ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Yen (Millions) | ||||||
Assets | September 30, 2010 | March 31, 2010 | ||||
Current assets: | ||||||
Cash and cash equivalents | ¥ | 67,063 | 96,439 | |||
Short-term investments | 22,241 | 10,498 | ||||
Trade receivables, net | 25,060 | 15,930 | ||||
Inventories | 22,160 | 16,590 | ||||
Other current assets | 3,485 | 4,292 | ||||
Total current assets | 140,009 | 143,749 | ||||
Investment securities | 7,206 | 8,077 | ||||
Property, plant and equipment, net of accumulated | 31,972 | 32,881 | ||||
depreciation of 40,602 million yen and 40,390 million yen, | ||||||
as of September 30, 2010 and March 31, 2010, respectively | ||||||
Intangible assets, net of accumulated | 1,452 | 1,445 | ||||
amortization of 1,666 million yen and 2,403 million yen, | ||||||
as of September 30, 2010 and March 31, 2010, respectively | ||||||
Other assets | 2,371 | 2,511 | ||||
Total assets | ¥ | 183,010 | 188,663 |
The accompanying notes, together with the Notes to Consolidated Financial Statements included in
Advantest’s Annual Report on Form 20-F for the year ended March 31, 2010 are an integral part of
the consolidated financial statements.
1
ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Yen (Millions) | ||||||
Liabilities and Stockholders’ Equity | September 30, 2010 | March 31, 2010 | ||||
Current liabilities: | ||||||
Trade accounts payable | ¥ | 17,476 | 11,430 | |||
Accrued expenses | 6,270 | 4,894 | ||||
Accrued warranty expenses | 2,514 | 2,802 | ||||
Other current liabilities | 1,988 | 2,793 | ||||
Total current liabilities | 28,248 | 21,919 | ||||
Accrued pension and severance costs | 13,762 | 13,765 | ||||
Other liabilities | 2,780 | 2,737 | ||||
Total liabilities | 44,790 | 38,421 | ||||
Commitments and contingent liabilities | ||||||
Stockholders’ equity: | ||||||
Common stock, | ||||||
Authorized 440,000,000 shares; issued 199,566,770 shares | 32,363 | 32,363 | ||||
Capital surplus | 40,518 | 40,463 | ||||
Retained earnings | 183,306 | 181,606 | ||||
Accumulated other comprehensive income (loss) | (18,371 | ) | (14,859 | ) | ||
Treasury stock, 26,293,821 shares and 20,845,178 shares | ||||||
as of September 30, 2010 and March 31, 2010, respectively | (99,596 | ) | (89,331 | ) | ||
Total stockholders’ equity | 138,220 | 150,242 | ||||
Total liabilities and stockholders’ equity | ¥ | 183,010 | 188,663 |
The accompanying notes, together with the Notes to Consolidated Financial Statements included in
Advantest’s Annual Report on Form 20-F for the year ended March 31, 2010 are an integral part of
the consolidated financial statements.
2
ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Yen (Millions) | ||||||
Six months ended | Six months ended | |||||
September 30, 2009 | September 30, 2010 | |||||
Net sales | ¥ | 18,769 | 52,093 | |||
Cost of sales | 8,676 | 26,814 | ||||
Gross profit | 10,093 | 25,279 | ||||
Research and development expenses | 8,713 | 10,338 | ||||
Selling, general and administrative expenses | 9,363 | 10,201 | ||||
Operating income (loss) | (7,983 | ) | 4,740 | |||
Other income (expense): | ||||||
Interest and dividends income | 362 | 200 | ||||
Interest expense | (2 | ) | (2 | ) | ||
Other, net | 1,217 | (831 | ) | |||
Total other income (expense) | 1,577 | (633 | ) | |||
Income (loss) before income taxes and equity | ||||||
in earnings (loss) of affiliated company | (6,406 | ) | 4,107 | |||
Income taxes | 614 | 1,505 | ||||
Equity in earnings (loss) of affiliated company | (68 | ) | (9 | ) | ||
Net income (loss) | ¥ | (7,088 | ) | 2,593 | ||
Yen | ||||||
Six months ended | Six months ended | |||||
September 30, 2009 | September 30, 2010 | |||||
Net income (loss) per share: | ||||||
Basic | ¥ | (39.66 | ) | 14.59 | ||
Diluted | (39.66 | ) | 14.59 |
The accompanying notes, together with the Notes to Consolidated Financial Statements included in
Advantest’s Annual Report on Form 20-F for the year ended March 31, 2010 are an integral part of
the consolidated financial statements.
3
ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Yen (Millions) | ||||||
Three months ended | Three months ended | |||||
September 30, 2009 | September 30, 2010 | |||||
Net sales | ¥ | 11,156 | 28,558 | |||
Cost of sales | 5,315 | 14,873 | ||||
Gross profit | 5,841 | 13,685 | ||||
Research and development expenses | 4,302 | 5,397 | ||||
Selling, general and administrative expenses | 5,005 | 5,361 | ||||
Operating income (loss) | (3,466 | ) | 2,927 | |||
Other income (expense): | ||||||
Interest and dividends income | 122 | 83 | ||||
Interest expense | (1 | ) | (1 | ) | ||
Other, net | 672 | (531 | ) | |||
Total other income (expense) | 793 | (449 | ) | |||
Income (loss) before income taxes and equity | ||||||
in earnings (loss) of affiliated company | (2,673 | ) | 2,478 | |||
Income taxes | 606 | 674 | ||||
Equity in earnings (loss) of affiliated company | (22 | ) | 1 | |||
Net income (loss) | ¥ | (3,301 | ) | 1,805 | ||
Yen | ||||||
Three months ended | Three months ended | |||||
September 30, 2009 | September 30, 2010 | |||||
Net income (loss) per share: | ||||||
Basic | ¥ | (18.47 | ) | 10.22 | ||
Diluted | (18.47 | ) | 10.22 |
The accompanying notes, together with the Notes to Consolidated Financial Statements included in
Advantest’s Annual Report on Form 20-F for the year ended March 31, 2010 are an integral part of
the consolidated financial statements.
4
ADVANTEST CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Yen (Millions) | ||||||||
Six months ended | Six months ended | |||||||
September 30, 2009 | September 30, 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | ¥ | (7,088 | ) | 2,593 | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) | ||||||||
operating activities: | ||||||||
Depreciation and amortization | 1,953 | 2,018 | ||||||
Deferred income taxes | (418 | ) | 351 | |||||
Stock option compensation expense | 49 | 55 | ||||||
Changes in assets and liabilities: | ||||||||
Trade receivables | (147 | ) | (10,344 | ) | ||||
Inventories | (4,846 | ) | (5,937 | ) | ||||
Trade accounts payable | 2,189 | 7,218 | ||||||
Other accounts payable | (6,027 | ) | (321 | ) | ||||
Accrued expenses | (1,850 | ) | 1,485 | |||||
Accrued warranty expenses | (234 | ) | (278 | ) | ||||
Accrued pension and severance costs | 518 | 174 | ||||||
Other | 2,595 | 290 | ||||||
Net cash used in operating activities | (13,306 | ) | (2,696 | ) | ||||
Cash flows from investing activities: | ||||||||
(Increase) decrease in short-term investments | 14,424 | (12,309 | ) | |||||
Proceeds from sale of property, plant and equipment | 43 | 3 | ||||||
Purchases of property, plant and equipment | (1,192 | ) | (1,140 | ) | ||||
Purchases of intangible assets | (75 | ) | (127 | ) | ||||
Other | (23 | ) | 100 | |||||
Net cash provided by (used in) investing activities | 13,177 | (13,473 | ) | |||||
Cash flows from financing activities: | ||||||||
Purchases of treasury stock | (2 | ) | (10,266 | ) | ||||
Dividends paid | (901 | ) | (894 | ) | ||||
Other | (1 | ) | 0 | |||||
Net cash used in financing activities | (904 | ) | (11,160 | ) | ||||
Net effect of exchange rate changes on cash and cash equivalents | (1,696 | ) | (2,047 | ) | ||||
Net change in cash and cash equivalents | (2,729 | ) | (29,376 | ) | ||||
Cash and cash equivalents at beginning of period | 105,455 | 96,439 | ||||||
Cash and cash equivalents at end of period | ¥ | 102,726 | 67,063 |
The accompanying notes, together with the Notes to Consolidated Financial Statements included in
Advantest’s Annual Report on Form 20-F for the year ended March 31, 2010 are an integral part of
the consolidated financial statements.
5
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(1) Accounting Principles, Procedures and the Presentation of the Consolidated Financial Statements
(a) | Terminology, Form and Method of Preparation of the Consolidated Financial Statements |
Advantest Corporation (the “Company”) and its consolidated subsidiaries (collectively “Advantest”) prepares its consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). U.S. GAAP is codified in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities.
Advantest prepared the accompanying interim consolidated financial statements in conformity with U.S. GAAP, consistent in all material respects with those applied in Advantest’s Annual Report on Form 20-F for the year ended March 31, 2010.
The interim financial statements are unaudited, but reflect all normal adjustments that are, in the opinion of management, necessary to provide a fair presentation of results for the interim periods presented. This interim information should be read with the consolidated financial statements in Advantest’s Annual Report on Form 20-F for the year ended March 31, 2010.
(b) | Preparation of the Consolidated Financial Statements and Registration with the U.S. Securities and Exchange Commission |
The Company became listed on the New York Stock Exchange on September 17, 2001 (local time) by means of an issuance of American Depository Shares, and has been filing a Form 20-F (equivalent to the Annual Securities Report in Japan) with the U.S. Securities and Exchange Commission since the year ended March 31, 2002. Advantest prepares the consolidated financial statements in its Form 20-F in accordance with U.S. GAAP.
(c) | Significant differences from the preparation of financial statements under Japanese GAAP |
Of the accounting principles, procedures and method of presentation adopted by Advantest, the following is a brief summary description of the significant differences from the preparation of financial statements using the accounting principles, procedures and methods of presentation under Japanese GAAP, as required under the Financial Instruments and Exchange Law of Japan:
(i) Allowance for compensated absences
An allowance is provided for the right of employees to receive compensated absences in the future.
(ii) Accrued pension and severance costs
The funded status, which is the difference between the fair value of plan assets and the projected benefit obligation, of pension plans is recognized in the consolidated balance sheets.
(iii) Goodwill
Goodwill is not amortized, but instead is tested for impairment at least annually.
6
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(2) Description of Business and Summary of Significant Accounting Policies and Practices
(a) | Description of Business |
Advantest manufactures and sells semiconductor and component test system products and mechatronics-related products such as test handlers and device interfaces. Advantest also engages in research and development activities and provides maintenance and support services associated with these products.
Description of the business by segment is as follows:
The semiconductor and component test system segment provides customers with test system products for the semiconductor industry and the electronic parts industry. Product lines provided in the semiconductor and component test system segment include test systems for memory semiconductors for memory semiconductor devices and test systems for SoC (“System-on-a-Chip”) semiconductors for non memory semiconductor devices.
The mechatronics system segment provides product lines such as test handlers, mechatronic-applied products for handling semiconductor devices, device interfaces that serve as interfaces with the devices that are measured and operations related to nano-technology products.
The services, support and others segment consists of comprehensive customer solutions provided in connection with the above segments, support services, equipment lease business and others.
(b) | Accounting Changes and Accounting Standards Not Yet Adopted |
In October 2009, the FASB amended the accounting guidance for revenue recognition under multiple-deliverable arrangements. The guidance modifies the criteria for separating deliverables and allocating consideration in multiple-deliverable arrangements. The allocation of revenue is based on estimated selling price if neither vendor-specific objective evidence nor third-party evidence of selling price is available. The guidance is effective for fiscal years beginning on or after June 15, 2010, with early adoption permitted. The guidance is required to be adopted by Advantest in the first quarter beginning April 1, 2011. Advantest is currently evaluating the timing and the effect that this adoption will have on its consolidated results of operations and financial condition.
In October 2009, the FASB amended accounting guidance for software revenue recognition. This guidance changes the accounting model for revenue arrangements that include both tangible products and software elements. It provides guidance on how to determine which software, if any, relating to the tangible product would be excluded from the scope of the software revenue guidance. The guidance is effective for fiscal years beginning on or after June 15, 2010, with early adoption permitted. The guidance is required to be adopted by Advantest in the first quarter beginning April 1, 2011. Advantest is currently evaluating the timing and the effect that this adoption will have on its consolidated results of operations and financial condition.
7
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(c) | Reclassification |
Certain reclassifications have been made to the prior year’s consolidated financial statement to conform with the presentation used for the second quarter ended September 30, 2010.
(3) Short-term Investments
Short-term investments include Japanese money trusts with fixed maturities of three months, which are carried at cost, based on the characteristics of its fixed maturities, restriction of early redemption and non negotiability. The Japanese money trusts amounted to ¥12,000 million and ¥9,000 million at September 30, 2010 and March 31, 2010, respectively.
(4) Inventories
Inventories at September 30, 2010 and March 31, 2010 are composed of the following:
Yen (Millions) | ||||||||
September 30, 2010 | March 31, 2010 | |||||||
Finished goods | ¥ | 6,827 | 5,965 | |||||
Work in process | 10,726 | 7,482 | ||||||
Raw materials and supplies | 4,607 | 3,143 | ||||||
¥ | 22,160 | 16,590 |
8
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(5) Investment Securities
Debt and marketable equity securities are classified as available-for-sale securities. The acquisition cost, gross unrealized gains, gross unrealized losses and fair value at September 30, 2010 and March 31, 2010 were as follows:
Yen (Millions) | ||||||||||||
Noncurrent: | September 30, 2010 | |||||||||||
Available-for-sale: | Equity securities | Debt securities | Total | |||||||||
Acquisition cost | ¥ | 2,453 | 368 | 2,821 | ||||||||
Gross unrealized gains | 1,090 | - | 1,090 | |||||||||
Gross unrealized losses | 94 | - | 94 | |||||||||
Fair value | ¥ | 3,449 | 368 | 3,817 |
Yen (Millions) | ||||||||||||
Noncurrent: | March 31, 2010 | |||||||||||
Available-for-sale: | Equity securities | Debt securities | Total | |||||||||
Acquisition cost | ¥ | 2,833 | 411 | 3,244 | ||||||||
Gross unrealized gains | 1,468 | - | 1,468 | |||||||||
Gross unrealized losses | 69 | - | 69 | |||||||||
Fair value | ¥ | 4,232 | 411 | 4,643 |
Equity securities consist primarily of stocks issues by Japanese listed companies. Debt securities are redeemable at the option of Advantest, and have no contractual maturity.
No proceeds from the sale of available-for-sale securities and no gross gains and losses were realized on the sale of available-for-sale securities for the six months and three months ended September 30, 2009. Proceeds from the sale of available-for-sale securities and gross realized gains on the sale of available-for-sale securities for the six months and three months ended September 30, 2010 were insignificant. No gross losses were realized on the sale of available-for-sale securities.
Net realized gains and losses of the sale of available-for-sale securities are based on the averaged cost method and are included in “other income (expense)” in the consolidated statements of operations, and “other” in net cash provided by (used in) operating activities in the consolidated statements of cash flows.
There were no impairment losses on available-for-sale securities, which were not considered other-than-temporarily impaired, for the six months and three months ended September 30, 2009. For the six months and three months ended September 30, 2010, Advantest recognized impairment losses of ¥377 million and ¥371 million on available-for-sale securities, which were considered other-than-temporarily impaired and wrote them down to the fair value.
9
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Gross unrealized losses on available-for-sale securities and the fair value of the related securities, aggregated by length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2010 and March 31, 2010, were as follows:
Yen (Millions) | ||||||||||||||||
September 30, 2010 | ||||||||||||||||
Less than 12 months | 12 months or longer | |||||||||||||||
Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | |||||||||||||
Noncurrent: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Equity securities | ¥ | 482 | 77 | 164 | 17 |
Yen (Millions) | ||||||||||||||||
March 31, 2010 | ||||||||||||||||
Less than 12 months | 12 months or longer | |||||||||||||||
Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | |||||||||||||
Noncurrent: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Equity securities | ¥ | 740 | 69 | 2 | 0 |
Advantest maintains non-marketable equity securities, which are recorded at cost. The carrying amounts of non-marketable equity securities were ¥3,389 million and ¥3,434 million at September 30, 2010 and March 31, 2010, respectively. For non-marketable equity securities which Advantest identified events or changes in circumstances that might have had significant adverse effect on the fair value of the investments, the fair value approximates the carrying value. Advantest has not estimated the fair value of other non-marketable equity securities of ¥1,433 million and ¥1,417 million at September 30, 2010 and March 31, 2010, respectively, since it is not practicable to estimate the fair value of the investments. It is because of the lack of readily determinable fair values and difficulty in estimating fair value without incurring excessive cost.
(6) Derivative Financial Instruments
Derivative
Advantest uses foreign exchange forward contracts and currency options to manage currency exposure, resulting from changes in foreign currency exchange rates, on trade receivables. However, these contracts do not qualify for hedge accounting since they do not meet the hedging criteria specified in U.S. GAAP.
Foreign exchange contracts generally have terms of several months. These contracts are used to reduce Advantest’s risk associated with exchange rate fluctuations, as gains and losses on these contracts are intended to offset exchange losses and gains on underlying exposures. Changes in fair value of foreign exchange contracts are recognized in earnings under the caption of other income (expense).
10
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Advantest does not, as a matter of policy, enter into derivative transactions for the purpose of speculation.
Advantest had foreign exchange contracts to exchange currencies among Japanese yen, US dollar and Euro at September 30, 2010 and March 31, 2010. The notional amounts of these contracts at September 30, 2010 and March 31, 2010 were as follows:
Yen (Millions) | ||||||||
September 30, 2010 | March 31, 2010 | |||||||
Foreign exchange contracts | ¥ | 2,892 | 3,041 |
The fair value of derivative instruments not designated as hedging instruments under U.S. GAAP at September 30, 2010 and March 31, 2010 were as follows:
Yen (Millions) | ||||||||||||||||
September 30, 2010 | March 31, 2010 | |||||||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||||||
Assets: | ||||||||||||||||
Foreign exchange contracts | Other current assets | ¥ | 25 | Other current assets | ¥ | 0 | ||||||||||
Liabilities: | ||||||||||||||||
Foreign exchange contracts | Other current liabilities | ¥ | 6 | Other current liabilities | ¥ | 29 |
The effect of derivative instruments not designated as hedging instruments under U.S. GAAP on consolidated statements of operations for the six months and three months ended September 30, 2009, 2010 was as follows:
Yen (Millions) | ||||||||||||
Location of gain (loss) recognized in income on derivatives | Amount of gain (loss) recognized in income on derivatives | |||||||||||
Six months ended September 30, 2009 | Six months ended September 30, 2010 | |||||||||||
Foreign exchange contracts | Other income (expense) | ¥ | 175 | 164 |
11
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Yen (Millions) | ||||||||||||
Location of gain (loss) recognized in income on derivatives | Amount of gain (loss) recognized in income on derivatives | |||||||||||
Three months ended September 30, 2009 | Three months ended September 30, 2010 | |||||||||||
Foreign exchange contracts | Other income (expense) | ¥ | 37 | 64 |
Concentration of credit risk
Derivative financial instruments contain an element of risk in the event the counterparties are unable to meet the terms of the agreements. However, Advantest minimizes risk exposure by limiting the counterparties to major international banks and financial institutions meeting established credit guidelines. Management of Advantest does not expect any counterparty to default on its obligations and, therefore, does not expect to incur any losses due to counterparty default on its obligations.
Advantest generally does not require or place collateral for these derivative financial instruments.
(7) Fair Value Measurement
Disclosure about the fair value of Financial Instruments
The following table presents the carrying amounts and estimated fair values of Advantest’s financial instruments at September 30, 2010 and March 31, 2010, except for cash and cash equivalents, short-term investments, trade receivables, other current assets, trade accounts payable and accrued expenses for which fair value approximate their carrying amounts. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. 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.
Yen (Millions) | ||||||||||||||||
September 30, 2010 | March 31, 2010 | |||||||||||||||
Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
Financial assets: | ||||||||||||||||
Investment securities | ||||||||||||||||
Available-for-sale securities | ¥ | 3,817 | 3,817 | ¥ | 4,643 | 4,643 | ||||||||||
Foreign exchange contracts | 25 | 25 | 0 | 0 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Foreign exchange contracts | 6 | 6 | 29 | 29 |
The carrying amounts of available-for-sale securities are included in the consolidated balance sheets under investment securities. The carrying amounts of foreign exchange contracts are included in other current assets and other current liabilities.
12
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following methods and assumptions are used to estimate the fair value of each class of financial instruments:
Cash and cash equivalents, short-term investments, trade receivables, other current assets, trade accounts payable and accrued expenses: The carrying amounts approximate fair value because of the short maturity of these instruments.
Available-for-sale securities: The fair values of available-for-sale equity securities are based on quoted market prices at the reporting date for those investments. The fair values of available-for-sale debt securities are based on unobservable inputs as the market for the assets was not active at the measurement date.
Foreign exchange contracts: The fair value of foreign exchange contracts are estimated by obtaining quotes from financial institutions.
Fair Value Hierarchy
US GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally the inputs to valuation techniques used to measure fair value are prioritized into the following three levels:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 - Observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly.
Level 3 - Unobservable inputs for the asset or liability.
Assets / Liabilities Measured at Fair Value on a Recurring Basis
As of September 30, 2010 and March 31, 2010, carrying amount of financial assets and liabilities that were measured at fair value on a recurring basis by level are as follows:
13
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Yen (Millions) | ||||||||||||||||
Fair Value Measurements at September 30, 2010 | ||||||||||||||||
Quoted Prices in Active Markets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Financial Assets | ||||||||||||||||
Available-for-sale equity securities | 3,449 | 3,449 | - | - | ||||||||||||
Available-for-sale debt securities | 368 | - | - | 368 | ||||||||||||
Foreign exchange contracts | 25 | - | 25 | - | ||||||||||||
Total assets measured at fair value | 3,842 | 3,449 | 25 | 368 | ||||||||||||
Financial Liabilities | ||||||||||||||||
Foreign exchange contracts | 6 | - | 6 | - | ||||||||||||
Total liabilities measured at fair value | 6 | - | 6 | - |
Yen (Millions) | ||||||||||||||||
Fair Value Measurements at March 31, 2010 | ||||||||||||||||
Quoted Prices in Active Markets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Financial Assets | ||||||||||||||||
Available-for-sale equity securities | 4,232 | 4,232 | - | - | ||||||||||||
Available-for-sale debt securities | 411 | - | - | 411 | ||||||||||||
Foreign exchange contracts | 0 | - | 0 | - | ||||||||||||
Total assets measured at fair value | 4,643 | 4,232 | 0 | 411 | ||||||||||||
Financial Liabilities | ||||||||||||||||
Foreign exchange contracts | 29 | - | 29 | - | ||||||||||||
Total liabilities measured at fair value | 29 | - | 29 | - |
14
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The table does not include assets and liabilities which are measured at historical cost or any basis other than fair value. Advantest’s financial assets and liabilities measured at fair value consist of available-for-sale debt and equity securities and foreign exchange contracts. Adjustments to fair value of available-for-sale debt and equity securities are recorded as an increase or decrease, net of tax, in accumulated other comprehensive income (loss) except where losses are considered to be other than temporary, in which case the losses are recorded in impairment losses on investment securities. Changes in fair value of foreign exchange contracts are recognized in earnings under the caption of other income (expense).
Changes in the Level 3 financial assets and liabilities measured on a recurring basis for the six months and three months ended September 30, 2010 are as follows:
Yen (Millions) | ||||||||
Six months ended September 30, 2010 | ||||||||
Debt Securities | Total | |||||||
Balance at beginning of period | ¥ | 411 | 411 | |||||
Other comprehensive income (loss) | (43 | ) | (43 | ) | ||||
Balance at end of period | ¥ | 368 | 368 |
Yen (Millions) | ||||||||
Three months ended September 30, 2010 | ||||||||
Debt Securities | Total | |||||||
Balance at beginning of period | ¥ | 358 | 358 | |||||
Other comprehensive income (loss) | 10 | 10 | ||||||
Balance at end of period | ¥ | 368 | 368 |
15
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Assets / Liabilities Measured at Fair Value on a Nonrecurring Basis
As of September 30, 2010 and March 31, 2010, carrying amount of financial assets and liabilities, which was measured at fair value on a nonrecurring basis by level for the six months ended September 30, 2010 and during the year ended March 31, 2010, is as follows:
Yen (Millions) | ||||||||||||||||||||
Fair Value Measurements at September 30, 2010 | ||||||||||||||||||||
Quoted Prices in Active Markets | Significant Other Observable Inputs | Significant Unobservable Inputs | Total gains (losses) for the six months ended | |||||||||||||||||
Financial Assets | Total | (Level 1) | (Level 2) | (Level 3) | September 30, 2010 | |||||||||||||||
Non-marketable equity securities | 56 | - | - | 56 | (43 | ) | ||||||||||||||
Total gains (losses) for assets held as of September 30, 2010 | (43 | ) |
Yen (Millions) | ||||||||||||||||||||
Fair Value Measurements at March 31, 2010 | ||||||||||||||||||||
Quoted Prices in Active Markets | Significant Other Observable Inputs | Significant Unobservable Inputs | Total gains (losses) for the year ended March | |||||||||||||||||
Financial Assets | Total | (Level 1) | (Level 2) | (Level 3) | 31, 2010 | |||||||||||||||
Non-marketable equity securities | 117 | - | - | 117 | (259 | ) | ||||||||||||||
Total gains (losses) for assets held as of March 31, 2010 | (259 | ) |
The fair value of non-marketable equity securities is based on quoted prices in markets that are not active at the reporting date, or present value of expected future cash flows for those investments.
16
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(8) Income Taxes
As of September 30, 2009, the estimated annual effective tax rate for FY2009 differs from the 40.5 percent statutory income tax rate primarily due to the estimated net increases in valuation allowance for deferred tax assets and the effects of foreign tax rates.
As of September 30, 2010, the estimated annual effective tax rate for FY2010 differs from the 40.4 percent statutory income tax rate primarily due to effects of separate company income tax reporting positions and related impacts of valuation allowance on deferred tax assets, and effects of foreign income tax rates.
(9) Other Comprehensive Income (Loss)
The components of other comprehensive income (loss), net of tax, are as follows:
Yen (Millions) | ||||||||
Six months ended September 30, 2009 | Six months ended September 30, 2010 | |||||||
Net income (loss) | ¥ | (7,088 | ) | 2,593 | ||||
Other comprehensive income (loss), net of tax: | ||||||||
Foreign currency translation adjustments | (3,274 | ) | (3,412 | ) | ||||
Net unrealized gains (losses) on investment securities: | ||||||||
Net unrealized gains (losses) arising during the period | 766 | (462 | ) | |||||
Less reclassification adjustments for net gains (losses) realized in earnings | - | 222 | ||||||
Net unrealized gains (losses) | 766 | (240 | ) | |||||
Pension related adjustment | 148 | 140 | ||||||
Total comprehensive income (loss) | ¥ | (9,448 | ) | (919 | ) |
17
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Yen (Millions) | ||||||||
Three months ended September 30, 2009 | Three months ended September 30, 2010 | |||||||
Net income (loss) | ¥ | (3,301 | ) | 1,805 | ||||
Other comprehensive income (loss), net of tax: | ||||||||
Foreign currency translation adjustments | (2,696 | ) | (919 | ) | ||||
Net unrealized gains (losses) on investment securities: | ||||||||
Net unrealized gains (losses) arising during the period | 328 | (210 | ) | |||||
Less reclassification adjustments for net gains (losses) realized in earnings | - | 218 | ||||||
Net unrealized gains (losses) | 328 | 8 | ||||||
Pension related adjustment | 90 | 70 | ||||||
Total comprehensive income (loss) | ¥ | (5,579 | ) | 964 |
(10) Stock-Based Compensation
In July 2010, stock options were issued to directors, executive officers and corporate auditors of the Company under a stock option plan approved by the Board of Directors. The number of granted shares totaled 308,000. Options were granted with an exercise price of ¥2,089 per share that is equal to the higher of (1) 1.05 times the average price of the Company’s common shares of the preceding month on the date of grant and (2) the closing price of the Company’s common shares traded on the Tokyo Stock Exchange on the date of grant. The options have an exercise period of 4 years and are exercisable from April 1, 2011.
Stock based compensation expense recognized were ¥49 million and ¥55 million for the six months ended September 30, 2009 and 2010, and ¥47 million and ¥55 million for the three months ended September 30, 2009 and 2010, which were included in selling, general and administrative expenses. The tax benefit were ¥17 million and ¥20 million for the six months ended September 30, 2009 and 2010, and ¥17 million and ¥20 million for the three months ended September 30, 2009 and 2010.
As of September 30, 2010 and March 31, 2010, a valuation allowance was recorded against related deferred tax asset.
The weighted average fair value per share for stock option that was granted during the six months ended September 30, 2009 and 2010 were ¥409 and ¥535.
18
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(11) Accrued Pension and Severance Costs
The components of net periodic benefit cost recognized are as follows:
Yen (Millions) | ||||||||
Six months ended September 30, 2009 | Six months ended September 30, 2010 | |||||||
Service cost | ¥ | 658 | 687 | |||||
Interest cost | 373 | 362 | ||||||
Expected return on plan assets | (140 | ) | (243 | ) | ||||
Amortization of unrecognized: | ||||||||
Net actuarial (gain) or loss | 280 | 244 | ||||||
Prior service (benefit) cost | (88 | ) | (88 | ) | ||||
Net periodic benefit cost | ¥ | 1,083 | 962 |
Yen (Millions) | ||||||||
Three months ended September 30, 2009 | Three months ended September 30, 2010 | |||||||
Service cost | ¥ | 330 | 348 | |||||
Interest cost | 187 | 181 | ||||||
Expected return on plan assets | (70 | ) | (122 | ) | ||||
Amortization of unrecognized: | ||||||||
Net actuarial (gain) or loss | 140 | 122 | ||||||
Prior service (benefit) cost | (44 | ) | (44 | ) | ||||
Net periodic benefit cost | ¥ | 543 | 485 |
(12) Dividends and Other Significant Changes to Stockholders’ Equity
Based on the resolution for the payment of year-end dividends at the Board of Directors meeting held on May 25, 2010, Advantest paid cash dividends totaling ¥894 million, or ¥5 per share of common stock on June 2, 2010 to stockholders of record on March 31, 2010.
Based on the resolution for the payment of interim dividends at the Board of Directors meeting held on October 28, 2010, Advantest will pay cash dividends totaling ¥866 million, or ¥5 per share of common stock on December 1, 2010 to stockholders of record on September 30, 2010.
Treasury stock increased by ¥10,265 million compared to March 31, 2010. This amount was primarily attributable to purchases of treasury stock (¥10,264 million; 5,447,922 shares) from dissenting shareholders in accordance with Article 797, Section 1 of Japanese Corporate Law.
19
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(13) Accrued Warranty Expenses
Advantest’s products are generally subject to warranty, and Advantest provides an allowance for such estimated costs when product revenue is recognized. To provide for future repairs during warranty periods, estimated repair expenses over the warranty period are accrued based on the historical ratio of actual repair expenses to corresponding sales, and any facts and circumstances that occurred.
Changes in accrued warranty expenses for the six months ended September 30, 2009 and 2010 were summarized as follows:
Yen (Millions) | ||||||||
Six months ended September 30, 2009 | Six months ended September 30, 2010 | |||||||
Balance at beginning of period | ¥ | 2,811 | 2,802 | |||||
Addition | 1,140 | 1,051 | ||||||
Utilization | (1,374 | ) | (1,329 | ) | ||||
Translation adjustments | 4 | (10 | ) | |||||
Balance at end of period | ¥ | 2,581 | 2,514 |
(14) Other income (expense)
Other income (expense) includes exchange gains of ¥1,033 million and ¥608 million for the six months and the three months ended September 30, 2009, respectively.
Other income (expense) includes impairment losses on investment securities of ¥420 million and ¥413 million, and foreign exchange losses of ¥470 million and ¥163 million for the six months and the three months ended September 30, 2010, respectively.
20
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(15) Operating Segment and Geographic Information
Advantest manufactures and sells semiconductor and component test system products and mechatronics-related products such as test handlers and device interfaces. Advantest also engages in research and development activities and provides maintenance and support services associated with these products. Advantest’s organizational structure consists of three reportable operating segments, which are the design, manufacturing, and sale of semiconductor and component test systems, mechatronics systems and services, support and others. These reportable operating segments are determined based on the nature of the products and the markets. Segment information is prepared on the same basis that Advantest’s management reviews financial information for operational decision making purposes.
Reportable operating segment information for the six months and three months ended September 30, 2009 and 2010 are as follows:
Yen (Millions) | ||||||||||||||||||||
Six months ended September 30, 2009 | ||||||||||||||||||||
Semiconductor and Component Test System Business | Mechatronics System Business | Services, Support and Others | Elimination and Corporate | Total | ||||||||||||||||
Net sales to unaffiliated customers | ¥ | 10,396 | 3,478 | 4,895 | - | 18,769 | ||||||||||||||
Inter-segment sales | 832 | - | - | (832 | ) | - | ||||||||||||||
Net sales | 11,228 | 3,478 | 4,895 | (832 | ) | 18,769 | ||||||||||||||
Operating income (loss) before stock option compensation expense | (5,020 | ) | (1,319 | ) | 679 | (2,274 | ) | (7,934 | ) | |||||||||||
Adjustment: | ||||||||||||||||||||
Stock option compensation expense | 49 | |||||||||||||||||||
Operating income (loss) | ¥ | (7,983 | ) |
Yen (Millions) | ||||||||||||||||||||
Six months ended September 30, 2010 | ||||||||||||||||||||
Semiconductor and Component Test System Business | Mechatronics System Business | Services, Support and Others | Elimination and Corporate | Total | ||||||||||||||||
Net sales to unaffiliated customers | ¥ | 35,216 | 9,686 | 7,191 | - | 52,093 | ||||||||||||||
Inter-segment sales | 771 | 4 | - | (775 | ) | - | ||||||||||||||
Net sales | 35,987 | 9,690 | 7,191 | (775 | ) | 52,093 | ||||||||||||||
Operating income (loss) before stock option compensation expense | 5,586 | 225 | 1,346 | (2,362 | ) | 4,795 | ||||||||||||||
Adjustment: | ||||||||||||||||||||
Stock option compensation expense | 55 | |||||||||||||||||||
Operating income (loss) | ¥ | 4,740 |
21
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Yen (Millions) | ||||||||||||||||||||
Three months ended September 30, 2009 | ||||||||||||||||||||
Semiconductor and Component Test System Business | Mechatronics System Business | Services, Support and Others | Elimination and Corporate | Total | ||||||||||||||||
Net sales to unaffiliated customers | ¥ | 6,349 | 2,122 | 2,685 | - | 11,156 | ||||||||||||||
Inter-segment sales | 828 | - | - | (828 | ) | - | ||||||||||||||
Net sales | 7,177 | 2,122 | 2,685 | (828 | ) | 11,156 | ||||||||||||||
Operating income (loss) before stock option compensation expense | (2,198 | ) | (368 | ) | 408 | (1,261 | ) | (3,419 | ) | |||||||||||
Adjustment: | ||||||||||||||||||||
Stock option compensation expense | 47 | |||||||||||||||||||
Operating income (loss) | ¥ | (3,466 | ) |
Yen (Millions) | ||||||||||||||||||||
Three months ended September 30, 2010 | ||||||||||||||||||||
Semiconductor and Component Test System Business | Mechatronics System Business | Services, Support and Others | Elimination and Corporate | Total | ||||||||||||||||
Net sales to unaffiliated customers | ¥ | 19,572 | 5,661 | 3,325 | - | 28,558 | ||||||||||||||
Inter-segment sales | 647 | 1 | - | (648 | ) | - | ||||||||||||||
Net sales | 20,219 | 5,662 | 3,325 | (648 | ) | 28,558 | ||||||||||||||
Operating income (loss) before stock option compensation expense | 3,501 | 243 | 662 | (1,424 | ) | 2,982 | ||||||||||||||
Adjustment: | ||||||||||||||||||||
Stock option compensation expense | 55 | |||||||||||||||||||
Operating income (loss) | ¥ | 2,927 |
Adjustments to operating income (loss) in Corporate principally represent corporate general and administrative expenses and research and development expenses related to fundamental research activities that are not allocated to operating segments.
Advantest uses the operating income (loss) before stock option compensation expense for management’s analysis of business segment results.
22
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Supplemental Segment Information
The following information is provided as supplemental information in consideration of the disclosure requirements under the Financial Instruments and Exchange Law of Japan.
(Consolidated Net Sales by Geographical Areas)
Net sales to unaffiliated customers for the three months and six months ended September 30, 2009 are as follows:
Yen (Millions) | ||||
Three months ended | ||||
September 30, 2009 | ||||
Japan | ¥ | 2,694 | ||
Americas | 1,404 | |||
Europe | 494 | |||
Asia | 6,564 | |||
Total | ¥ | 11,156 |
Yen (Millions) | ||||
Six months ended | ||||
September 30, 2009 | ||||
Japan | ¥ | 4,670 | ||
Americas | 2,542 | |||
Europe | 1,546 | |||
Asia | 10,011 | |||
Total | ¥ | 18,769 |
(Notes) | 1. | Net sales to unaffiliated customers are based on the customer’s location. |
2. | Each of the segments includes primarily the following countries or regions: |
(1) Americas | U.S.A., Republic of Costa Rica, etc. |
(2) Europe | Israel, Germany, etc. |
(3) Asia | South Korea, China, Taiwan, etc. |
23
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Geographic Segment Information / Based on Location of the Company and its Affiliates)
The following table sets forth the net sales and operating income (loss) for the three months and six months ended September 30, 2009, classified by location of office from which product was shipped.
Yen (Millions) | ||||||||||||||||||||||||
Three months ended September 30, 2009 | ||||||||||||||||||||||||
Japan | Americas | Europe | Asia | Elimination and Corporate | Total | |||||||||||||||||||
Net sales to unaffiliated customers | ¥ | 4,845 | 4,010 | 596 | 1,705 | - | 11,156 | |||||||||||||||||
Inter-segment sales | 7,376 | 898 | 335 | 879 | (9,488 | ) | - | |||||||||||||||||
Net sales | 12,221 | 4,908 | 931 | 2,584 | (9,488 | ) | 11,156 | |||||||||||||||||
Operating income (loss) | ¥ | (2,855 | ) | 259 | 209 | 540 | (1,619 | ) | (3,466 | ) |
Yen (Millions) | ||||||||||||||||||||||||
Six months ended September 30, 2009 | ||||||||||||||||||||||||
Japan | Americas | Europe | Asia | Elimination and Corporate | Total | |||||||||||||||||||
Net sales to unaffiliated customers | ¥ | 8,304 | 6,410 | 1,185 | 2,870 | - | 18,769 | |||||||||||||||||
Inter-segment sales | 10,072 | 1,700 | 675 | 1,696 | (14,143 | ) | - | |||||||||||||||||
Net sales | 18,376 | 8,110 | 1,860 | 4,566 | (14,143 | ) | 18,769 | |||||||||||||||||
Operating income (loss) | ¥ | (7,297 | ) | 441 | 476 | 1,017 | (2,620 | ) | (7,983 | ) |
(Notes) | 1. Geographical segments are organized by physical proximity of countries or regions. |
2. Each of the geographical segments includes primarily the following countries or regions: |
(1) Americas | U.S.A., etc. |
(2) Europe | Germany, etc. |
(3) Asia | South Korea, Taiwan, Singapore, etc. |
24
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(16) Per Share Data
The following table sets forth the computation of basic and diluted net income (loss) per share for the six months and three months ended September 30, 2009 and 2010:
Yen (Millions) except share and per share data | ||||||||
Six months ended September 30, 2009 | Six months ended September 30, 2010 | |||||||
Numerator: | ||||||||
Net income (loss) | ¥ | (7,088 | ) | 2,593 | ||||
Denominator: | ||||||||
Basic weighted average shares of common stock outstanding | 178,722,847 | 177,679,225 | ||||||
Dilutive effect of exercise of stock options | - | 27,207 | ||||||
Diluted weighted average shares of common stock outstanding | 178,722,847 | 177,706,432 | ||||||
Basic net income (loss) per share | ¥ | (39.66 | ) | 14.59 | ||||
Diluted net income (loss) per share | ¥ | (39.66 | ) | 14.59 |
Yen (Millions) except share and per share data | ||||||||
Three months ended September 30, 2009 | Three months ended September 30, 2010 | |||||||
Numerator: | ||||||||
Net income (loss) | ¥ | (3,301 | ) | 1,805 | ||||
Denominator: | ||||||||
Basic weighted average shares of common stock outstanding | 178,722,633 | 176,648,360 | ||||||
Dilutive effect of exercise of stock options | - | - | ||||||
Diluted weighted average shares of common stock outstanding | 178,722,633 | 176,648,360 | ||||||
Basic net income (loss) per share | ¥ | (18.47 | ) | 10.22 | ||||
Diluted net income (loss) per share | ¥ | (18.47 | ) | 10.22 |
25
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
At September 30, 2009 and 2010, Advantest had outstanding stock options into 4,180,980 and 2,915,000 shares of common stock, respectively, which were anti-dilutive and excluded from the calculation of diluted net income per share but could potentially dilute net income per share in future periods.
26