
$ |
60,480 |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Less: KEMET investment 34% |
|
|
|
$ |
20,563 |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fair value to be allocated |
|
|
|
$ |
33,918 |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allocation: |
|
|
|
|
|
|
|
|
|
|
| ||||
Fixed Assets |
|
|
|
$ |
(9,908 |
) |
13 |
|
$ |
(381 |
) |
$ |
(762 |
) | |
Technology |
|
|
|
12,000 |
|
10 |
|
600 |
|
1,200 |
| ||||
Customer Relationships |
|
|
|
3,000 |
|
8 |
|
188 |
|
375 |
| ||||
Inventory |
|
|
|
1,724 |
|
|
|
1,724 |
|
1,724 |
| ||||
Deferred taxes at 35% |
|
|
|
(2,474 |
)(d) |
|
|
(773 |
) |
(921 |
) | ||||
Goodwill |
|
|
|
29,576 |
|
|
|
|
|
|
| ||||
Total |
|
|
|
$ |
33,918 |
|
|
|
$ |
(1,358 |
) |
$ |
(1,616 |
) | |
The following pro forma adjustments give effect to the unaudited pro forma condensed combined statements of operations for the six months ended September 30, 2012 and the year ended March 31, 2012, and the unaudited pro forma condensed combined balance sheet as March 31, 2012 as if the NEC TOKIN Investment occurred on April 1, 2011 for the statements of operations and September 30, 2012 for the balance sheet:
(a) This adjustment reflects payment of $54.5 million for the investment in NEC TOKIN, which includes $50 million of cash consideration plus approximately $4.5 million in transaction expenses. Expenses include fees for legal, accounting, due diligence, investment banking and other various services necessary to complete the transactions.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(b) These adjustments reflect the recognition of KEMETs equity (through KEC) in NEC Tokins loss for the six month period ended September 30, 2012 as follows (in thousands except percentage):
NEC TOKIN loss |
|
|
| |
(¥729,000 loss at YEN/USD average exchange rate of 0.0126) |
|
$ |
(9,185 |
) |
|
|
|
| |
KEMETs equity investment in NEC TOKIN |
|
34 |
% | |
|
|
|
| |
KEMETs equity in loss of NEC TOKIN before adjustments |
|
(3,123 |
) | |
|
|
|
| |
Adjustments for: |
|
|
| |
Profit in inventory |
|
(38 |
) | |
Total fair value related adjustments (see table above) |
|
(1,358 |
) | |
KEMETs equity in loss of NEC TOKIN |
|
$ |
(4,519 |
) |
(c) These adjustments reflect the recognition of KEMETs equity (through KEC) in NEC Tokins loss for the year ended March 31, 2012 as follows (in thousands except percentage):
NEC TOKIN loss |
|
|
| |
(¥821,000 loss at YEN/USD average exchange rate of 0.0127) |
|
$ |
(10,427 |
) |
|
|
|
| |
KEMETs equity investment in NEC TOKIN |
|
34 |
% | |
|
|
|
| |
KEMETs equity in loss of NEC TOKIN before adjustments |
|
(3,545 |
) | |
|
|
|
| |
Total fair value related adjustments (see table above) |
|
(1,616 |
) | |
KEMETs equity in loss of NEC TOKIN |
|
$ |
(5,161 |
) |
(d) A deferred tax liability of $2.6 million has been recorded using the blended statutory rate of 36.3% based on the preliminary step-up value of $7.1 million that has been allocated to acquired inventory, fixed assets, and intangible assets. The unaudited pro forma condensed combined statements of operations reflect the amortization of this deferred tax liability using the blended statutory rate of 36.3%.