[Advantest logo]
Advantest Corporation
Interim Business Report for FY2004
(April 1, 2004 through September 30, 2004)
[Cover graphics]
To Our Shareholders
================================================================================
Let us report on the business results of Advantest (the "Company") on a
consolidated basis during the interim period of fiscal year 2004 (April 1, 2004
through September 30, 2004).
During this interim fiscal period, business conditions affecting the
company have generally continued to improve due to a continued appetite for
capital expenditures in the semiconductor manufacturing industry, as stimulated
by the strong performance of digital consumer products including flat-screen
televisions and DVD recorders, and continued demands for personal computers.
Under this environment, Advantest made concentrated efforts to increase
incoming orders and expand sales through the timely introduction of new products
that meet customer needs. In addition to its continued efforts to reduce fixed
costs, Advantest and its group companies combined forces in a drive towards
improving profitability, including the shortening of time to market by improving
the manufacturing process, parts procurement and manufacturing efficiencies.
As a result of the above, as compared to the corresponding interim
period for the previous fiscal year, incoming orders increased by 56.0% to
(Y)125.2 billion and net sales increased by 135.3% to (Y)146.5 billion. Income
before income taxes increased to (Y)46.8 billion, 12.6 times and interim net
income increased to (Y)28.5 billion, 11.7 times the result of the corresponding
interim period for the previous fiscal year. Overseas sales as a percentage of
total sales was 74.3%, as compared to 60.2% in the corresponding interim period
for the previous fiscal year.
Interim dividends of (Y)25 per share as compared to (Y)15 in the
corresponding interim period for the previous fiscal year will be distributed to
shareholders beginning on December 1, 2004, as resolved by the Board of
Directors' Meeting on October 26, 2004.
We look forward to your continued support and guidance.
November 2004
[Picture of Hiroshi Oura and Toshio Maruyama]
Hiroshi Oura Toshio Maruyama
(Chairman of the Board and CEO) (Representative Board Director, President of
Corporate Executive Officers and COO)
Summary of Consolidated Results (U.S. GAAP)
=========================================================================================
-----------------------------------------------------------------------------------------
FY2002 FY2003 FY2003 FY2004
interim interim
-----------------------------------------------------------------------------------------
(in millions of Yen)
Incoming orders 101,487 208,961 80,280 125,244
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(in millions of Yen)
Net sales 97,740 174,218 62,286 146,589
Semiconductor and 64,368 123,489 40,961 113,172
component test system
Mechatronics system 19,465 34,225 13,261 28,100
Services, support and 19,227 20,465 9,949 10,875
others
Elimination and corporate (5,320) (3,961) (1,885) (5,558)
(loss)
Overseas portion of net 58,867 116,228 37,467 108,920
sales
Operating income (loss) (16,743) 30,960 4,439 45,420
Net income (loss) (12,994) 17,329 2,453 28,573
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(in Yen)
Net income (loss) per share (131.99) 176.37 24.96 290.68
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(in millions of Yen)
Total assets 281,224 330,808 287,094 349,951
Stockholders' equity 210,663 221,768 210,303 249,928
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(in Yen)
Stockholders' equity per 2,144.23 2,256.59 2,140.61 2,542.41
share
-----------------------------------------------------------------------------------------
*Advantest's previous two business segments - "Automated test equipment" and
"Measuring instruments" - have been reclassified into three business segments -
"Semiconductor and component test system", "Mechatronics system" and "Services,
support and others". Certain revisions have been made to the business segment
information for FY2002, FY2003 interim and FY2003 to conform to the business
segment information used for FY2004 interim.
** "Net income (loss) per share" was calculated based on the average number of
issued shares (excluding treasury stock) during the period.
***"Stockholders'equity per share" was calculated based on the number of issued
shares (excluding treasury stock) as of the end of the period.
[Charts illustrating information presented in the above table]
Business Results by Segment
================================================================================
Starting this fiscal period, Advantest, in conjunction with its
business and organizational restructuring efforts, reclassified its previous two
business segments, automated test equipment and measuring instruments, into
three business segments: semiconductor and component test system; mechatronics
system; and services, support and others. The comparison figures against the
previous interim period, presented below, have been calculated with adjustments
to the figures from the previous interim period into the three new business
segments.
Semiconductor and Component Test System Segment
In the semiconductor and component test system segment, flash memory
testers in the memory tester market continued to perform strongly both
domestically and overseas. In addition, DRAM testers experienced solid sales in
Japan and overseas, particularly with respect to new models such as the ultra
high-speed memory tester for next generation DDR memory and the general purpose
high-speed memory tester.
In the SoC (System-on-a-chip)/AS (Application Specific) tester market,
strong sales of T2000, new concept testers based on OPENSTAR(R)*1, continued. In
addition, SoC testers for mobile phones and digital consumer devices and testers
for LCD driver ICs continued to perform strongly particularly in Japan and
Taiwan. Moreover, new products aimed at the CCD market and on-board device
markets have seen strong sales.
As a result of the above, as compared to the corresponding interim
period for the previous fiscal year, incoming orders in the semiconductor and
component test system segment increased by 70.7% to (Y)96.1 billion, while net
sales of the segment increased by 176.3% to (Y)113.1 billion. Operating income
in the semiconductor and component test system segment increased to (Y)37.7
billion, 10.5 times the corresponding interim period for the previous fiscal
year.
[Picture of the SoC test system T6575]
[Picture of the Memory test system T5377]
*1 OPENSTAR(R) - The name of an open architecture standard published by the
Semiconductor Test Consortium, Inc. OPENSTAR(R) is a
registered trademark or trademark of Semiconductor Test
Consortium, Inc. in the U.S., Japan and other countries.
Mechatronics System Segment
In the mechatronics system segment, memory test handlers with
simultaneous multiple handling capacity or with cooling capabilities as well as
interface products continued to perform well due to the positive growth in sales
of memory testers.
As a result of the above, incoming orders in the mechatronics system
segment, as compared with the corresponding interim period for the previous
fiscal year, increased by 51.8% to (Y)24.6 billion, while net sales of the
segment increased by 111.9% to (Y)28.1 billion. Operating income in the
mechatronics system segment increased by 211.6% to (Y)9.9 billion, as compared
with the corresponding interim period for the previous fiscal year.
[Picture of the Dynamic Test Handler M6542AD]
Services, Support and Others
Incoming orders in the services, support and others segment, as
compared with the corresponding interim period for the previous fiscal year,
increased by 3.6% to (Y)10.0 billion, while net sales of the segment increased
by 9.3% to (Y)10.8 billion. Operating income in the services, support and others
segment increased by 33.0% to (Y)0.7 billion, as compared with the corresponding
interim period for the previous fiscal year.
Prospects for the Fiscal Year
================================================================================
With respect to business conditions in the upcoming future, growth in
semiconductor-related demands is expected to continue, resulting from the
continued success of third generation mobile phones and continued demand for
personal computers and an expected increase in demand for digital consumer
devices in the medium term. In addition, capital expenditures by semiconductor
manufacturers are expected to increase as 300 mm wafer-related investments are
projected to materialize and the next generation of memory devices are rolled
out.
Responding to the above situation, Advantest plans to focus on
improvement of profitability through revenue growth generated by timely
introduction of new products designed to meet customer needs, continued
improvement of the manufacturing process for quick delivery and cost-cutting
efforts.
Factors such as the temporary production and inventory adjustments of
drivers in the digital sector, such as semiconductors and electronic components,
and an increase in crude oil prices may have adverse effects on Advantest's
performance in the short run.
As a result of the above, net sales for the fiscal year are currently
estimated at (Y)250.0 billion, while income before income taxes is estimated at
(Y)71.0 billion and net income at (Y)43.0 billion.
(Cautionary Statement with Respect to Forward-Looking Statements)
This document contains "forward-looking statements" that are based on
Advantest's current expectations, estimates and projections. These
forward-looking statements are subject to known and unknown risks, uncertainties
and other factors that may cause Advantest's actual results, levels of activity,
performance or achievements to be materially different from those expressed or
implied by such forward-looking statements. These factors include: (i) changes
in demand for the products and services produced and offered by Advantest's
customers, including semiconductors, communications services and electronic
goods; (ii) circumstances relating to Advantest's investment in technology,
including its ability to timely develop products that meet the changing needs of
semiconductor manufacturers and communications network equipment and components
makers and service providers; (iii) significant changes in the competitive
environment in the major markets where Advantest purchases materials, components
and supplies for the production of its products or where its products are
produced, distributed or sold; and (iv) changes in economic conditions, currency
exchange rates or political stability in the major markets where Advantest
procures materials, components and supplies for the production of its principal
products or where its products are produced, distributed or sold. A discussion
of these and other factors which may affect Advantest's actual results, levels
of activity, performance or achievements is contained in the "Operating and
Financial Review and Prospects", "Key Information - Risk Factors" and
"Information on the Company" sections and elsewhere in Advantest's annual report
on Form 20-F, which is on file with the United States Securities and Exchange
Commission.
Consolidated Financial Statements (U.S. GAAP)
=========================================================================================================
o Balance Sheets
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FY2003 FY2004 interim
(as of March 31,2004) (as of September 30, 2004)
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(in millions of Yen)
(Assets)
Current assets 255,762 273,735
Cash and cash equivalents 101,146 139,911
Trade accounts receivable, less allowance 76,133 86,222
for doubtful accounts
Inventories 49,423 32,687
Deferred tax assets 25,875 12,411
Other current assets 3,185 2,504
Investment securities 7,952 6,882
Property, plant and equipment,net 50,516 51,938
Deferred tax assets 10,964 11,781
Intangible assets,at cost,less accumulated 3,756 3,334
amortization
Other assets 1,858 2,281
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Total assets 330,808 349,951
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----------------------------------------------------------------------------------------------------
(Liabilities) (in millions of Yen)
Current liabilities 66,611 57,469
Current installments of long-term debt 4,543 4,543
Trade accounts payable 38,214 24,985
Accrued expenses 8,939 8,809
Other current liabilities 14,915 19,132
Long-term debt, excluding current installments 20,083 20,062
Accrued pension and severance cost 18,348 18,866
Other long-term liabilities 3,411 3,512
Total liabilities 108,453 99,909
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(Minority interests)
Minority interests 587 114
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(Stockholders' equity)
Common stock 32,363 32,363
Capital surplus 32,973 32,973
Retained earnings 177,404 203,420
Accumulated other comprehensive income (loss) (8,061) (6,157)
Treasury stock (12,911) (12,671)
Total stockholders' equity 221,768 249,928
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Total liabilities and stockholders' equity 330,808 349,951
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o Statements of Income
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FY2003 Interim FY2004 Interim
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(in millions of Yen)
Net sales 62,286 146,589
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Cost of sales 31,801 68,238
Research and development expenses 10,749 12,087
Selling, general and administrative 15,297 20,844
expenses
Operating income 4,439 45,420
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Other income (expense) (718) 1,424
Income before income taxes 3,721 46,844
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Income taxes 1,268 18,271
Net income 2,453 28,573
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o Statements of Cash Flows
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FY2003 Interim FY2004 Interim
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(in millions of Yen)
Cash flows provided by operating activities 13,361 44,545
Cash flows used in investing activities (2,263) (5,308)
Cash flows used in financing activities (2,627) (2,255)
Net effect of exchange rate changes on cash and (1,203) 1,783
cash equivalents
----------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 7,268 38,765
Cash and cash equivalents at beginning of year 87,338 101,146
----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year 94,606 139,911
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o Consolidated Subsidiaries
=======================================================================
39 subsidiaries (22 in Japan and 17 overseas)
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Advantest Laboratories Ltd.
Advantest Customer Support Corporation
Advanmechatec Co., Ltd.
Advantest Manufacturing, Inc.
Japan Engineering Co., Ltd.
Advantest Finance Inc.
Advantest America Corporation (Holding Co.)
Advantest America, Inc.
Advantest (Europe) GmbH
Advantest Taiwan Inc.
Advantest (Singapore) Pte. Ltd.
and 28 others
=======================================================================
Summary of Unconsolidated Results (prepared in accordance with accounting
principles generally accepted in Japan)
=========================================================================================
FY2002 FY2003 FY2003 FY2004
interim interim
=========================================================================================
(in millions of Yen)
Incoming orders 78,217 172,414 65,504 108,365
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(in millions of Yen)
Net sales 76,686 150,558 50,846 121,065
Semiconductor and component 53,787 113,365 36,114 96,920
test system
Mechatronics system 14,138 28,777 10,547 21,202
Services, support and others 8,761 8,415 4,184 2,943
Export portion of net sales 40,570 97,744 28,096 84,119
Operating income (loss) (18,209) 23,776 1,528 28,346
Net income (loss) (11,467) 11,957 1,819 18,684
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(in Yen)
Net income (loss) per share (116.49) 119.97 18.52 190.09
-----------------------------------------------------------------------------------------
(in Yen)
Dividends per share 30.00 40.00 15.00 25.00
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(in millions of Yen)
Total assets 235,456 277,047 241,173 286,780
Stockholders' equity 178,253 188,891 179,589 204,749
-----------------------------------------------------------------------------------------
(in Yen)
Stockholders' equity per share 1,814.36 1,920.33 1,827.98 2,082.83
=========================================================================================
* Advantest's previous two business segments - "Automated test equipment" and
"Measuring instruments" - have been reclassified into three business segments
- "Semiconductor and component test system", "Mechatronics system" and
"Services, support and others". Certain revisions have been made to the
business segment information for FY2002, FY2003 interim and FY2003 to conform
to the business segment information used for FY2004 interim.
** "Net income (loss) per share" was calculated based on the average number of
issued shares during the period. Treasury stock was excluded from such number.
*** "Stockholders' equity per share" was calculated based on the number of
issued shares as of the end of the period. Treasury stock was excluded from
such number.
[Charts illustrating the information presented in the above table]
Unconsolidated Financial Statements (Japanese GAAP)
================================================================================
o Balance Sheets
-----------------------------------------------------------------------------------------
FY2003 FY2004 interim
(as of March 31, 2004) (as of September 30, 2004)
-----------------------------------------------------------------------------------------
(in millions of Yen)
(Assets)
Current assets 203,388 213,898
Cash and deposits 64,469 90,958
Trade accounts receivables 72,021 80,795
Inventories 35,588 23,805
Other 31,308 18,339
Noncurrent assets 73,658 72,881
Property, plant and equipment 40,054 39,636
Buildings 16,183 15,850
Land 18,141 18,141
Other 5,729 5,644
Intangible fixed assets 1,884 1,492
Investments and other assets 31,718 31,752
Investment in associated 16,347 16,272
companies
Deferred tax assets 5,707 6,478
Other 9,663 9,001
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Total assets 277,047 286,780
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
(in millions of Yen)
(Liabilities)
Current liabilities 56,504 49,518
Trade accounts payable 38,444 24,400
Accrued warranty expenses 1,771 5,901
Other 16,288 19,216
Noncurrent liabilities 31,651 32,511
Bonds 20,000 20,000
Long-term borrowings 82 61
Allowance for retirement benefits 9,386 10,114
Other 2,181 2,335
Total liabilities 88,155 82,030
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(Stockholders' equity)
Common stock 32,362 32,362
Capital surplus 32,973 32,973
Retained earnings 135,672 151,631
Net unrealized holding gains on 793 453
other securities
Treasury stock (12,910) (12,671)
Total stockholders' equity 188,891 204,749
-----------------------------------------------------------------------------------------
Total liabilities and 277,047 286,780
stockholders' equity
-----------------------------------------------------------------------------------------
o Statements of Income
------------------------------------------------------------------------------------
FY2003 Interim FY2004 Interim
====================================================================================
(in millions of Yen)
Net sales 50,846 121,065
------------------------------------------------------------------------------------
Cost of sales 30,072 63,908
Selling, general and administrative 19,245 28,809
expenses
Operating income 1,528 28,346
------------------------------------------------------------------------------------
Non-operating income 2,702 3,611
Non-operating expenses 1,747 1,772
Ordinary income 2,482 30,185
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Income before income taxes 2,482 30,185
------------------------------------------------------------------------------------
Income taxes 44 137
Income taxes - deferred 618 11,364
Net income 1,819 18,684
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Corporate Overview
================================================================================
Registered name ADVANTEST CORPORATION
Registered office 1-32-1 Asahi-cho, Nerima-ku, Tokyo
Head office * We moved to the following address as of
September 21, 2004.
Shin-Marunouchi Center Building,
1-6-2, Marunouchi, Chiyoda-ku,
Tokyo, JAPAN 100-0005
(03) 3214-7500
Date registered December 2, 1954
Number of employees 3,575 (consolidated)
(as of September 30, 2004) 1,450 (unconsolidated)
* Employee numbers above do not include
temporary employees
Listed stock exchanges Tokyo Stock Exchange, First Section (Code: 6857)
New York Stock Exchange (Ticker Symbol: ATE)
Directors, Corporate Auditors and Executive Officers (as of September 30, 2004)
================================================================================
Directors and Corporate Auditors
Chairman of the Board and CEO Hiroshi Oura
Vice Chairman of the Board Shinpei Takeshita
Representative Board Director Toshio Maruyama
Director Kiyoshi Miyasaka
Director Junji Nishiura
Director Hiroji Agata
Director Hitoshi Owada
Director Takashi Tokuno
Standing Corporate Auditor Noboru Yamaguchi
Standing Corporate Auditor Tadahiko Hirano
Corporate Auditor Takashi Takaya
Corporate Auditor Kuniaki Suzuki
Executive Officers
President of Corporate Toshio Maruyama
Executive Officers and COO
Senior Executive Officer Kiyoshi Miyasaka
Senior Executive Officer Junji Nishiura
Senior Executive Officer Hiroji Agata
Managing Executive Officer Hitoshi Owada
Managing Executive Officer Takashi Tokuno
Managing Executive Officer Kenichi Mitsuoka
Managing Executive Officer Norihito Kotani
Managing Executive Officer Yuri Morita
Managing Executive Officer Jiro Katoh
Executive Officer Takao Tadokoro
Executive Officer Hiroyasu Sawai
Executive Officer Hiroshi Tsukahara
Executive Officer Masao Shimizu
Executive Officer Masao Araki
Executive Officer Yoshiaki Furuse
Executive Officer Yuichi Kurita
Executive Officer Yoshiro Yagi
Executive Officer Hideaki Imada
Executive Officer Shinichiro Umeda
Major Shareholders (as of September 30, 2004)
================================================================================
------------------------------------------------------- ------------------- ---------------
Name of shareholder Number of shares Percentage in
(in thousands) voting rights
------------------------------------------------------- ------------------- ---------------
Mizuho Trust & Banking Co., Ltd. (retirement benefit 16,023 16.32%
trust (Fujitsu account))
The Master Trust Bank of Japan, Ltd. (trust account) 8,676 8.84
Japan Trustee Services Bank, Ltd. (trust account) 7,601 7.74
Fujitsu Limited 4,047 4.12
BNP Paribas Securities (Japan) Ltd. 2,284 2.32
Deutsche Bank AG London 610 2,201 2.24
The Dai-ichi Mutual Life Insurance Company 1,724 1.75
Shinsei Bank, Limited 1,627 1.65
Fukoku Mutual Life Insurance Company 1,546 1.57
State Street Bank and Trust Company 505103 1,336 1.36
1. 1,479 thousand treasury shares held by the Company have not been included in
the table above.
2. Mizuho Trust & Banking Co., Ltd. holds 16,023 thousand shares of common stock
referred above as the trustee of a retirement benefit plan of Fujitsu Limited,
and exercises its voting rights pursuant to instructions given by Fujitsu
Limited.
Share Data (as of September 30, 2004)
================================================================================
Total number of authorized shares----------------------------------220,000,000
Total number of issued shares--------------------------------------99,783,385
Number of shareholders---------------------------------------------40,282
Shareholders by Category
Category Number of Number of shares Percentage
shareholders (in thousands)
--------------------------------------------------------------------------------------------------
Financial institutions and securities firms 202 51,796 51.9
Foreign nationals and entities 432 26,397 26.5
Other individual investors 39,127 12,722 12.7
Other corporate investors 521 8,867 8.9
Guide to Common Stock
================================================================================
End of fiscal year March 31 of each year
General meeting of shareholders June of each year
Record date for determining March 31 of each year (in the case of interim
eligibility to receive dividends dividends, if paid, September 30)
payment
Newspaper for public notices Nihon Keizai Shimbun
Web site to view Advantest's balance sheets and
income statements:
http://www.advantest.co.jp/j/ir/index.html
Share handling agent Tokyo Securities Transfer Agent Co., Ltd. Head
Office
Transfer agent for common stock Tougin Building 3rd floor
1-4-2 Marunouchi, Chiyoda-ku
Tokyo, JAPAN 100-0005
(0120) 49-7009 [toll-free], (03) 3212-4611
(Share handling offices)
Offices or agents of the above share handling agent,
head office and branches of Mizuho Investors
Securities Co., Ltd.
Number of shares per unit 100 shares
Requests for Repurchase by Advantest of Shares Constituting Less Than A
Full Unit/ Requests to Purchase Additional Shares from Advantest to
Constitute a Full Unit
Any such requests shall be made to the transfer agent stated above.
However, requests to purchase additional shares from Advantest are
temporarily suspended during the 12 business days before, and including,
March 31 and September 30 of each year. Advantest may establish other
periods in which the handling of requests to purchase additional shares
from Advantest will be temporarily suspended.
Registration of Loss of Share Certificates
In case of loss of share certificates, shareholders may perform procedures
for registration of lost share certificates through the transfer agent
stated above. Upon registration of loss of share certificates, the serial
number and other information of the lost share certificates will be
available for public viewing on the registry of lost share certificates. In
the event that no objection against such registration is filed within one
year, or that the registration is not cancelled by the shareholder within
one year, such share certificates shall be cancelled and the shareholder
may have new share certificates issued. The fee for registering the loss of
share certificates is (Y)10,000 in addition to (Y)500 per lost share
certificate.
Related inquiries shall be directed to the above transfer agent.
[Advantest logo]