FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of February 2014
Commission File Number 2 - 68279
RICOH COMPANY, LTD.
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(Translation of Registrant's name into English)
13-1, Ginza 8-Chome, Chuo-ku, Tokyo 104-8222, Japan
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(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.)
Form 20-F [X] Form 40-F [_]
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): __ )
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): __ )
(Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes [_] No [X]
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-__ )
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Ricoh Company, Ltd.
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(Registrant)
By: /S/ Zenji Miura
------------------------------
Zenji Miura
Representative Director, President
and Chief Executive Officer
(principal executive officer)
February 13, 2014
RICOH COMPANY, LTD.
Consolidated Financial Statements
For the Nine Months Ended December 31, 2013
This is an English translation of the Quarterly Securities Report (Shihanki
Hokokusho) for the nine months ended December 31, 2013 pursuant to the Japanese
Financial Instrument and Exchange Law.
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31, 2013 and December 31, 2013
Millions of Yen
------------------------------
March 31, December 31,
ASSETS 2013 2013
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Current assets:
Cash and cash equivalents 117,051 144,126
Time deposits 3,280 3,730
Trade receivables:
Notes 36,772 46,950
Accounts 488,233 535,210
Less- Allowance for doubtful receivables (15,424) (18,184)
Current maturities of long-term finance receivables, net 235,889 244,008
Inventories:
Finished goods 101,568 118,329
Work in process and raw materials 93,799 110,140
Deferred income taxes and other 65,051 67,115
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Total current assets 1,126,219 1,251,424
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Property, plant and equipment, at cost:
Land 45,809 45,478
Buildings 271,272 279,420
Machinery and equipment 701,590 729,350
Construction in progress 17,891 7,889
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Total 1,036,562 1,062,137
Less- accumulated depreciation (745,687) (769,298)
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Net property, plant and equipment 290,875 292,839
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Investments and other assets:
Long-term finance receivables, net 466,608 513,038
Investment securities 54,102 61,382
Investments in and advances to affiliates 1,026 1,385
Goodwill 221,217 249,486
Other intangible assets 107,702 105,622
Lease deposits and other 92,948 85,246
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Total investments and other assets 943,603 1,016,159
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Total assets 2,360,697 2,560,422
===========================================================================================================
1
Millions of Yen
------------------------------
March 31, December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 2013 2013
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Current liabilities:
Short-term borrowings 65,219 94,116
Current maturities of long-term indebtedness 161,180 194,919
Trade payables:
Notes 15,197 22,627
Accounts 241,341 240,975
Accrued income taxes 12,091 15,431
Accrued expenses and other 205,339 234,590
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Total current liabilities 700,367 802,658
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Long-term liabilities:
Long-term indebtedness 476,381 489,159
Accrued pension and severance costs 164,289 140,884
Deferred income taxes and other 61,002 60,053
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Total long-term liabilities 701,672 690,096
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Equity:
Ricoh Company, Ltd. shareholders' equity:
Common stock 135,364 135,364
Additional paid-in capital 186,083 186,083
Retained earnings 759,783 779,418
Accumulated other comprehensive loss (146,088) (60,131)
Treasury stock at cost (37,146) (37,266)
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Total Ricoh Company, Ltd. shareholders' equity 897,996 1,003,468
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Noncontrolling interests 60,662 64,200
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Total equity 958,658 1,067,668
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Total liabilities and equity 2,360,697 2,560,422
===========================================================================================================
The accompanying notes are an integral part of consolidated financial
statements.
2
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended December 31, 2012 and 2013
Millions of Yen
---------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
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Net Sales:
Products 620,920 739,290
Post sales and rentals 680,676 778,649
Other revenue 85,503 93,582
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Total 1,387,099 1,611,521
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Cost of sales:
Products 448,652 527,790
Post sales and rentals 313,731 360,329
Other revenue 61,314 66,383
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Total 823,697 954,502
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Gross profit 563,402 657,019
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Selling, general and administrative expenses 522,919 578,818
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Operating income 40,483 78,201
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Other (income) expenses:
Interest and dividend income (1,916) (1,548)
Interest expense 5,047 5,237
Gain on sale of investment securities, net (24) (2,324)
Foreign currency exchange loss, net 1,301 1,306
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Other, net (199) (364)
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Total 4,209 2,307
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Income before income taxes and equity in earnings of affiliates 36,274 75,894
Provision for income taxes:
Current 13,575 21,152
Deferred 1,935 7,011
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Total 15,510 28,163
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Equity in earnings of affiliates 47 (29)
Consolidated net income 20,811 47,702
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Net income attributable to noncontrolling interests 3,509 4,139
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Net income attributable to Ricoh Company, Ltd. 17,302 43,563
=================================================================================================================
Yen
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Nine months ended Nine months ended
December 31, 2012 December 31, 2013
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Per share of common stock:
Net income attributable to Ricoh Company, Ltd.
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Basic 23.86 60.09
Diluted -- --
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Cash dividends paid per share 21.00 33.00
=================================================================================================================
Per American Depositary Share, each representing 5 shares of
common stock:
Net income attributable to Ricoh Company, Ltd.
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Basic 119.30 300.45
Diluted -- --
-----------------------------------------------------------------------------------------------------------------
Cash dividends paid per share 105.00 165.00
=================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
3
For the Three Months Ended December 31, 2012 and 2013
Millions of Yen
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Three months ended Three months ended
December 31, 2012 December 31, 2013
-----------------------------------------------------------------------------------------------------------------
Net Sales:
Products 206,212 257,525
Post sales and rentals 234,469 266,597
Other revenue 28,951 31,822
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Total 469,632 555,944
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Cost of sales:
Products 151,118 179,916
Post sales and rentals 108,546 126,834
Other revenue 20,972 22,565
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Total 280,636 329,315
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Gross profit 188,996 226,629
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Selling, general and administrative expenses 175,901 194,288
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Operating income 13,095 32,341
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Other (income) expenses:
Interest and dividend income (380) (418)
Interest expense 1,492 1,609
Gain (loss) on sale of investment securities, net 1 (32)
Foreign currency exchange gain (loss), net 341 (169)
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Other, net (143) (160)
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Total 1,311 830
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Income before income taxes and equity in earnings of affiliates 11,784 31,511
Provision for income taxes:
Current 2,816 8,914
Deferred 2,293 2,436
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Total 5,109 11,350
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Equity in earnings of affiliates (10) 6
Consolidated net income 6,665 20,167
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Net income attributable to noncontrolling interest 1,076 1,315
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Net income attributable to Ricoh Company, Ltd. 5,589 18,852
=================================================================================================================
Yen
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Three months ended Three months ended
December 31, 2012 December 31, 2013
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Per share of common stock:
Net income attributable to Ricoh Company, Ltd.
-----------------------------------------------------------------------------------------------------------------
Basic 7.71 26.00
Diluted -- --
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Cash dividends paid per share 12.50 16.50
=================================================================================================================
Per American Depositary Share, each representing 5 shares of
common stock:
Net income attributable to Ricoh Company, Ltd.
-----------------------------------------------------------------------------------------------------------------
Basic 38.55 130.00
Diluted -- --
-----------------------------------------------------------------------------------------------------------------
Cash dividends paid per share 62.50 82.50
=================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Nine Months Ended December 31, 2012 and 2013
Millions of Yen
---------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
-----------------------------------------------------------------------------------------------------------------
Consolidated net income 20,811 47,702
Other comprehensive income (loss), net of tax:
Net unrealized holding gains (losses) on available-for-sale securities (449) 7,669
Pension liability adjustments (747) 6,993
Net unrealized gains (losses) on derivative instruments (117) 889
Foreign currency translation adjustments 22,028 70,479
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Total 20,715 86,030
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Comprehensive income 41,526 133,732
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Comprehensive income attributable to noncontrolling interests 3,351 4,212
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Comprehensive income attributable to Ricoh Company, Ltd. 38,175 129,520
=================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
For the Three Months Ended December 31, 2012 and 2013
Millions of Yen
----------------------------------------
Three months ended Three months ended
December 31, 2012 December 31, 2013
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Consolidated net income 6,665 20,167
Other comprehensive income (loss), net of tax:
Net unrealized holding gains on available-for-sale securities 1,040 4,480
Pension liability adjustments (4,195) 837
Net unrealized gains on derivative instruments 175 384
Foreign currency translation adjustments 50,876 43,766
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Total 47,896 49,467
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Comprehensive income 54,561 69,634
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Comprehensive income attributable to noncontrolling interests 1,204 1,552
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Comprehensive income attributable to Ricoh Company, Ltd. 53,357 68,082
=================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
5
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended December 31, 2012 and 2013
Millions of Yen
---------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
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CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income 20,811 47,702
Adjustments to reconcile consolidated net income to net cash
provided by operating activities
Depreciation and amortization 62,918 73,784
Equity in earnings of affiliates, net of dividends received (47) 29
Deferred income taxes 1,935 7,011
Gain on sale of investment securities, net (24) (2,324)
Pension and severance costs, less payment (2,843) (16,893)
Changes in assets and liabilities, net of effects from acquisition-
Increase in trade receivables (4,714) (10,071)
Increase in inventories (9,259) (15,921)
Increase in finance receivables (12,800) (35,627)
Decrease in trade payables (15,464) (2,211)
Decrease in accrued income taxes and accrued expenses
and other (17,068) (4,185)
Other, net 4,895 (6,865)
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Net cash provided by operating activities 28,340 34,429
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment 1,399 530
Expenditures for property, plant and equipment, including
interest capitalized (61,156) (55,279)
Expenditures for intangible assets (8,340) (8,429)
Payments for purchases of available-for-sale securities (91) (62)
Proceeds from sales of available-for-sale securities 64 7,153
(Increase) Decrease in time deposits, net (1,276) 34
Other, net (6,886) (4,828)
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Net cash used in investing activities (76,286) (60,881)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayments) of debt with original maturities of
three months or less (19,644) 24,815
Proceeds from debt with original maturities of more than three months 128,762 103,345
Repayments of debt with original maturities of more than three months (87,786) (78,327)
Proceeds from issuance of long-term debt securities 20,000 20,000
Repayment of long-term debt securities -- (1,826)
Dividends paid (15,226) (23,925)
Payment for purchase of treasury stock (8) (109)
Other, net (694) (671)
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Net cash provided by financing activities 25,404 43,302
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EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 740 10,225
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (21,802) 27,075
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CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 156,210 117,051
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CASH AND CASH EQUIVALENTS AT END OF PERIOD 134,408 144,126
===================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
6
Ricoh Company, Ltd. and Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
According to the article 95 of the "Regulations Regarding Terms, Forms and
Preparation of Interim Consolidated Financial Statements" (Cabinet office
Ordinance No.64, 2007), the accompanying consolidated financial statements of
Ricoh (Ricoh Company, Ltd. and its consolidated subsidiaries) have been prepared
in conformity with U.S. generally accepted accounting principles. Significant
accounting and reporting policies are summarized below:
The accompanying consolidated financial statements for the nine months ended
December 31, 2013 are presented in Japanese yen, the functional currency of the
Company and its domestic subsidiaries.
The books of the Company and its domestic subsidiaries are maintained in
conformity with Japanese accounting principles and practices, while foreign
subsidiaries maintain their books in conformity with the standards of their
country of domicile.
The accompanying consolidated financial statements reflect necessary
adjustments, not recorded in the books, to present them in conformity with U.S.
generally accepted accounting principles ("U.S. GAAP").
(A) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. The accounts of variable interest
entity are included in the consolidated financial statements, if applicable.
Investments in entities in which Ricoh has the ability to exercise significant
influence over the entities' operating and financial policies (generally 20% to
50% ownership) are accounted for on an equity basis. All significant
inter-company balances and transactions have been eliminated in consolidation.
(B) REVENUE RECOGNITION
Ricoh generates revenue principally through the sale of equipment, supplies and
related services under separate contractual arrangements for each. Ricoh
recognizes revenue when (1) it has a firm contract, (2) the product has been
shipped to and accepted by the customer or the service has been provided, (3)
the sales price is fixed or determinable and (4) amounts are reasonably assured
of collection.
Products sales are recognized at the time of delivery and installation at the
customer location. Equipment revenues are based on established prices by product
type and model and are net of discounts. A sales return is accepted only when
the equipment is defective and does not meet Ricoh's product performance
specifications. Other than installation, there are no customer acceptance
clauses in the sales contract.
Post sales and rentals result primarily from maintenance contracts that are
normally entered into at the time the equipment is sold. Standard service fee
prices are established depending on equipment classification and include a cost
value for the estimated services to be performed based on historical experience
plus a profit margin thereon. As a matter of policy, Ricoh does not discount
such prices. On a monthly basis, maintenance service revenues are earned and
recognized by Ricoh and billed to the customer in accordance with the contract
and include a fixed monthly fee plus a variable amount based on usage. The
length of the contract ranges up to five years; however, most contracts are
cancelable at any time by the customer upon a short notice period. Leases not
qualifying as sales-type leases or direct financing leases are accounted for as
operating leases and related revenue is recognized over the lease term.
7
Ricoh enters into arrangements with multiple elements, which may include any
combination of products, equipment, installation and maintenance. Consideration
in a multiple-element arrangement is allocated at the inception of the
arrangement to all deliverables on the basis of the relative selling price if
both of the following criteria are met: the delivered item(s) has value to the
customer on a stand-alone basis; and the delivery of the undelivered item must
be probable and controlled by Ricoh if the arrangement includes the right of
return. If these criteria are not met, revenue is deferred until the undelivered
elements are fulfilled and accounted for as a single unit of accounting.
Revenue from the sale of equipment under sales-type leases is recognized as
product sales at the inception of the lease. Other revenue consists primarily of
interest income on sales-type leases and direct-financing leases, which are
recognized as other revenue over the life of each respective lease using the
interest method.
(C) FOREIGN CURRENCY TRANSLATION
For foreign operations with functional currencies other than the Japanese yen,
assets and liabilities are translated at the exchange rates in effect at each
fiscal year-end, and income and expenses are translated at the average rates of
exchange prevailing during each fiscal year. The resulting translation
adjustments are included as a part of accumulated other comprehensive income
(loss) and noncontrolling interests in equity.
All foreign currency transaction gains and losses are included in other income
and expenses in the period incurred.
(D) CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments such as certificates
of deposits (CD) and time deposits with maturities of three months or less.
In addition, short term investments such as money management funds (MMF) and
free financial funds (FFF) with maturities of three months or less are also
classified into cash and cash equivalents, as they are readily convertible to
cash and present insignificant risk of changes in value.
(E) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
As discussed further in Note 8, Ricoh manages its exposure to certain market
risks, primarily foreign currency and interest rate risks, through the use of
derivative instruments. As a matter of policy, Ricoh does not enter into
derivative contracts for trading or speculative purposes.
Ricoh recognizes all derivative instruments as either assets or liabilities in
the consolidated balance sheets and measures those instruments at fair value.
When Ricoh enters into a derivative contract, it makes a determination as to
whether or not for accounting purposes the derivative is part of a hedging
relationship. In general, a derivative may be designated as either (1) a hedge
of the fair value changes of a recognized asset or liability or an unrecognized
firm commitment ("fair value hedge"), (2) a hedge of the variability of the
expected cash flows associated with an existing asset or liability or a
forecasted transaction ("cash flow hedge"), or (3) a foreign currency fair value
or cash flow hedge ("foreign currency hedge"). Ricoh formally documents all
relationships between hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking various hedge
transactions. This process includes linking all derivatives that are designated
as fair value, cash flow, or foreign currency hedges to specific assets and
liabilities on the consolidated balance sheets or to specific firm commitments
or forecasted transactions.
8
For derivative contracts that are designated and qualify as fair value hedges
including foreign currency fair value hedges, the derivative instrument is
marked-to-market with gains and losses recognized in current period earnings to
offset the respective losses and gains recognized on the change in fair value of
the hedged item. For derivative contracts that are designated and qualify as
cash flow hedges including foreign currency cash flow hedges, the effective
portion of gains and losses on these contracts is reported as a component of
accumulated other comprehensive income (loss) and noncontrolling interests in
equity, and reclassified into earnings in the same period the hedged item or
transaction affects earnings. Any hedge ineffectiveness on cash flow hedges is
immediately recognized in earnings. For all derivative instruments that are not
designated as part of a hedging relationship and for designated derivative
instruments that do not qualify for hedge accounting, the contracts are recorded
at fair value with the gain or loss recognized in current period earnings.
(F) ALLOWANCE FOR DOUBTFUL TRADE RECEIVABLES AND FINANCE RECEIVABLES
Ricoh records allowances for doubtful receivables that are based upon historical
experience and specific customer collection issues. The estimated amount of
probable credit losses in its existing receivables is determined from write-off
history adjusted to reflect current economic conditions and specific allowances
for receivables including nonperforming leases, impaired loans or other accounts
for which Ricoh has concluded it will be unable to collect all amounts due
according to original terms of the lease or loan agreement. Account balances net
of expected recovery from available collateral are charged-off against the
allowances when collection is considered remote.
(G) SECURITIES
Ricoh's investments in debt and marketable equity securities are classified as
available-for-sale securities. Available-for-sale securities are reported at
fair value with unrealized gains and losses, net of related taxes, reported in
accumulated other comprehensive income (loss) and noncontrolling interests in
equity.
Individual securities classified as available-for-sale securities are reduced to
fair market value by a charge to income for other than temporary declines in
value. Factors considered in assessing whether an indication of other than
temporary impairment exists with respect to available-for-sale securities
include: financial condition and near term prospects of issuer and intent and
ability of Ricoh to retain its investments for a period of time sufficient to
allow for any anticipated recovery in market value.
The cost of the securities sold is computed based on the average cost of each
security held at the time of sale.
Investments in affiliated companies over which Ricoh has the ability to exercise
significant influence, but does not hold a controlling financial interest, are
accounted for by the equity method.
Non-marketable equity securities owned by Ricoh primarily relate to less than
20% owned companies and funds are stated at cost unless indication of impairment
exist, which require the investment to be written down to its estimated fair
value.
(H) INVENTORIES
Inventories are mainly stated at the lower of average cost or net realizable
values. Inventory costs include raw materials, labor and manufacturing
overheads.
9
(I) PROPERTY, PLANT AND EQUIPMENT
The depreciation of property, plant and equipment is computed principally by
using the straight-line method over the estimated useful lives. The depreciation
period generally ranges from 5 years to 50 years for buildings and 2 years to 12
years for machinery and equipment.
Ordinary maintenance and repairs are charged to expense as incurred. Major
replacements and improvements are capitalized. When properties are retired or
otherwise disposed of, the property and related accumulated depreciation
accounts are relieved of the applicable amounts, and any differences are
included in earnings.
(J) CAPITALIZED SOFTWARE COSTS
Ricoh capitalizes certain internal and external costs incurred to acquire or
create internal use software during the application development stage as well as
upgrades and enhancements that result in additional functionality. The
capitalized software is amortized on a straight line basis generally from 3
years to 5 years.
(K) GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill is not amortized and is required to be tested at least annually for
impairment. Acquired intangible assets with a definite useful life are amortized
over their respective estimated useful lives and reviewed for impairment when an
indication of impairment is identified. Other intangible assets with definite
useful lives, consisting primarily of software, customer relationships and
trademarks are amortized on a straight line basis over 1 year to 20 years. Any
acquired intangible assets determined to have an indefinite useful life are not
amortized, but instead are tested annually for impairment based on its fair
value until its life would be determined to no longer be indefinite. In
performing the goodwill impairment test, Ricoh utilizes the two-step approach
prescribed. The first step requires a comparison of the carrying amount of the
reporting units to the fair value of these units. If the carrying amount of a
reporting unit exceeds its fair value, Ricoh will perform the second step of the
goodwill impairment test to measure the amount of impairment loss, if any.
(L) PENSION AND RETIREMENT ALLOWANCES PLANS
Ricoh recognizes the overfunded or underfunded status of the defined benefit
plans as an asset or liability in the consolidated balance sheets, with a
corresponding adjustment to accumulated other comprehensive income (loss) and
noncontrolling interests, net of tax. The expected long-term rate of return on
plan assets used for pension accounting is determined based on the historical
long-term rate of return on plan assets. The discount rate is determined based
on the rates of return of high-quality fixed-income investments currently
available and expected to be available during the period to maturity of the
pension benefits.
(M) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences and carryforwards are
expected to be realized or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Ricoh recognizes interest and penalties related to unrecognized tax benefits in
provision for income taxes in the consolidated statements of operations.
10
(N) RESEARCH AND DEVELOPMENT EXPENSES AND ADVERTISING COSTS
Research and development expenses and advertising costs are expensed as
incurred.
(O) SHIPPING AND HANDLING COSTS
Shipping and handling costs, which mainly include transportation to customers,
are included in selling, general and administrative expenses in the consolidated
statements of operations.
(P) IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
Long-lived assets and acquired intangible assets with a definite life are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset or asset group may not be recoverable.
Recoverability of assets to be held and used is assessed by comparing the
carrying amount of an asset or asset group to the expected future undiscounted
net cash flows of the asset or asset group. If an asset or asset group is
considered to be impaired, the impairment charge to be recognized is measured as
the amount by which the carrying amount of the asset or asset group exceeds fair
value. Long-lived assets meeting the criteria to be considered as held for sale
are reported at the lower of their carrying amount or fair value less costs to
sell.
(Q) NET INCOME ATTRIBUTABLE TO RICOH COMPANY, LTD. PER SHARE
Basic net income attributable to Ricoh Company, Ltd. per share of common stock
is calculated by dividing net income attributable to Ricoh Company, Ltd. by the
weighted-average number of shares of common stock outstanding during the period.
The calculation of diluted net income attributable to Ricoh Company, Ltd. per
share of common stock is similar to the calculation of basic net income
attributable to Ricoh Company, Ltd. per share, except that the weighted-average
number of shares outstanding includes the additional dilution from potential
common stock equivalents such as convertible bonds.
(R) USE OF ESTIMATES
Management of Ricoh has made a number of estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses and the
disclosures of fair value of financial instruments and contingent assets and
liabilities, to prepare these financial statements in conformity with U.S.
generally accepted accounting principles. Actual results could differ from those
estimates.
Ricoh has identified seven areas where it believes assumptions and estimates are
particularly critical to the consolidated financial statements. These are
determination of the allowance for doubtful receivables, impairment of
securities, impairment of long-lived assets including goodwill, uncertain tax
positions, realizability of deferred tax assets, the valuation of assets and
liabilities in business combinations and pension accounting.
(S) RECENTLY ADOPTED NEW ACCOUNTING STANDARDS
Ricoh adopted retroactively Accounting Standards Update (ASU) 2011-11 and ASU
2013-01 from April 1 2013. ASU 2011-11 requires an entity to disclose
information about offsetting and related arrangements. ASU 2013-01 replaced ASU
2011-11. The updates create new disclosure requirements requiring entities to
disclose both gross and net information for derivatives and other financial
instruments that are either offset in the Statement of assets and liabilities or
subject to an enforceable master netting arrangement or similar agreement. These
ASU's impact disclosures only and will have no impact on Ricoh's consolidated
financial position.
11
Ricoh adopted ASU 2013-02 from April 1 2013. This ASU requires an entity to
report the effect of reclassifications out of accumulated other comprehensive
income. This ASU will only impact disclosures and will have no impact on Ricoh's
consolidated financial position.
(T) RECLASSIFICATION
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
12
2. SECURITIES
Investment securities as of March 31, 2013 and December 31, 2013 consist of the
following:
Millions of Yen
----------------------------------
March 31, 2013 December 31, 2013
--------------------------------------------------------------------------------
Investment securities:
Available-for-sale securities 52,319 59,331
Non-marketable equity securities 1,783 2,051
--------------------------------------------------------------------------------
54,102 61,382
================================================================================
The noncurrent security types of available-for-sale securities, and the
respective cost, gross unrealized holding gains, gross unrealized holding losses
and fair value as of March 31, 2013 and December 31, 2013 are as follows:
Millions of Yen
-----------------------------------------------------------------------------------
March 31, 2013 December 31, 2013
----------------------------------------- -----------------------------------------
Gross Gross Gross Gross
unrealized unrealized unrealized unrealized
holding holding Fair holding holding Fair
Cost gains losses value Cost gains losses value
----------------------------------------------------------------------------------------------------------
Noncurrent:
Equity securities 35,378 15,058 69 50,367 30,706 26,720 32 57,394
Corporate debt
securities 1,836 116 -- 1,952 1,916 21 -- 1,937
----------------------------------------------------------------------------------------------------------
37,214 15,174 69 52,319 32,622 26,741 32 59,331
==========================================================================================================
Gross unrealized holding losses and the fair value of available-for-sale
securities, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position at March 31, 2013
and December 31, 2013 are as follows:
Millions of Yen
----------------------------------------------------------------------------------
March 31, 2013
----------------------------------------------------------------------------------
Less than 12 months 12 months or longer Total
--------------------------- ---------------------------- -------------------------
Gross Gross Gross
unrealized unrealized unrealized
holding holding holding
Fair value losses Fair value losses Fair value losses
--------------------------------------------------------------------------------------------------------------
Noncurrent:
Available-for-sale:
Equity securities 61 5 288 64 349 69
==============================================================================================================
Millions of Yen
----------------------------------------------------------------------------------
December 31, 2013
----------------------------------------------------------------------------------
Less than 12 months 12 months or longer Total
--------------------------- ---------------------------- -------------------------
Gross Gross Gross
unrealized unrealized unrealized
holding holding holding
Fair value losses Fair value losses Fair value losses
--------------------------------------------------------------------------------------------------------------
Noncurrent:
Available-for-sale:
Equity securities 38 4 143 28 181 32
==============================================================================================================
13
Gross unrealized holding losses of available-for-sale securities as of March 31,
2013 and December 31, 2013 consist of 13 and 9 kinds of securities. Ricoh
concluded that the decline in fair value of investment securities at period end
to be temporary, with considering such factors as financial and operating
conditions of issuer, the industry in which the issuer operates and other
relevant factors. Ricoh judged the degree of decline in fair value of investment
securities against the fair value to be immaterial.
The contractual maturities of debt securities classified as available-for-sale
as of December 31, 2013 are as follows:
Millions of Yen
---------------------
Cost Fair value
------------------------------------------------------------------------------
Due after one year through five years 773 764
Over five years 1,143 1,173
------------------------------------------------------------------------------
1,916 1,937
==============================================================================
There were no significant proceeds from the sales of available-for-sale
securities for the nine months ended December 31, 2012. The proceeds from the
sales of available-for-sale securities for the nine months ended December 31,
2013 was Yen 7,153 million.
There were no significant realized gains or losses on sales of
available-for-sale securities for the nine months ended December 31, 2012. The
realized gains on sales of available-for-sale securities for the nine months
ended December 31, 2013 was Yen 2,349 million. There were no significant
realized losses on sales of available-for-sale securities for the nine months
ended December 31, 2013.
There were no significant realized gains or losses on valuation of
available-for-sale securities for the nine months ended December 31, 2012 and
2013.
3. PENSION AND RETIREMENT ALLOWANCE PLANS
From October 1, 2013, some of domestic subsidiaries have modified a portion of
the existing defined benefit pension plans into defined contribution plan. As a
result of this modification, Ricoh recognized curtailment gain in net periodic
pension cost for the three months and the six months ended September 30, 2013.
The net periodic pension costs of the pension plans consist of the following
components:
Millions of Yen
---------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
--------------------------------------------------------------------------------
Service cost 9,370 9,020
Interest cost 9,804 10,469
Expected return on plan assets (7,942) (10,702)
Net amortization 2,768 2,317
Curtailment gain -- (5,951)
--------------------------------------------------------------------------------
Total net periodic pension cost 14,000 5,153
================================================================================
14
Millions of Yen
----------------------------------------
Three months ended Three months ended
December 31, 2012 December 31, 2013
--------------------------------------------------------------------------------
Service cost 3,148 2,836
Interest cost 3,327 3,496
Expected return on plan assets (2,687) (3,556)
Net amortization 929 708
Curtailment gain -- (901)
--------------------------------------------------------------------------------
Total net periodic pension cost 4,717 2,583
================================================================================
4. EQUITY
The change in Ricoh shareholders' equity, noncontrolling interests and total
equity for the nine months ended December 31, 2012 and 2013 are as follows:
Millions of Yen
-----------------------------------------------------------------------------------
Nine months ended December 31, 2012 Nine months ended December 31, 2013
---------------------------------------- ----------------------------------------
Ricoh Ricoh
Shareholders' Noncontrolling Total Shareholders' Noncontrolling Total
Equity Interests Equity Equity Interests Equity
----------------------------------------------------------------------------------------------------------------------
Equity, Beginning of Period 822,704 56,314 879,018 897,996 60,662 958,658
----------------------------------------------------------------------------------------------------------------------
Net income 17,302 3,509 20,811 43,563 4,139 47,702
Unrealized gains (losses) on
securities (447) (2) (449) 7,618 51 7,669
Pension liability adjustments (761) 14 (747) 7,094 (101) 6,993
Unrealized gains (losses) on
derivatives (115) (2) (117) 586 303 889
Foreign currency translation
adjustments 22,196 (168) 22,028 70,659 (180) 70,479
----------------------------------------------------------------------------------------------------------------------
Comprehensive income 38,175 3,351 41,526 129,520 4,212 133,732
----------------------------------------------------------------------------------------------------------------------
Cash dividends on Common stock (15,226) -- (15,226) (23,925) -- (23,925)
Distributions to Noncontrolling
interests -- (697) (697) -- (674) (674)
Net changes in Treasury stock (14) -- (14) (120) -- (120)
Other (7) -- (7) (3) -- (3)
----------------------------------------------------------------------------------------------------------------------
Equity, End of Period 845,632 58,968 904,600 1,003,468 64,200 1,067,668
======================================================================================================================
5. OTHER COMPREHENSIVE INCOME (LOSS)
Changes in accumulated other comprehensive income (loss) during the nine months
ended December 31, 2013 is as follows:
Millions of Yen
---------------------------------------------------------------------------
Nine months ended December 31, 2013
---------------------------------------------------------------------------
Unrealized Pension Unrealized Foreign currency
gains (losses) liability gains (losses) translation
on securities adjustments on derivatives adjustments Total
--------------------------------------------------------------------------------------------------------------
Beginning balance 8,665 (64,266) (861) (89,626) (146,088)
--------------------------------------------------------------------------------------------------------------
Other comprehensive income
before reclassifications 9,161 5,537 818 70,479 85,995
Reclassifications from other
comprehensive income (1,492) 1,456 71 -- 35
--------------------------------------------------------------------------------------------------------------
Other comprehensive income 7,669 6,993 889 70,479 86,030
--------------------------------------------------------------------------------------------------------------
Less: Other comprehensive
income attributable to
noncontrolling interests 51 (101) 303 (180) 73
--------------------------------------------------------------------------------------------------------------
Ending balance 16,283 (57,172) (275) (18,967) (60,131)
==============================================================================================================
15
Tax effects allocated to other comprehensive income before reclassifications
resulting from unrealized gains (losses) on securities, pension liability
adjustments, unrealized gains (losses) on derivatives and foreign currency
translation adjustments are Yen (4,767) million, Yen (3,088) million, Yen (495)
million and Yen (226) million, respectively.
Changes in accumulated other comprehensive income (loss) during the three months
ended December 31, 2013 is as follows:
Millions of Yen
---------------------------------------------------------------------------
Three months ended December 31, 2013
---------------------------------------------------------------------------
Unrealized Pension Unrealized Foreign currency
gains (losses) liability gains (losses) translation
on securities adjustments on derivatives adjustments Total
--------------------------------------------------------------------------------------------------------------
Beginning balance 11,797 (58,012) (444) (62,702) (109,361)
--------------------------------------------------------------------------------------------------------------
Other comprehensive income
before reclassifications 4,501 381 359 43,766 49,007
Reclassifications from other
comprehensive income (21) 456 25 -- 460
--------------------------------------------------------------------------------------------------------------
Other comprehensive income 4,480 837 384 43,766 49,467
--------------------------------------------------------------------------------------------------------------
Less: Other comprehensive
income attributable to
noncontrolling interests (6) (3) 215 31 237
--------------------------------------------------------------------------------------------------------------
Ending balance 16,283 (57,172) (275) (18,967) (60,131)
==============================================================================================================
Tax effects allocated to other comprehensive income before reclassifications
resulting from unrealized gains (losses) on securities, pension liability
adjustments, unrealized gains (losses) on derivatives and foreign currency
translation adjustments are Yen (2,477) million, Yen (213) million, Yen (215)
million and Yen (85) million, respectively.
Reclassifications out of accumulated other comprehensive income (loss) during
the nine months ended December 31, 2013 is as follows:
Millions of Yen
-------------------------------------------------
Nine months ended December 31, 2013
----------------------------------------------------------------------------------------------------
Reclassification out
of Accumulated other Affected line items in
comprehensive consolidated statement of
income operations
----------------------------------------------------------------------------------------------------
Unrealized gains and losses on securities:
2,324 Gain on sale of investment
securities, net
(832) Provision for income taxes
--------------------
1,492 Consolidated net income
--------------------
Pension liability adjustments:
(2,317) (b)
861 Provision for income taxes
--------------------
(1,456) Consolidated net income
--------------------
16
Millions of Yen
-------------------------------------------------
Nine months ended December 31, 2013
----------------------------------------------------------------------------------------------------
Reclassification out
of Accumulated other Affected line items in
comprehensive consolidated statement of
income operations
----------------------------------------------------------------------------------------------------
Unrealized gains and losses on derivatives: (115) Interest expense
44 Provision for income taxes
--------------------
(71) Consolidated net income
--------------------
Total reclassification adjustments, net of tax (35)
====================
(a) Amounts in parentheses indicate losses in consolidated statements of
operations.
(b) This accumulated other comprehensive income (loss) component is included in
the computation of net periodic pension cost. (See Note 3 for the information.)
Reclassifications out of accumulated other comprehensive income (loss) during
the three months ended December 31, 2013 is as follows:
Millions of Yen
-------------------------------------------------
Three months ended December 31, 2013
----------------------------------------------------------------------------------------------------
Reclassification out
of Accumulated other Affected line items in
comprehensive consolidated statement of
income operations
----------------------------------------------------------------------------------------------------
Unrealized gains and losses on securities:
32 Gain on sale of investment
securities, net
(11) Provision for income taxes
--------------------
21 Consolidated net income
--------------------
Pension liability adjustments:
(708) (b)
252 Provision for income taxes
--------------------
(456) Consolidated net income
--------------------
Unrealized gains and losses on derivatives: (40) Interest expense
15 Provision for income taxes
--------------------
(25) Consolidated net income
--------------------
Total reclassification adjustments, net of tax (460)
====================
(a) Amounts in parentheses indicate losses in consolidated statements of
operations.
(b) This accumulated other comprehensive income (loss) component is included in
the computation of net periodic pension cost. (See Note 3 for the information.)
17
6. DIVIDENDS
Cash dividends paid during the nine months ended December 31, 2012 is as
follows:
Resolved at the General meetings of Shareholders on June 26, 2012
-----------------------------------------------------------------------------
Total amount of dividends (million of yen) 6,163
Dividend per share of common stock (yen) 8.50
Record date March 31, 2012
Effective date June 27, 2012
Resource for dividend Retained earnings
=============================================================================
Resolved at the Board meeting on October 30, 2012
-----------------------------------------------------------------------------
Total amount of dividends (millions of yen) 9,063
Dividend per share of common stock (yen) 12.50
Record date September 30, 2012
Effective date December 3, 2012
Resource for dividend Retained earnings
=============================================================================
Cash dividends paid during the nine months ended December 31, 2013 is as
follows:
Resolved at the General meetings of Shareholders on June 21, 2013
-----------------------------------------------------------------------------
Total amount of dividends (million of yen) 11,963
Dividend per share of common stock (yen) 16.50
Record date March 31, 2013
Effective date June 24, 2012
Resource for dividend Retained earnings
=============================================================================
Resolved at the Board meeting on October 31, 2013
-----------------------------------------------------------------------------
Total amount of dividends (millions of yen) 11,962
Dividend per share of common stock (yen) 16.50
Record date September 30, 2013
Effective date December 2, 2013
Resource for dividend Retained earnings
=============================================================================
7. PER SHARE DATA
Ricoh shareholders' equity per share was Yen 1,238.55 and Yen 1,384.23 as of
March 31, 2013 and December 31, 2013, respectively. Dividends per share shown in
the consolidated statement of operations are computed based on dividends paid
for the third quarter ended December 31, 2012 and 2013.
A reconciliation of the numerator and the denominators of the basic and diluted
per share computations for net income attributable to Ricoh Company, Ltd. are as
follows:
Thousands of shares
--------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------------------
Weighted average number of shares of common stock outstanding 725,069 725,000
Millions of Yen
--------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd. 17,302 43,563
18
Yen
--------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd. per share: 23.86 60.09
Thousands of shares
--------------------------------------
Three months ended Three months ended
December 31, 2012 December 31, 2013
----------------------------------------------------------------------------------------------------
Weighted average number of shares of common stock outstanding 725,059 724,997
Millions of Yen
--------------------------------------
Three months ended Three months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd. 5,589 18,852
Yen
--------------------------------------
Three months ended Three months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------------------
Net income attributable to Ricoh Company, Ltd. per share: 7.71 26.00
Diluted net income per share attributable to Ricoh Company, Ltd. for the nine
months and three months ended December 31, 2012 and 2013 is omitted because the
Company did not have potentially dilutive common shares that were outstanding
for the period.
8. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Policy
Ricoh enters into various derivative financial instrument contracts in the
normal course of business in connection with the management of its assets and
liabilities.
Ricoh uses derivative instruments to reduce risk and protect market value of
assets and liabilities in conformity with the Ricoh's policy. Ricoh does not use
derivative financial instruments for trading or speculative purposes, nor is it
a party to leveraged derivatives.
All derivative instruments are exposed to credit risk arising from the inability
of counterparties to meet the terms of the derivative contracts. However, Ricoh
does not expect any counterparties to fail to meet their obligations because
these counterparties are financial institutions with satisfactory credit
ratings. Ricoh utilizes a number of counterparties to minimize the concentration
of credit risk.
Foreign Exchange Risk Management
Ricoh conducts business on a global basis and holds assets and liabilities
denominated in foreign currencies. Ricoh enters into foreign exchange contracts
and foreign currency options to hedge against the potentially adverse impacts of
foreign currency fluctuations on these assets and liabilities denominated in
foreign currencies.
19
Interest Rate Risk Management
Ricoh enters into interest rate swap agreements (including interest rate and
currency swap agreements) to hedge against the potential adverse impacts of
changes in fair value or cash flow fluctuations on interest of its outstanding
debt.
Fair Value Hedges
Changes in the fair value of derivative instruments and the related hedged items
designated and qualifying as fair value hedges are included in other (income)
expenses in the consolidated statements of operations. The critical terms of the
hedged debt obligations and the interest rate swaps are identical and there is
no hedging ineffectiveness nor are net gains or losses excluded from the
assessment of hedge effectiveness for the nine months ended December 31, 2013.
Cash Flow Hedges
Changes in the fair value of derivative instruments designated and qualifying as
cash flow hedges are included in accumulated other comprehensive income (loss)
and noncontrolling interests on the consolidated balance sheets. These amounts
are reclassified into earnings as interest on the hedged loans is paid. The
critical terms of the hedged debt obligations and the interest rate swaps are
identical and there is no hedging ineffectiveness nor are net gains or losses
excluded from the assessment of hedge effectiveness for the nine months ended
December 31, 2013. Ricoh expects that it will reclassify into earnings through
other expenses during the next 12 months approximately Yen 129 million of the
balance of accumulated other comprehensive income as of December 31, 2013.
Undesignated Derivative Instruments
Derivative instruments not designated as hedging instruments are held mainly to
reduce the risk relating to the variability in exchange rates on assets and
liabilities denominated in foreign currencies. Changes in the fair value of
these instruments are included in other (income) expenses in the consolidated
statement of operations.
Contract amounts of derivative instruments at March 31, 2013 and December 31,
2013 are shown in the following tables:
Millions of Yen
-------------------------------------
March 31, 2013 December 31, 2013
---------------------------------------------------------------------------
Interest rate swap agreements 311,883 339,308
Foreign currency contracts 214,512 227,073
Foreign currency options 8,451 14,135
===========================================================================
The location and fair value amounts of derivatives in consolidated balance sheet
are shown in the following tables:
20
Derivatives designated as hedging instruments
Current Long-term
----------------------------------------- ----------------------------------------
Fair value Fair value
----------------------------------------- ----------------------------------------
Balance sheet Balance sheet
Location Millions of Yen Location Millions of Yen
----------------------------------------------------------------------------- ----------------------------------------
March 31, December 31, March 31, December 31,
Asset Derivatives 2013 2013 2013 2013
----------------------------------------------------------------------------------------------------------------------
Interest rate swap agreements Deferred income Lease deposits
taxes and other -- 2 and other 835 1,785
======================================================================================================================
March 31, December 31, March 31, December 31,
Liability Derivatives 2013 2013 2013 2013
----------------------------------------------------------------------------------------------------------------------
Interest rate swap agreements Accrued expenses Deferred income
and other 217 142 taxes and other 1,781 1,351
======================================================================================================================
Derivatives not designated as hedging instruments
Current Long-term
----------------------------------------- ----------------------------------------
Fair value Fair value
----------------------------------------- ----------------------------------------
Balance sheet Balance sheet
Location Millions of Yen Location Millions of Yen
----------------------------------------------------------------------------- ----------------------------------------
March 31, December 31, March 31, December 31,
Asset Derivatives 2013 2013 2013 2013
----------------------------------------------------------------------------------------------------------------------
Foreign currency contracts Deferred income Lease deposits
taxes and other 531 785 and other -- 2
Foreign currency options 99 -- -- --
----------------------------------------------------------------------------------------------------------------------
Total 630 785 -- 2
======================================================================================================================
March 31, December 31, March 31, December 31,
Liability Derivatives 2013 2013 2013 2013
----------------------------------------------------------------------------------------------------------------------
Interest rate swap agreements Accrued expenses
and other 3 31 238 136
Deferred income
Foreign currency contracts 10,114 24,401 taxes and other 10,334 --
Foreign currency options 15 583 -- --
----------------------------------------------------------------------------------------------------------------------
Total 10,132 25,015 10,572 136
======================================================================================================================
Total fair value amounts of derivatives
Millions of Yen
--------------------------
Fair value
----------------------------------------------------------------------------
March 31, December 31,
2013 2013
----------------------------------------------------------------------------
Total Asset Derivatives 1,465 2,574
Total Liability Derivatives 22,702 26,644
----------------------------------------------------------------------------
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of operations for the nine months ended December 31,
2012 are shown in the following tables:
21
Derivatives designated as hedging instruments
Millions of Yen
--------------------------------------------------------------------------------------------
Gain or (Loss)
Recognized in OCI Gain or (Loss) Reclassified from
on Derivative Accumulated OCI Into Income Gain or (Loss) Recognized in Income on
(Effective Portion) (Effective Portion) Derivative (Ineffective Portion)
--------------------------------------------------------------------------------------------
Amount Location Amount Location Amount
---------------------------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements (579) Interest expense (101) -- --
===========================================================================================================================
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative
--------------------------------------------------------------
Location Millions of Yen
-----------------
December 31, 2012
---------------------------------------------------------------------------------------------
Interest rate swap agreements Other, net (16)
Foreign currency contracts Foreign currency exchange (gain)loss, net (8,157)
Foreign currency options Foreign currency exchange (gain)loss, net (491)
---------------------------------------------------------------------------------------------
Total (8,664)
=============================================================================================
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of operations for the three months ended December 31,
2012 are shown in the following tables:
Derivatives designated as hedging instruments
Millions of Yen
--------------------------------------------------------------------------------------------
Gain or (Loss)
Recognized in OCI Gain or (Loss) Reclassified from
on Derivative Accumulated OCI Into Income Gain or (Loss) Recognized in Income on
(Effective Portion) (Effective Portion) Derivative (Ineffective Portion)
--------------------------------------------------------------------------------------------
Amount Location Amount Location Amount
---------------------------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements (6) Interest expense (34) -- --
===========================================================================================================================
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative
--------------------------------------------------------------
Location Millions of Yen
-----------------
December 31, 2012
---------------------------------------------------------------------------------------------
Interest rate swap agreements Other, net (11)
Foreign currency contracts Foreign currency exchange (gain)loss, net (16,931)
Foreign currency options Foreign currency exchange (gain)loss, net (1,463)
---------------------------------------------------------------------------------------------
Total (18,405)
=============================================================================================
22
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of operations for the nine months ended December 31,
2013 are shown in the following tables:
Derivatives designated as hedging instruments
Millions of Yen
--------------------------------------------------------------------------------------------
Gain or (Loss)
Recognized in OCI Gain or (Loss) Reclassified from
on Derivative Accumulated OCI Into Income Gain or (Loss) Recognized in Income on
(Effective Portion) (Effective Portion) Derivative (Ineffective Portion)
--------------------------------------------------------------------------------------------
Amount Location Amount Location Amount
---------------------------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements 1,313 Interest expense (115) -- --
===========================================================================================================================
Millions of Yen
-----------------------------------------------------------------
Gain or (loss) recognized Gain or (loss) recognized in
in income on derivative instruments income on hedged item
-----------------------------------------------------------------
Location Amount Location Amount
------------------------------------------------------------------------------------------------
Fair value hedge
Interest rate swap agreements Other, net 29 Other, net (29)
================================================================================================
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative
--------------------------------------------------------------
Location Millions of Yen
-----------------
December 31, 2013
---------------------------------------------------------------------------------------------
Interest rate swap agreements Other, net 74
Foreign currency contracts Foreign currency exchange (gain)loss, net (3,697)
Foreign currency options Foreign currency exchange (gain)loss, net (667)
---------------------------------------------------------------------------------------------
Total (4,290)
=============================================================================================
The location and amount of gains and losses related to derivatives reported in
the consolidated statement of operations for the three months ended December 31,
2013 are shown in the following tables:
23
Derivatives designated as hedging instruments
Millions of Yen
--------------------------------------------------------------------------------------------
Gain or (Loss)
Recognized in OCI Gain or (Loss) Reclassified from
on Derivative Accumulated OCI Into Income Gain or (Loss) Recognized in Income on
(Effective Portion) (Effective Portion) Derivative (Ineffective Portion)
--------------------------------------------------------------------------------------------
Amount Location Amount Location Amount
---------------------------------------------------------------------------------------------------------------------------
Cash flow hedge
Interest rate swap agreements 574 Interest expense (40) -- --
===========================================================================================================================
Millions of Yen
-----------------------------------------------------------------
Gain or (loss) recognized Gain or (loss) recognized in
in income on derivative instruments income on hedged item
-----------------------------------------------------------------
Location Amount Location Amount
------------------------------------------------------------------------------------------------
Fair value hedge
Interest rate swap agreements Other, net 12 Other, net (12)
================================================================================================
Derivatives not designated as hedging instruments
Gain or (Loss) Recognized in Income on Derivative
--------------------------------------------------------------
Location Millions of Yen
-----------------
December 31, 2013
---------------------------------------------------------------------------------------------
Interest rate swap agreements Other, net 7
Foreign currency contracts Foreign currency exchange (gain)loss, net (6,744)
Foreign currency options Foreign currency exchange (gain)loss, net (592)
---------------------------------------------------------------------------------------------
Total (7,329)
=============================================================================================
9. COMMITMENTS AND CONTINGENT LIABILITIES
As of December 31, 2013, there were no significant contingent liabilities.
As of December 31, 2013 the Company and certain of its subsidiaries were parties
to litigation involving routine matters, such as patent rights. In the opinion
of management, the ultimate liability, if any, resulting from such litigation
will not materially affect the consolidated financial position or the results of
operations of Ricoh.
24
10. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
(A) CASH AND CASH EQUIVALENTS, TIME DEPOSITS, TRADE RECEIVABLES, SHORT-TERM
BORROWINGS, CURRENT MATURITIES OF LONG-TERM INDEBTEDNESS, TRADE PAYABLES
AND ACCRUED EXPENSES
The following summary excludes cash and cash equivalents, time deposits, trade
receivables, short-term borrowings, current maturities of long-term
indebtedness, trade payables and accrued expenses for which fair values
approximate their carrying amounts because of the short maturities of these
instruments.
(B) INVESTMENT SECURITIES
The fair value of the investment securities is principally based on quoted
market price. Ricoh have not estimated the fair value of non-marketable equity
securities, as it is not practicable. Because there were no quoted market prices
for non-marketable equity securities and each security had different nature and
characteristics, reasonable estimates of fair values could not be made without
incurring excessive costs. The carrying amounts of non-marketable equity
securities were Yen 1,783 million and Yen 2,051 million as of March 31, 2013 and
December 31, 2013, respectively. The following summary excludes non-marketable
equity securities.
(C) INSTALLMENT LOANS
The fair value of installment loans is based on the present value of future cash
flows using the current interest rate for similar instruments of comparable
maturity. Installment loans using inputs described above are classified as Level
2 under the Fair Value Measurement and Disclosure framework. The 3 levels of
inputs that are used to measure the fair values are defined in Note 11.
(D) LONG-TERM INDEBTEDNESS
The fair value of each of the long-term indebtedness instruments is based on the
present value of future cash flows associated with each instrument discounted
using the current borrowing rate for similar instruments of comparable maturity.
Long-term indebtedness using inputs described above are classified as Level 2
under the Fair Value Measurement and Disclosure framework.
(E) INTEREST RATE SWAP AGREEMENTS, FOREIGN CURRENCY CONTRACTS AND FOREIGN
CURRENCY OPTIONS
The fair value of interest rate swap agreements, foreign currency contracts and
foreign currency options is estimated by obtaining quotes from brokers or
suitable valuation method based on available data.
The estimated fair value of the financial instruments as of March 31, 2013 and
December 31, 2013 are summarized as follows:
Millions of Yen
-------------------------------------------------
March 31, 2013 December 31, 2013
----------------------- -----------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
-------------------------------------------------------------------------------------
Investment securities 52,319 52,319 59,331 59,331
Installment loans, net 89,657 90,655 93,822 94,866
Long-term indebtedness (476,381) (475,018) (489,159) (487,437)
Interest rate swap agreements:
assets 835 835 1,787 1,787
liabilities 2,239 2,239 1,660 1,660
Foreign currency contracts:
assets 531 531 787 787
liabilities 20,448 20,448 24,401 24,401
Foreign currency options:
assets 99 99 -- --
liabilities 15 15 583 583
=====================================================================================
25
Limitations: Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
11. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The three levels fair value hierarchy that prioritizes the
inputs used to measure fair value is established. The three levels of inputs
used to measure fair value are as follows:
Level 1 - Inputs are quoted prices in active markets for identical assets or
liabilities.
Level 2 - Inputs are quoted prices for similar assets or liabilities in an
active market, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than quoted
prices that are observable and market-corroborated inputs which are
derived principally from or corroborated by observable market data.
Level 3 - Inputs are derived from valuation techniques in which one or more
significant inputs or value drivers are unobservable.
The following tables present the fair-value hierarchy levels of Ricoh's assets
and liabilities that are measured at fair value on a recurring basis as of March
31, 2013 and December 31, 2013.
26
Millions of Yen
------------------------------
March 31, 2013
------------------------------
Level 1 Level 2 Level 3 Total
-------------------------------------------------------------------------
Assets:
Available-for-sale securities:
Domestic equity securities 41,622 -- -- 41,622
Foreign equity securities 8,745 -- -- 8,745
Foreign corporate bonds 1,952 -- -- 1,952
Derivative instruments
Interest rate swap agreements -- 835 -- 835
Foreign currency contracts -- 531 -- 531
Foreign currency options -- 99 -- 99
-------------------------------------------------------------------------
Total assets 52,319 1,465 -- 53,784
=========================================================================
Liabilities:
Derivatives instruments
Interest rate swap agreements -- 2,239 -- 2,239
Foreign currency contracts -- 20,448 -- 20,448
Foreign currency options -- 15 -- 15
-------------------------------------------------------------------------
Total liabilities -- 22,702 -- 22,702
=========================================================================
Millions of Yen
------------------------------
December 31, 2013
------------------------------
Level 1 Level 2 Level 3 Total
-------------------------------------------------------------------------
Assets:
Available-for-sale securities:
Domestic equity securities 55,059 -- -- 55,059
Foreign equity securities 2,335 -- -- 2,335
Foreign corporate bonds 1,937 -- -- 1,937
Derivative instruments
Interest rate swap agreements -- 1,787 -- 1,787
Foreign currency contracts -- 787 -- 787
Foreign currency options -- -- -- --
-------------------------------------------------------------------------
Total assets 59,331 2,574 -- 61,905
=========================================================================
Liabilities:
Derivatives instruments
Interest rate swap agreements -- 1,660 -- 1,660
Foreign currency contracts -- 24,401 -- 24,401
Foreign currency options -- 583 -- 583
-------------------------------------------------------------------------
Total liabilities -- 26,644 -- 26,644
=========================================================================
Available-for-sale securities
Available-for-sale securities classified Level 1 in the fair value hierarchy
contains marketable securities and bonds. Marketable securities and bonds are
valued using a market approach based on the quoted market prices of identical
instruments in active markets.
Derivative instruments
Ricoh uses foreign exchange contracts, foreign currency options and interest
rate swap agreements to manage exposure to the variability of cash flow. These
derivative instruments are classified as Level 2 in the fair value hierarchy,
since they are valued using observable market data such as LIBOR-based yield
curves.
Assets and liabilities measured at fair value on a nonrecurring basis
There were no material assets and liabilities measured at fair value on a
non-recurring basis during the nine months ended December 31, 2012 and 2013.
12. TRANSFER OF FINANCIAL ASSETS
Ricoh Leasing Company, Ltd. transferred its lease receivables to a trust and
received the beneficial interests in the trust originated from the transferred
assets. Subsequently, Ricoh Leasing Company, Ltd. transferred the
non-subordinated beneficial interests to and received cash as consideration from
transferees, such as Special Purpose Entity ("SPE") that are different from the
trust mentioned above, as a part of securitization programs. The retained
subordinated interests were considered as variable interests, since the
subordinated interests had the obligation to absorb the expected loss of the
trust.
27
Ricoh performs a qualitative analysis to determine the primary beneficiary of a
Variable Interest Entity ("VIE"). The primary beneficiary of a VIE has both
the : (1) power to direct the activities of a VIE that most significantly impact
the entity's economic performance and (2) obligation to absorb losses or the
right to receive benefits from the VIE that could potentially be significant to
the VIE.
Ricoh Leasing Company, Ltd. was considered as the primary beneficiary since
Ricoh Leasing Company, Ltd. acted as a special servicer for lease receivables
transferred to the trust and therefore, deemed to meet the criteria (1) and (2)
above.
As a result of the above consideration, Ricoh consolidated the trust and
eliminating the retained subordinated beneficial interests on the consolidated
balance sheet. The consolidated assets and liabilities as of March 31, 2013 and
December 31, 2013 are as follows:
Millions of Yen
----------------------------------
March 31, 2013 December 31, 2013
--------------------------------------------------------------------------------------------
Current maturities of long-term finance receivables, net 12,039 13,035
Long-term finance receivables, net 24,442 18,021
Current maturities of long-term indebtedness 10,161 10,154
Long-term indebtedness 20,624 16,516
============================================================================================
The transferring of the non-subordinated beneficial interests was recorded as
secured loans, since Ricoh Leasing Company, Ltd. retained subordinated
beneficial interests and such interests did not meet the definition of
participating interest. Lease receivables are only to be used to settle
obligation of the trust's liabilities or transferee's liabilities in
substantially. Servicing assets or liabilities related to securitization
transactions initiated were not recorded, because the servicing fees adequately
compensate Ricoh.
Apart from the transactions mentioned above, Ricoh's foreign subsidiaries
transferred lease receivables with recourse. Ricoh recorded these transfers as
secured loans, since these transactions did not meet the derecognition criteria
of financial assets. The assets and liabilities that were accounted for as
secured loans are as follows:
Millions of Yen
----------------------------------
March 31, 2013 December 31, 2013
--------------------------------------------------------------------------------------------
Current maturities of long-term finance receivables, net 1,743 1,513
Long-term finance receivables, net 5,575 4,477
Current maturities of long-term indebtedness 1,743 1,513
Long-term indebtedness 5,575 4,477
============================================================================================
28
13. CREDIT QUALITY OF FINANCING RECEIVABLES AND THE ALLOWANCE FOR DOUBTFUL
RECEIVABLES
(A) FINANCING RECEIVABLES AND ALLOWANCE FOR DOUBTFUL RECEIVABLES
The financial subsidiaries of the Company have financing receivables and Ricoh
classifies them into three categories; "lease receivables", "installment loans"
and "installment receivables and other". These receivables consist of a large
number of smaller-balance homogenous loans, lease receivables and installment
receivables. Financing receivables classified as "lease receivables" and
"installment receivables and other" are resulting from sale and lease
transactions of mainly office equipment. Financing receivables classified
as "installment loans" are resulting from financial services.
Ricoh continuously monitors overdue financing receivables, which Ricoh considers
as uncollectible risk receivables. For financing receivables with specific
customer collection issues, Ricoh individually evaluates their collectability in
order to determine the amount of allowance for doubtful receivables. For other
financing receivables, Ricoh categorizes these receivables into groups by their
nature and characteristics. Ricoh collectively evaluates the collectability by
each group, using its historical experience of write-off and determines the
amount of allowance for doubtful receivables.
29
Financing receivables and allowance for doubtful receivables as of December 31,
2012 and December 31, 2013 are as follows:
Millions of Yen
---------------------------------------------------
December 31, 2012
---------------------------------------------------
Installment
Lease Installment receivables
receivables loans and other Total
-------------------------------------------------------------------------------------------------
Allowance for doubtful receivables:
Beginning balance 8,472 1,747 2,595 12,814
-------------------------------------------------------------------------------------------------
Charge-offs (1,293) (22) (56) (1,371)
Recoveries -- -- -- --
Provision 1,124 (240) (1,287) (403)
Translation adjustment 128 -- -- 128
Ending balance 8,431 1,485 1,252 11,168
-------------------------------------------------------------------------------------------------
Allowance for doubtful receivables:
Individually evaluated 2,355 422 665 3,442
Collectively evaluated 6,076 1,063 587 7,726
-------------------------------------------------------------------------------------------------
Financing receivables:
Individually evaluated 61,621 461 2,720 64,802
Collectively evaluated 569,980 89,135 47,054 706,169
-------------------------------------------------------------------------------------------------
Total:Financing receivables 631,601 89,596 49,774 770,971
=================================================================================================
Millions of Yen
---------------------------------------------------
December 31, 2013
---------------------------------------------------
Installment
Lease Installment receivables
receivables loans and other Total
-------------------------------------------------------------------------------------------------
Allowance for doubtful receivables:
Beginning balance 8,727 1,522 1,265 11,514
-------------------------------------------------------------------------------------------------
Charge-offs (1,309) (203) (38) (1,550)
Recoveries (23) -- -- (23)
Provision 941 300 (77) 1,164
Translation adjustment 278 -- -- 278
Ending balance 8,614 1,619 1,150 11,383
-------------------------------------------------------------------------------------------------
Allowance for doubtful receivables:
Individually evaluated 2,332 445 480 3,257
Collectively evaluated 6,282 1,174 670 8,126
-------------------------------------------------------------------------------------------------
Financing receivables:
Individually evaluated 53,181 531 2,762 56,474
Collectively evaluated 618,657 94,910 61,933 775,500
-------------------------------------------------------------------------------------------------
Total:Financing receivables 671,838 95,441 64,695 831,974
=================================================================================================
30
(B) AGE ANALYSIS
Ricoh ascribes the fact of past due to credit quality indicators and classifies
financing receivables into Overdue and Current.
Analysis of the age of the recorded financing receivables as of March 31, 2013
and December 31, 2013 are as follows:
Millions of Yen
---------------------------------------------------
March 31, 2013
---------------------------------------------------
Installment
Lease Installment receivables
receivables loans and other Total
-------------------------------------------------------------------------------------------------
Current 616,658 90,606 54,649 761,913
Overdue 4,909 573 1,967 7,449
-------------------------------------------------------------------------------------------------
Total:Financing receivables 621,567 91,179 56,616 769,362
=================================================================================================
Millions of Yen
---------------------------------------------------
December 31, 2013
---------------------------------------------------
Installment
Lease Installment receivables
receivables loans and other Total
-------------------------------------------------------------------------------------------------
Current 665,586 94,875 63,178 823,639
Overdue 6,252 566 1,517 8,335
-------------------------------------------------------------------------------------------------
Total:Financing receivables 671,838 95,441 64,695 831,974
=================================================================================================
14. SEGMENT INFORMATION
Ricoh's operating segments are comprised of Imaging & Solutions, including
copiers and related supplies, communications and information systems, Industrial
Products, including thermal media and semiconductors, and Other, including
digital cameras.
Segment Profit (loss) is determined by subtracting cost of sales and selling,
general and administrative expenses from sales, and is used by Ricoh's
management in deciding how to allocate resources and in assessing performance.
Segment Profit (loss) excludes certain corporate expenses, such as costs related
to human resources, legal relations, investor relations, public relations,
corporate planning and environmental activities.
The following tables present certain information regarding Ricoh's operating
segments and by geographic areas for the nine and three months ended December
31, 2012 and 2013, respectively. Intersegment sales are made at arm's-length
prices. No single customer accounted for 10% or more of the total revenues for
the nine and three months ended December 31, 2012 and 2013.
31
(A) OPERATING SEGMENT INFORMATION
Millions of Yen
----------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------
Segment Sales:
Imaging & Solutions 1,207,241 1,413,041
Industrial Products 73,401 81,784
Other 109,657 119,721
Intersegment transaction (3,200) (3,025)
------------------------------------------------------------------------------------------
Total Segment Sales 1,387,099 1,611,521
==========================================================================================
Segment Profit (loss):
Imaging & Solutions 91,879 124,863
Industrial Products (445) 3,619
Other (2,368) (333)
------------------------------------------------------------------------------------------
Total Segment Profit (loss) 89,066 128,149
==========================================================================================
Reconciling Items:
Corporate expenses and Elimination (48,583) (49,948)
Interest and dividend income 1,916 1,548
Interest expense (5,047) (5,237)
Gain on sale of investment securities, net 24 2,324
Foreign currency exchange loss, net (1,301) (1,306)
Other, net 199 364
------------------------------------------------------------------------------------------
Income before Income Taxes and Equity in Earnings
of Affiliates 36,274 75,894
==========================================================================================
Millions of Yen
----------------------------------------
Three months ended Three months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------
Segment Sales:
Imaging & Solutions 409,604 489,824
Industrial Products 23,912 28,159
Other 37,264 38,955
Intersegment transaction (1,148) (994)
------------------------------------------------------------------------------------------
Total Segment Sales 469,632 555,944
==========================================================================================
Segment Profit (loss):
Imaging & Solutions 32,286 47,056
Industrial Products 213 1,421
Other (1,625) 165
------------------------------------------------------------------------------------------
Total Segment Profit (loss) 30,874 48,642
==========================================================================================
Reconciling Items:
Corporate expenses and Elimination (17,779) (16,301)
Interest and dividend income 380 418
Interest expense (1,492) (1,609)
Gain on sale of investment securities, net (1) 32
Foreign currency exchange gain (loss), net (341) 169
Other, net 143 160
------------------------------------------------------------------------------------------
Income before Income Taxes and Equity in Earnings
of Affiliates 11,784 31,511
==========================================================================================
Intersegment sales represent sales of Industrial Products segment to Imaging &
Solutions segment.
32
(B) GEOGRAPHIC INFORMATION
Sales which are attributed to countries based on location of customers are as
follows:
Millions of Yen
----------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------
Sales-
Japan 640,902 672,306
The Americas 353,827 433,658
Europe, Middle East and Africa 294,340 376,918
Other 98,030 128,639
------------------------------------------------------------------------------------------
Consolidated 1,387,099 1,611,521
==========================================================================================
Millions of Yen
----------------------------------------
Three months ended Three months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------
Sales-
Japan 210,140 228,502
The Americas 119,508 147,589
Europe, Middle East and Africa 107,177 136,342
Other 32,807 43,511
------------------------------------------------------------------------------------------
Consolidated 469,632 555,944
==========================================================================================
15. SUPPLEMENTARY INFORMATION TO THE STATEMENT OF OPERATIONS
The following amounts were charged to selling, general and administrative
expenses for the nine months and three months ended December 31, 2012 and 2013:
Millions of Yen
----------------------------------------
Nine months ended Nine months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------
Research and development costs 82,188 85,964
Advertising costs 9,254 9,431
Shipping and handling costs 17,695 19,588
==========================================================================================
Millions of Yen
----------------------------------------
Three months ended Three months ended
December 31, 2012 December 31, 2013
------------------------------------------------------------------------------------------
Research and development costs 27,418 28,326
Advertising costs 3,586 3,291
Shipping and handling costs 6,381 6,653
==========================================================================================
33