ADVANTEST CORPORATION | |||||||||||
AND SUBSIDIARIES |
Consolidated Balance Sheets (Unaudited) |
Yen (Millions) | ||||||||
Assets | March 31, 2012 | June 30, 2012 | ||||||
Current assets: | ||||||||
Cash and cash equivalents | ¥ | 58,218 | 49,994 | |||||
Trade receivables, net | 24,119 | 24,541 | ||||||
Inventories | 29,836 | 33,217 | ||||||
Other current assets | 6,522 | 7,183 | ||||||
Total current assets | 118,695 | 114,935 | ||||||
Investment securities | 5,929 | 4,988 | ||||||
Property, plant and equipment, net of accumulated | 34,206 | 35,365 | ||||||
depreciation of 39,386 million yen and 39,790 million yen, | ||||||||
as of March 31, 2012 and June 30, 2012, respectively | ||||||||
Intangible assets, net of accumulated | 15,794 | 14,819 | ||||||
amortization of 3,380 million yen and 3,829 million yen, | ||||||||
as of March 31, 2012 and June 30 2012, respectively | ||||||||
Goodwill | 36,496 | 35,240 | ||||||
Other assets | 8,106 | 7,775 | ||||||
Total assets | ¥ | 219,226 | 213,122 |
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, 2012 are an integral part of the consolidated financial statements. |
- 1 -
ADVANTEST CORPORATION |
AND SUBSIDIARIES |
Consolidated Balance Sheets (Unaudited) |
Yen (Millions) | ||||||||
Liabilities and Stockholders’ Equity | March 31, 2012 | June 30, 2012 | ||||||
Current liabilities: | ||||||||
Trade accounts payable | ¥ | 15,659 | 18,725 | |||||
Short term debt | 25,000 | - | ||||||
Accrued expenses | 12,068 | 8,577 | ||||||
Accrued warranty expenses | 2,129 | 2,070 | ||||||
Customer prepayments | 2,228 | 2,195 | ||||||
Other current liabilities | 3,288 | 4,352 | ||||||
Total current liabilities | 60,372 | 35,919 | ||||||
Corporate bonds | - | 25,000 | ||||||
Accrued pension and severance costs | 23,444 | 23,117 | ||||||
Other liabilities | 3,858 | 3,378 | ||||||
Total liabilities | 87,674 | 87,414 | ||||||
Commitments and contingent liabilities | ||||||||
Stockholders’ equity: | ||||||||
Common stock, | ||||||||
Authorized 440,000,000 shares; issued 199,566,770 shares | 32,363 | 32,363 | ||||||
Capital surplus | 42,280 | 42,274 | ||||||
Retained earnings | 179,081 | 177,751 | ||||||
Accumulated other comprehensive income (loss) | (22,574 | ) | (27,117 | ) | ||||
Treasury stock, 26,295,390 shares and 26,286,253 shares | ||||||||
as of March 31, 2012 and June 30, 2012, respectively | (99,598 | ) | (99,563 | ) | ||||
Total stockholders’ equity | 131,552 | 125,708 | ||||||
Total liabilities and stockholders’ equity | ¥ | 219,226 | 213,122 |
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, 2012 are an integral part of the consolidated financial statements. |
- 2 -
ADVANTEST CORPORATION | ||||||||||
AND SUBSIDIARIES |
Consolidated Statements of Operations (Unaudited) |
Yen (Millions) | ||||||||
Three months ended | Three months ended | |||||||
June 30, 2011 | June 30, 2012 | |||||||
Net sales | ¥ | 26,848 | 33,355 | |||||
Cost of sales | 13,766 | 15,797 | ||||||
Gross profit | 13,082 | 17,558 | ||||||
Research and development expenses | 5,786 | 8,054 | ||||||
Selling, general and administrative expenses | 6,512 | 8,748 | ||||||
Operating income | 784 | 756 | ||||||
Other income (expense): | ||||||||
Interest and dividend income | 117 | 68 | ||||||
Interest expense | (1 | ) | (30 | ) | ||||
Other, net | (522 | ) | 461 | |||||
Total other income (expense) | (406 | ) | 499 | |||||
Income before income taxes and equity | ||||||||
in earnings (loss) of affiliated company | 378 | 1,255 | ||||||
Income tax expense | 8 | 853 | ||||||
Equity in earnings (loss) of affiliated company | (24 | ) | 21 | |||||
Net income | ¥ | 346 | 423 | |||||
Yen | ||||||||
Three months ended | Three months ended | |||||||
June 30, 2011 | June 30, 2012 | |||||||
Net income per share: | ||||||||
Basic | ¥ | 2.00 | 2.44 | |||||
Diluted | 2.00 | 2.44 |
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, 2012 are an integral part of the consolidated financial statements. |
- 3 -
ADVANTEST CORPORATION |
AND SUBSIDIARIES |
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) |
Yen (Millions) | ||||||||
Three months ended | Three months ended | |||||||
June 30, 2011 | June 30, 2012 | |||||||
Comprehensive income (loss) | ||||||||
Net income | ¥ | 346 | 423 | |||||
Other comprehensive income (loss), net of tax | ||||||||
Foreign currency translation adjustments | (561 | ) | (4,236 | ) | ||||
Net unrealized gains (losses) on investment securities | ||||||||
Net unrealized gains (losses) arising | ||||||||
during the period | (214 | ) | (591 | ) | ||||
Less reclassification adjustments for net | ||||||||
gains (losses) realized in earnings | - | - | ||||||
Net unrealized gains (losses) | (214 | ) | (591 | ) | ||||
Pension related adjustments | 78 | 284 | ||||||
Total other comprehensive income (loss) | (697 | ) | (4,543 | ) | ||||
Total comprehensive income (loss) | ¥ | (351 | ) | (4,120 | ) |
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, 2012 are an integral part of the consolidated financial statements. |
- 4 -
ADVANTEST CORPORATION | ||||||||||
AND SUBSIDIARIES |
Consolidated Statements of Cash Flows (Unaudited) |
Yen (Millions) | ||||||||
Three months ended | Three months ended | |||||||
June 30, 2011 | June 30, 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net income | ¥ | 346 | 423 | |||||
Adjustments to reconcile net income to net cash | ||||||||
provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 829 | 1,892 | ||||||
Deferred income taxes | (472 | ) | (9 | ) | ||||
Changes in assets and liabilities: | ||||||||
Trade receivables | (1,924 | ) | (994 | ) | ||||
Inventories | (3,050 | ) | (3,794 | ) | ||||
Trade accounts payable | 3,645 | 3,543 | ||||||
Accrued expenses | (175 | ) | (3,315 | ) | ||||
Accrued warranty expenses | 147 | (49 | ) | |||||
Customer prepayments | 1,851 | 45 | ||||||
Accrued pension and severance costs | 29 | 35 | ||||||
Other | 105 | 353 | ||||||
Net cash provided by (used in) operating activities | 1,331 | (1,870 | ) | |||||
Cash flows from investing activities: | ||||||||
Decrease in short-term investments | 12,652 | - | ||||||
Proceeds from sale of property, plant and equipment | 0 | 22 | ||||||
Purchases of property, plant and equipment | (558 | ) | (3,129 | ) | ||||
Purchases of intangible assets | (69 | ) | (98 | ) | ||||
Other | 48 | (45 | ) | |||||
Net cash provided by (used in) investing activities | 12,073 | (3,250 | ) | |||||
Cash flows from financing activities: | ||||||||
Increase (decrease) in short term debt | 41,146 | (25,000 | ) | |||||
Proceeds from issuance of corporate bonds | - | 25,000 | ||||||
Dividends paid | (794 | ) | (1,577 | ) | ||||
Other | 0 | 8 | ||||||
Net cash provided by (used in) financing activities | 40,352 | (1,569 | ) | |||||
Net effect of exchange rate changes on cash and cash equivalents | (962 | ) | (1,535 | ) | ||||
Net change in cash and cash equivalents | 52,794 | (8,224 | ) | |||||
Cash and cash equivalents at beginning of period | 75,323 | 58,218 | ||||||
Cash and cash equivalents at end of period | ¥ | 128,117 | 49,994 |
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, 2012 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”) prepare 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, 2012.
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, 2012.
(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) Business Combination
Goodwill arising from business combination is not amortized, but instead is tested for impairment at least annually. Acquisition related costs are expensed as incurred.
(iv) Stock option
Expired unused gains from stock based compensation are not recognized in the case of expiration of stock option.
- 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 June 2011, the FASB amended the accounting guidance for the presentation of comprehensive income. This new guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity and provides the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB deferred the effective date for presentation of reclassifications out of accumulated other comprehensive income. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The guidance was adopted by Advantest in the first quarter beginning April 1, 2012. The adoption of the guidance did not have a significant impact on its consolidated results of operations and financial condition.
- 7 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
In September 2011, the FASB amended the accounting guidance for testing goodwill for impairment. This new guidance gives entities the option to perform the two-step process only if they first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount and conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 with early adoption permitted. The guidance was adopted by Advantest in the first quarter beginning April 1, 2012. The adoption of the guidance did not have a significant impact on its consolidated results of operations and financial condition.
In July 2012, the FASB amended the accounting guidance to simplify how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. The guidance permits an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, the guidance eliminates the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The guidance is effective for fiscal years beginning on or after September 16, 2012, with early adoption permitted. The guidance is required to be adopted by Advantest in the first quarter beginning April 1, 2013. Advantest is currently evaluating the timing and the effect that this adoption will have on its consolidated results of operations and financial condition.
(c) | Reclassification |
Certain reclassifications have been made to the prior year’s consolidated financial statements to conform to the current quarter presentation.
(3) | Business Combinations |
On July 4, 2011, Advantest acquired all outstanding ordinary shares of Verigy Ltd. (“Verigy”), for US$15.00 per share in cash. Verigy became a wholly-owned subsidiary of Advantest. In addition, as part of the consideration in the acquisition, Advantest assumed the obligation for stock options which had been granted by Verigy to certain directors and employees.
Summary of the total purchase price is as follows.
Yen (Millions) | ||||
Cash paid | 77,661 | |||
Assumed stock options | 1,068 | |||
Total purchase price | 78,729 |
Acquisition-related costs for the three months ended June 30, 2011 were ¥835 million. These costs were included in “Selling, general and administrative expenses” in the consolidated statements of operations.
Verigy has historically been strong in the non-memory tester and research and development markets in North America and Europe. The complementary strengths in products, customer base, research and development, sales and service are expected to enhance combined company’s competitiveness in the global market. The acquisition will allow Advantest to provide more and better diversified solutions to its customers in the semiconductor test equipment sector.
- 8 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
This acquisition was accounted for using the acquisition method.
The table below summarizes the allocation of the purchase price based on the fair value of assets acquired and liabilities assumed as follows.
Yen (Millions) | ||||
Assets acquired and liabilities assumed | ||||
Cash and cash equivalents | 20,516 | |||
Trade receivable, net | 2,104 | |||
Inventories | 11,013 | |||
Property, plant and equipment | 3,316 | |||
Intangible assets | 16,899 | |||
Goodwill | 35,140 | |||
Other assets | 20,145 | |||
Trade accounts payable | (3,136 | ) | ||
Other liabilities | (27,268 | ) | ||
Net assets acquired | 78,729 | |||
Purchase Price | 78,729 |
Goodwill recognized is attributable primarily to expected synergies from combining operations of Verigy and Advantest. None of the goodwill is expected to be deductible for income tax purposes.
The following represents the unaudited pro forma results of operations of Verigy for the three months ended June 30, 2011, as if the acquisition of Verigy had occurred on April 1, 2010. The pro forma information does not necessarily reflect the actual results of operations had the acquisition been consummated at April 1, 2010, nor is it necessarily indicative of future operating results. The pro forma information does not give effect to any potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition (other than those realized subsequent to the July 4, 2011 acquisition date).
Yen (Millions) | ||
Three months ended June 30, 2011 | ||
Pro forma net sales | 35,649 | |
Pro forma income (loss) before income taxes | (3,910 | ) |
- 9 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(4) | Inventories |
Inventories at March 31, 2012 and June 30, 2012 were composed of the following:
Yen (Millions) | ||||||||
March 31, 2012 | June 30, 2012 | |||||||
Finished goods | ¥ | 8,318 | 7,520 | |||||
Work in process | 11,303 | 13,562 | ||||||
Raw materials and supplies | 10,215 | 12,135 | ||||||
¥ | 29,836 | 33,217 |
(5) | Investment Securities |
Marketable equity securities are classified as available-for-sale securities. The acquisition cost, gross unrealized gains, gross unrealized losses and fair value at March 31, 2012 and June 30, 2012 were as follows:
Yen (Millions) | ||||||||||||||||
March 31, 2012 | ||||||||||||||||
Acquisition cost | Gross unrealized gains | Gross unrealized losses | Fair value | |||||||||||||
Noncurrent: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Equity securities | ¥ | 3,422 | 2,248 | 191 | 5,479 |
Yen (Millions) | ||||||||||||||||
June 30, 2012 | ||||||||||||||||
Acquisition cost | Gross unrealized gains | Gross unrealized losses | Fair value | |||||||||||||
Noncurrent: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Equity securities | ¥ | 3,384 | 1,399 | 244 | 4,539 |
Equity securities consist primarily of stocks issued by Japanese listed companies.
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 three months ended June 30, 2011 and 2012.
- 10 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
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.
There were no impairment losses on available-for sale securities, which were not considered other-than-temporarily impaired for the three months ended June 30, 2011 and 2012, respectively.
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 March 31, 2012 and June 30, 2012, were as follows:
Yen (Millions) | ||||||||||||||||
March 31, 2012 | ||||||||||||||||
Less than 12 months | 12 months or longer | |||||||||||||||
Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | |||||||||||||
Noncurrent: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Equity securities | ¥ | 825 | 178 | 179 | 13 |
Yen (Millions) | ||||||||||||||||
June 30, 2012 | ||||||||||||||||
Less than 12 months | 12 months or longer | |||||||||||||||
Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | |||||||||||||
Noncurrent: | ||||||||||||||||
Available-for-sale: | ||||||||||||||||
Equity securities | ¥ | 358 | 61 | 812 | 183 |
Advantest maintains non-marketable equity securities, which are recorded at cost and included in “investment securities” in the consolidated balance sheets. The carrying amounts of non-marketable equity securities were ¥450 million and ¥449 million at March 31, 2012 and June 30, 2012, respectively. For certain 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 had not estimated the fair value of the majority of these non-marketable equity securities aggregating ¥50 million and ¥449 million at March 31, 2012 and June 30, 2012, respectively, since it was not practicable to estimate the fair value of the investments due to the lack of readily determinable fair values and difficulty in estimating fair value without incurring excessive cost. Non-marketable equity securities that had impairment indicators were evaluated to determine whether the investments were impaired and the impairment, if any, was other than temporary.
- 11 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(6) | Derivative Financial Instruments |
Advantest uses derivative instruments primarily to manage exposures to foreign currency. The instruments are not designated for trading or speculative purposes. 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. |
In accordance with U.S. GAAP, Advantest recognizes derivative instruments as either assets or liabilities on the balance sheet at fair value. Changes in fair value of the derivatives are recorded as cost of sales, operating expenses, other income (expense), or as accumulated other comprehensive income (loss). |
Derivatives not designated as hedges
Derivatives not designated as hedging instruments consist primarily of forward contracts 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 recorded as other income (expense).
Advantest had foreign exchange contracts to exchange currencies among Japanese yen, US dollar and Euro at March 31, 2012 and June 30, 2012. The notional amounts of outstanding forward contracts for foreign currency purchases were approximately ¥653 million, and the outstanding forward contracts for foreign currency sales were ¥280 million at March 31, 2012. The notional amounts of outstanding forward contracts for foreign currency sales were ¥279 million at June 30, 2012.
Fair Value of Derivative Contracts
Fair value of derivative contracts at March 31, 2012 and June 30, 2012 was as follows:
Derivatives not designated as hedging instruments
Yen (Millions) | ||||||||||||||
March 31, 2012 | June 30, 2012 | |||||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||||
Assets | ||||||||||||||
Foreign exchange contracts | Other current assets | ¥ | 21 | Other current assets | 0 | |||||||||
Liabilities | ||||||||||||||
Foreign exchange contracts | Other current liabilities | ¥ | 0 | Other current liabilities | 15 |
- 12 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Effect of derivative instruments on the consolidated statements of income
The effect of derivative instruments on the consolidated statements of operations was as follows:
Derivatives not designated as hedging instruments
Yen (Millions) | |||||||||||
Location of gain (loss) recognized in | Amount of gain (loss) recognized in income on derivatives | ||||||||||
income on derivatives | Three months ended June 30, 2011 | Three months ended June 30, 2012 | |||||||||
Foreign exchange contracts | Other income (expense) | ¥ | 731 | (17 | ) |
(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 March 31, 2012 and June 30, 2012. 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.
Yen (Millions) | ||||||||||||||||
March 31, 2012 | June 30, 2012 | |||||||||||||||
Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
Financial assets: | ||||||||||||||||
Investment securities | ||||||||||||||||
Available-for-sale securities | ¥ | 5,479 | 5,479 | 4,539 | 4,539 | |||||||||||
Foreign exchange contracts | 21 | 21 | 0 | 0 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Foreign exchange contracts | 0 | 0 | 15 | 15 | ||||||||||||
Corporate bonds | ¥ | - | - | 25,000 | 25,009 |
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.
- 13 -
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, trade receivables, trade accounts payable, short term debt 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.
Foreign exchange contracts: The fair value of foreign exchange contracts are estimated by obtaining quotes from financial institutions.
Corporate bonds: The fair value of corporate bonds is estimated using market quotes and are classified as Level 2.
Fair Value Hierarchy
U.S. 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 March 31, 2012 and June 30, 2012 carrying amount of assets and liabilities that were measured at fair value on a recurring basis by level was as follows:
Yen (Millions) | ||||||||||||||||
Fair Value Measurements at March 31, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Available-for-sale equity securities | ¥ | 5,479 | 5,479 | - | - | |||||||||||
Foreign exchange contracts | 21 | - | 21 | - | ||||||||||||
Total assets measured at fair value | 5,500 | 5,479 | 21 | - | ||||||||||||
Liabilities | ||||||||||||||||
Foreign exchange contracts | 0 | - | 0 | - | ||||||||||||
Total liabilities measured at fair value | ¥ | 0 | - | 0 | - |
- 14 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Yen (Millions) | ||||||||||||||||
Fair Value Measurements at June 30, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Available-for-sale equity securities | ¥ | 4,539 | 4,539 | - | - | |||||||||||
Foreign exchange contracts | 0 | - | 0 | - | ||||||||||||
Total assets measured at fair value | 4,539 | 4,539 | 0 | - | ||||||||||||
Liabilities | ||||||||||||||||
Foreign exchange contracts | 15 | - | 15 | - | ||||||||||||
Total liabilities measured at fair value | ¥ | 15 | - | 15 | - |
Adjustments to fair value of available-for-sale 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 recorded as other income (expense).
Assets / Liabilities Measured at Fair Value on a Nonrecurring Basis
As of March 31, 2012 carrying amount of assets and liabilities, which were measured at fair value on a nonrecurring basis by level during the years ended March 31, 2012 was as follows:
Yen (Millions) | ||||||||||||||||
Fair Value Measurements at March 31, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Non-marketable equity securities | ¥ | 400 | - | 400 | 0 | |||||||||||
Assets held for sale | 1,471 | - | - | 1,471 | ||||||||||||
Total assets measured at fair value | ¥ | 1,871 | - | 400 | 1,471 |
As of June 30, 2011, assets and liabilities that were measured at fair value on a nonrecurring basis were immaterial. As of June 30, 2012, there were no amount of assets and liabilities, which were measured at fair value on a nonrecurring basis.
Advantest recognized impairment losses of non-marketable equity securities when their fair values were below the carrying amounts and the decline in fair values was considered to be other than temporary. The non-marketable equity securities are valued using the market and income approaches. 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. The fair value was determined based on a third-party appraisal using similar assets and sales. The fair value of the assets held for sale was reclassified to other current assets on the consolidated balance sheets. The fair value is classified as Level 3 because significant unobservable inputs were involved in the fair value measurements.
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ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(8) | Short Term Debt and Corporate Bonds |
Short term debt at March 31, 2012 and June 30 2012 were as follows:
Yen (Millions) | ||||||||
March 31, 2012 | June 30, 2012 | |||||||
Unsecured borrowing, with weighted average annual interest 0.38% | ¥ | 25,000 | - | |||||
¥ | 25,000 | - |
As of March 31, 2012, the Company had no corporate bonds. As of June 30, 2012, the amount, interest rates and maturity dates of unsecured corporate bonds were as follows:
Amount | Interest rate | Maturity date | ||
¥10,000 million | 0.416% per annum | May 25, 2015 | ||
¥15,000 million | 0.606% per annum | May 25, 2017 |
(9) | Income Taxes |
As of June 30, 2011 and 2012, the estimated annual effective tax rate for FY2011 and FY2012 differ from the 40.4 and 37.8 percent statutory income tax rate primarily due to related impacts of valuation allowance on deferred tax assets, effects of foreign income tax rates, and effects of separate company income tax reporting positions.
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ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(10) | Accrued Pension and Severance Costs |
The components of net periodic benefit cost recognized were as follows:
Yen (Millions) | ||||||||||||
Three months ended | ||||||||||||
June 30, 2011 | June 30, 2012 | |||||||||||
Japanese Plans | Japanese Plans | Non-Japanese Plans | ||||||||||
Service cost | ¥ | 338 | 372 | 84 | ||||||||
Interest cost | 187 | 172 | 85 | |||||||||
Expected return on plan assets | (101 | ) | (75 | ) | (66 | ) | ||||||
Amortization of unrecognized: | ||||||||||||
Net actuarial (gain) or loss | 128 | 198 | 58 | |||||||||
Prior service (benefit) cost | (44 | ) | (42 | ) | – | |||||||
Net periodic benefit cost | ¥ | 508 | 625 | 161 | ||||||||
(11) | Dividends |
Based on the resolution for the payment of year-end dividends at the Board of Directors meeting held on May 26, 2011, Advantest declared cash dividends totaling ¥866 million, or ¥5 per share of common stock on June 2, 2011 to stockholders of record on March 31, 2011.
Based on the resolution for the payment of year-end dividends at the Board of Directors meeting held on May 30, 2012, Advantest declared cash dividends totaling ¥1,733 million, or ¥10 per share of common stock on June 4, 2012 to stockholders of record on March 31, 2012.
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ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(12) | 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 three months ended June 30, 2011 and 2012 were summarized as follows:
Yen (Millions) | ||||||||
Three months ended | ||||||||
June 30, 2011 | June 30, 2012 | |||||||
Balance at beginning of period | ¥ | 1,754 | 2,129 | |||||
Addition | 751 | 852 | ||||||
Reduction | (605 | ) | (900 | ) | ||||
Translation adjustments | (0 | ) | (11 | ) | ||||
Balance at end of period | ¥ | 1,900 | 2,070 | |||||
(13) | Other income (expense) |
Other income (expense) includes foreign exchange losses of ¥532 million and foreign exchange gains of ¥445 million for the three months ended June 30, 2011 and 2012, respectively.
(14) | Operating Segment 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.
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ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Reportable operating segment information for the three months ended June 30, 2011 and 2012 was as follows:
Yen (Millions) | ||||||||||||||||||||
Three months ended June 30, 2011 | ||||||||||||||||||||
Semiconductor and Component Test System Business | Mechatronics System Business | Services, Support and Others | Elimination and Corporate | Total | ||||||||||||||||
Net sales to unaffiliated customers | ¥ | 19,958 | 3,983 | 2,907 | - | 26,848 | ||||||||||||||
Inter-segment sales | 187 | 33 | - | (220 | ) | - | ||||||||||||||
Net sales | 20,145 | 4,016 | 2,907 | (220 | ) | 26,848 | ||||||||||||||
Operating income (loss) before stock option compensation expense | 2,603 | (194 | ) | 375 | (2,000 | ) | 784 | |||||||||||||
Adjustment: | ||||||||||||||||||||
Stock option compensation expense | - | |||||||||||||||||||
Operating income | ¥ | 784 |
Yen (Millions) | ||||||||||||||||||||
Three months ended June 30, 2012 | ||||||||||||||||||||
Semiconductor and Component Test System Business | Mechatronics System Business | Services, Support and Others | Elimination and Corporate | Total | ||||||||||||||||
Net sales to unaffiliated customers | ¥ | 25,521 | 3,239 | 4,595 | - | 33,355 | ||||||||||||||
Inter-segment sales | 361 | 106 | - | (467 | ) | - | ||||||||||||||
Net sales | 25,882 | 3,345 | 4,595 | (467 | ) | 33,355 | ||||||||||||||
Operating income (loss) before stock option compensation expense | 3,345 | (1,147 | ) | 26 | (1,468 | ) | 756 | |||||||||||||
Adjustment: | ||||||||||||||||||||
Stock option compensation expense | - | |||||||||||||||||||
Operating income | ¥ | 756 |
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.
- 19 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(15) | Per Share Data |
The following table sets forth the computation of basic and diluted net income per share for the three months ended June 30, 2011 and 2012:
Yen (Millions) except share and per share data | ||||||||
Three months ended | Three months ended | |||||||
June 30, 2011 | June 30, 2012 | |||||||
Numerator: | ||||||||
Net income | ¥ | 346 | 423 | |||||
Denominator: | ||||||||
Basic weighted average shares of common stock outstanding | 173,271,892 | 173,275,300 | ||||||
Dilutive effect of exercise of stock options | - | 269,983 | ||||||
Diluted weighted average shares of common stock outstanding | 173,271,892 | 173,545,283 | ||||||
Basic net income per share | ¥ | 2.00 | 2.44 | |||||
Diluted net income per share | ¥ | 2.00 | 2.44 | |||||
At June 30, 2011 and 2012, Advantest had outstanding stock options into 1,804,000 and 3,650,102 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.
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