Exhibit 2
I. Interim Consolidated Financial Statements, etc.
1. Interim Consolidated Financial Statements
(1) Interim Consolidated Balance Sheets
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FY2003 interim FY2004 interim Summarized consolidated
balance sheet of FY2003
(As of September 30, 2003) (As of September 30, 2004) (As of March 31, 2004)
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Amount Percentage Amount Percentage Amount Percentage
Notes (in million (%) (in million (%) (in million (%)
yen) yen) yen)
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(Assets)
Cash and cash equivalents 94,606 139,911 101,146
Trade accounts receivable, less Note 3 44,089 86,222 76,133
allowance for doubtful accounts
Inventories Note 4 34,346 32,687 49,423
Deferred tax assets 13,556 12,411 25,875
Other current assets Note 7 2,251 2,504 3,185
------- ------- -------
Total current assets 188,848 65.8 273,735 78.2 255,762 77.3
Investment securities Note 6 7,480 2.6 6,882 2.0 7,952 2.4
Property, plant and equipment, net Note 5, 53,688 18.7 51,938 14.8 50,516 15.3
10
Deferred tax assets 29,647 10.3 11,781 3.4 10,964 3.3
Intangible assets, at cost, less 5,196 1.8 3,334 1.0 3,756 1.1
accumulated amortization
Other assets 2,235 0.8 2,281 0.6 1,858 0.6
------- ------- -------
Total assets 287,094 100.0 349,951 100.0 330,808 100.0
------- ------- -------
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- 1-
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FY2003 interim FY2004 interim Summarized consolidated
balance sheet of FY2003
(As of September 30, 2003) (As of September 30, 2004) (As of March 31, 2004)
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Amount Percentage Amount Percentage Amount Percentage
Notes (in million (%) (in million (%) (in million (%)
yen) yen) yen)
- ------------------------------------------------------------------------------------------------------------------------------------
(Liabilities)
Current installments of long-term debt Note 10 2,243 4,543 4,543
Trade accounts payable 16,496 24,985 38,214
Income taxes payable 1,963 5,025 3,845
Accrued expenses 5,909 8,809 8,939
Accrued warranty expenses 2,367 4,746 3,121
Deferred revenue 1,740 4,252 4,543
Other current liabilities Note 7 2,415 5,109 3,406
------- ------- -------
Total current liabilities 33,133 11.6 57,469 16.4 66,611 20.1
Long-term debt, excluding current Note 10 24,604 8.6 20,062 5.7 20,083 6.1
installments
Accrued pension and severance cost 15,172 5.3 18,866 5.4 18,348 5.6
Other fixed liabilities 3,569 1.2 3,512 1.1 3,411 1.0
------- ------- -------
Total liabilities 76,478 26.7 99,909 28.6 108,453 32.8
------- ------- -------
(Minority interests)
Minority interests 313 0.1 114 0.0 587 0.2
(Stockholders' equity)
Common stock 32,363 11.3 32,363 9.3 32,363 9.8
Capital surplus 32,973 11.5 32,973 9.4 32,973 10.0
Retained earnings 164,017 57.1 203,420 58.1 177,404 53.5
Accumulated other comprehensive Note 6, (5,873) (2.1) (6,157) (1.8) (8,061) (2.4)
income (loss) 11
Treasury stock (13,177) (4.6) (12,671) (3.6) (12,911) (3.9)
------- ------- -------
Total stockholders' equity 210,303 73.2 249,928 71.4 221,768 67.0
------- ------- -------
Total liabilities and stockholders'
equity 287,094 100.0 349,951 100.0 330,808 100.0
------- ------- -------
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Notes FY2003 interim FY2004 interim FY2003
(As of September 30, 2003) (As of September 30, 2004) (As of March 31, 2004)
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Supplemental data for stockholders' equity
Authorized common stock 220,000,000 shares 220,000,000 shares 220,000,000 shares
Issued common stock 99,783,385 shares 99,783,385 shares 99,783,385 shares
(Outstanding common stock) (98,244,608 shares) (98,303,393 shares) (98,275,640 shares)
Treasury stock 1,538,777 shares 1,479,992 shares 1,507,745 shares
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- 2 -
(2) Interim Consolidated Statements of Income
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FY2003 interim FY2004 interim Summarized consolidated
statement of
income of FY2003
(April 1, 2003 through (April 1, 2004 through (April 1, 2003 through
September 30, 2003) September 30, 2004) March 31, 2004)
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Notes Amount Percentage Amount Percentage Amount Percentage
(in million yen) (%) (in million yen) (%) (in million yen) (%)
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Net sales 62,286 100.0 146,589 100.0 174,218 100.0
Cost of sales 31,801 51.1 68,238 46.6 85,513 49.1
-------- --------- ---------
Gross profit 30,485 48.9 78,351 53.4 88,705 50.9
Research and development 10,749 17.3 12,087 8.2 21,637 12.4
expenses
Selling, general and Note 15,297 24.5 20,844 14.2 36,108 20.7
administrative expenses 2(j)
-------- --------- ---------
Operating income 4,439 7.1 45,420 31.0 30,960 17.8
Other income (expense):
Interest and dividends 163 212 339
income
Interest expense (248) (225) (469)
Minority interests (5) (85) (214)
Equity in losses of (117) -- (117)
affiliates
Other Note 6, (511) (718) (1.1) 1,522 1,424 1.0 (1,621) (2,082) (1.2)
7
----------------- ------------------ -----------------
Income before income taxes 3,721 6.0 46,844 32.0 28,878 16.6
Income Taxes 1,268 2.1 18,271 12.5 11,549 6.6
-------- --------- ---------
Net income 2,453 3.9 28,573 19.5 17,329 10.0
-------- --------- ---------
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FY2003 interim FY2004 interim FY2003
(April 1, 2003 through (April 1, 2004 through (April 1, 2003 through
September 30, 2003) September 30, 2004) March 31, 2004)
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Notes Amount Amount Amount
(in yen) (in yen) (in yen)
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Net income per share Note 14
Basic 24.96 290.68 176.37
Diluted 24.94 290.07 176.02
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- 3 -
(3) Interim Consolidated Statements of Stockholders' Equity
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FY2003 interim FY2004 interim Consolidated statement of
stockholders'
equity of FY2003
(April 1, 2003 through (April 1, 2004 through (April 1, 2003 through
September 30, 2003) September 30, 2004) March 31, 2004)
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Amount Amount Amount
Notes (in million yen) (in million yen) (in million yen)
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Common stock:
Balance at beginning of period 32,363 32,363 32,363
--------------------------------------------------------------------------------------
Balance at end of period 32,363 32,363 32,363
--------------------------------------------------------------------------------------
Capital surplus:
Balance at beginning of period 32,973 32,973 32,973
--------------------------------------------------------------------------------------
Balance at end of period 32,973 32,973 32,973
--------------------------------------------------------------------------------------
Retained earnings:
Balance at beginning of period 162,547 177,404 162,547
Net income 2,453 28,573 17,329
Cash dividends (983) (2,458) (2,456)
Loss on disposal of treasury -- (99) (16)
stock --------------------------------------------------------------------------------------
Balance at end of period 164,017 203,420 177,404
--------------------------------------------------------------------------------------
Accumulated other comprehensive Note 6,
income (loss): 11
Balance at beginning of period (4,055) (8,061) (4,055)
Other comprehensive income (1,818) 1,904 (4,006)
(loss), net of tax --------------------------------------------------------------------------------------
Balance at end of period (5,873) (6,157) (8,061)
--------------------------------------------------------------------------------------
Treasury stock:
Balance at beginning of period (13,165) (12,911) (13,165)
Treasury stock purchased (12) (11) (32)
Exercise of stock options -- 249 180
Decrease in treasury stock
upon share exchange -- -- 105
Treasury stock sold -- 2 1
--------------------------------------------------------------------------------------
Balance at end of period (13,177) (12,671) (12,911)
--------------------------------------------------------------------------------------
Total stockholders' equity 210,303 249,928 221,768
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FY2003 interim FY2004 interim Consolidated statement of
stockholders'
equity of FY2003
(April 1, 2003 through (April 1, 2004 through (April 1, 2003 through
September 30, 2003) September 30, 2004) March 31, 2004)
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Amount Amount Amount
Notes (in million yen) (in million yen) (in million yen)
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Disclosure of comprehensive income:
Net income 2,453 28,573 17,329
Other comprehensive income (1,818) 1,904 (4,006)
(loss), net of tax
--------------------------------------------------------------------------------------
Total comprehensive income 635 30,477 13,323
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- 4 -
(4) Interim Consolidated Statements of Cash Flows
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FY2003 interim FY2004 interim Summarized consolidated
statement of
cash flows of FY2003
(April 1, 2003 through (April 1, 2004 through (April 1, 2003 through
September 30, 2003) September 30, 2004) March 31, 2004)
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Amount Amount Amount
Notes (in million yen) (in million yen) (in million yen)
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I Cash flows from operating activities:
Net income 2,453 28,573 17,329
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 4,857 4,035 9,328
Deferred income taxes (231) 13,081 6,703
Impairment loss on long-lived -- -- 3,030
assets
Decrease (increase) in trade (1,535) (8,544) (35,285)
accounts receivable
Decrease (increase) in inventories 1,028 17,171 (14,570)
Increase (decrease) in trade 6,105 (14,455) 29,190
accounts payable
Increase (decrease) in income taxes 12 1,074 1,997
payable
Increase (decrease) in accrued (659) (196) 2,518
expenses
Increase (decrease) in accrued (45) 1,625 709
warranty expenses
Increase (decrease) in deferred 444 (514) 3,441
revenue
Increase (decrease) in accrued
pension and severance cost 860 876 2,639
Other Note 6 72 1,819 1,186
--------------------------------------------------------------------------------
Net cash provided by operating 13,361 44,545 28,215
activities
--------------------------------------------------------------------------------
II Cash flows from investing activities:
Proceeds from sale of available-for-sale
marketable securities 236 634 323
Proceeds from sale of non-marketable 301 45 387
securities
Purchases of non-marketable securities (1,000) -- (1,288)
Proceeds from sale of property, plant 277 31 435
and equipment
Purchases of intangible assets (135) (204) (358)
Purchases of property, plant and (2,127) (4,818) (5,068)
equipment
Other 185 (996) 499
--------------------------------------------------------------------------------
Net cash used in investing (2,263) (5,308) (5,070)
activities
--------------------------------------------------------------------------------
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- 5 -
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FY2003 interim FY2004 interim Summarized consolidated
statement of
cash flows of FY2003
(April 1, 2003 through (April 1, 2004 through (April 1, 2003 through
September 30, 2003) September 30, 2004) March 31, 2004)
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Amount Amount Amount
Notes (in million yen) (in million yen) (in million yen)
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III Cash flows from financing activities:
Principal payments on long-term debt (1,590) (21) (3,811)
Payments to acquire treasury stock (12) (7) (31)
Dividends paid (981) (2,453) (2,462)
Other (44) 226 (72)
--------------------------------------------------------------------------------
Net cash used in financing (2,627) (2,255) (6,376)
activities
--------------------------------------------------------------------------------
IV Net effect of exchange rate changes on (1,203) 1,783 (2,961)
cash and cash equivalents
--------------------------------------------------------------------------------
V Net change in cash and cash 7,268 38,765 13,808
equivalents
VI Cash and cash equivalents at 87,338 101,146 87,338
beginning of period
--------------------------------------------------------------------------------
VII Cash and cash equivalents at end of 94,606 139,911 101,146
period
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FY2003 interim FY2004 interim Summarized consolidated
statement of
cash flows of FY2003
(April 1, 2003 through (April 1, 2004 through (April 1, 2003 through
September 30, 2003) September 30, 2004) March 31, 2004)
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Amount Amount Amount
Notes (in million yen) (in million yen) (in million yen)
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Supplemental data:
Cash paid during the interim period
and the year for:
Income taxes 1,079 3,678 1,936
Interest 247 225 473
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- 6 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 1) Accounting Principles, Procedures and the Presentation of the Interim
Consolidated Financial Statements
(a) Terminology, Form and Method of Preparation of the Interim Consolidated
Financial Statements
Advantest prepares these interim consolidated financial statements in
accordance with the accounting principles, procedures, terminology, form and
mode of preparation required in the U.S. in connection with its issuance of
American Depository Shares as established under Accounting Research Bulletins
("ARB"), Accounting Principles Board ("APB") statements, Statements of Financial
Accounting Standards ("SFAS") and other relevant sources. Unconsolidated
financial statements of Advantest Corporation and its subsidiaries are prepared
in accordance with accounting principles generally accepted in their respective
country of domicile. Certain adjustments and reclassifications have been
incorporated into such financial statements to reconcile to accounting
principles generally accepted in the U.S. ("U.S. GAAP").
(b) The Preparation of Consolidated Financial Statements and Registration with
the U.S. Securities and Exchange Commission
Advantest Corporation began listing on the New York Stock Exchange on
September 17, 2001 (local time) by means of an issuance of American Depository
Shares, and is registered with the U.S. Securities and Exchange Commission on
Form 20-F (equivalent to the Annual Securities Report in Japan) since FY2001. In
connection with the registration on Form 20-F, Advantest prepares consolidated
financial statements in accordance with U.S. GAAP.
(c) Scope of Consolidation and Application of the Equity Method
Advantest's interim consolidated financial statements include financial
statements of Advantest Corporation and its majority-owned subsidiaries. All
significant transactions, credit and debt between consolidated companies have
been eliminated.
The following table sets forth the number of consolidated subsidiaries
and equity method affiliates of Advantest:
------------------------------------------------------------------------------------------------------------
FY2004 interim FY2003
(As of September 30, (As of March 31, Increase (decrease)
2004) 2004)
------------------------------------------------------------------------------------------------------------
| Domestic 22 23 (1)
-------------------------------------------------------------------------------------------------
| Overseas 17 17 0
-------------------------------------------------------------------------------------------------
Consolidated subsidiaries 39 40 (1)
------------------------------------------------------------------------------------------------------------
Equity method affiliates 0 0 0
------------------------------------------------------------------------------------------------------------
Total 39 40 (1)
------------------------------------------------------------------------------------------------------------
Changes in the scope of consolidation:
Newly included (1): Advantest Costa Rica, Sociedad Anonima *1
Excluded (2): Advanmicrotec Co., Ltd. *2
Advantest America Measuring Solutions, Inc. *3
- 7 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
*1 Advantest Costa Rica, Sociedad Anonima was established on September 30,
2004 as an engineering service company of Advantest's products.
*2 Advanmicrotec Co., Ltd. was merged into Advantest Manufacturing, Inc.
on April 1, 2004 to consolidate Advantest's manufacturing operations.
*3 Advantest America Measuring Solutions, Inc. was merged into Advantest
America, Inc. on September 30, 2004 with a view to streamlining
management.
(d) Significant differences from the preparation of financial statements under
Japanese GAAP
Of the accounting principles, procedures and mode of presentation
adopted by Advantest Corporation and its consolidated subsidiaries (collectively
"Advantest"), the followings are the significant differences from the
preparation of financial statements using the accounting principles, procedure
and mode of presentation under Japanese GAAP:
(i) Scope of consolidation and application of the equity method
The scope of consolidation and application of the equity
method is determined based on percentage of voting rights. There is,
however, no difference in results when compared to the situation where
the scope is determined using the control criteria or influence
criteria.
(ii) Appropriation of earnings
Earnings appropriated for bonuses to directors are treated as
selling, general and administrative expenses.
(iii) Accounting for lease transactions
Regarding significant lease transactions, plant, property and
equipment and capital lease obligations are recognized if the lease is
considered a capital lease under SFAS No. 13, "Accounting for Leases".
(iv) Allowance for compensated absences
In accordance with SFAS No. 43, "Accounting for Compensated
Absences", an allowance is provided for the right of employees to
receive compensated absences in the future.
(v) Accrued pension and severance cost
Accrued pension and severance cost is accounted for based on
SFAS No. 87, "Employers' Accounting for Pensions" and minimum pension
liability adjustments are appropriated based on accumulated benefit
obligation. The transitional difference from the adoption of this
standard was retroactively recognized from the effective date of SFAS
No. 87 and amortized over 15 years.
(vi) Goodwill
In accordance with SFAS No. 142, "Goodwill and Other
Intangible Assets", goodwill is no longer amortized, but instead is
tested for impairment before impairment is recognized.
- 8 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 2) Description of Business and Summary of Significant Accounting Policies
and Practices
(a) Description of Business
Advantest manufactures and sells mechatronics-related products
such as semiconductor and component test system, test handlers and
device interfaces. Advantest also engages in research and development
activities and provides maintenance and support services associated
with these products.
In conjunction with its business and organizational restructuring,
since this interim period, Advantest reclassified its two previous
segments, automated test equipment and measuring instruments business
segment, into three business segments: semi-conductor and component
test system; mechatronics system; and services, support and others.
Description of business per segment is as follows:
The semiconductor and component test system business provides
customers with test system products for the semiconductor industry and
the electronic parts industry. Product lines provided by the
semiconductor and component test system segment include memory test
system for memory semiconductor devices; SoC/AS test system for
non-memory semiconductor devices and AS test system for RF component
markets, optical component markets and application specific information
and telecommunication markets.
The mechatronics system business provides product lines such as
test handlers, mechatronic-applied products, for handling semiconductor
devices and device interfaces that serve as interfaces with the devices
that are measured and operations related to nano-technology products.
The services, support and others business consists of
comprehensive customer solutions provided in connection with the above
businesses, support services, equipment lease business and others.
The Company was incorporated on December 2, 1954 under the name of
Takeda Riken Industry Co., Ltd. as a limited liability, joint-stock
company in Japan under the Commercial Code of Japan. Takeda Riken
Industry Co., Ltd. changed its legal name to Advantest Corporation in
1985.
(b) Cash Equivalents
Cash equivalents consist of deposits and certificates of deposit
with an initial maturity of three months or less from the date of
purchase. For purposes of the consolidated statements of cash flows,
Advantest considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
- 9 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(c) Allowance for Doubtful Accounts
Advantest recognizes allowance for doubtful accounts to ensure
that trade accounts receivable are not overstated due to
uncollectability, which represents Advantest's best estimate of the
amount of probable credit losses in Advantest's existing trade accounts
receivable. Advantest periodically reviews its estimated allowances for
doubtful accounts taking into account the customer's payment history,
assessing the customer's current financial position and considering
other information that is publicly available and the customer's credit
worthiness. Additional reviews are undertaken upon reports of
significant changes in the financial condition of Advantest's
significant customers and the semiconductor industry.
(d) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the average cost method.
(e) Investments in Affiliated Companies
Investments in affiliated companies owned 20% to 50%, where
Advantest exercises significant influence over their operating and
financial policies, are accounted for on the equity method. All
significant intercompany profits from affiliates have been eliminated.
(f) Investment Securities
Investment securities at September 30, 2003, September 30, 2004
and March 31, 2004 consist of equity securities. Advantest classifies
its marketable equity securities in one of two categories: trading or
available-for-sale. Trading securities are bought and held principally
for the purpose of selling them in the near term. All marketable equity
securities not included in trading are classified as
available-for-sale.
As of September 30, 2003, September 30, 2004 and March 31, 2004,
all marketable equity securities held by Advantest are classified as
available-for-sale.
Trading and available-for-sale securities are recorded at fair
value. Unrealized gains and losses on trading securities are included
in earnings. Unrealized gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from earnings and
are reported as a separate component of accumulated other comprehensive
income (loss) until realized.
A decline in the fair value of any available-for-sale security
below cost that is deemed to be other than temporary results in a
reduction in carrying amount to fair value. The impairment is charged
to earnings and a new cost basis for the security is established.
Dividend income is recognized when earned.
On a continuous basis, but no less frequently than at the end of
every half year, Advantest evaluates the cost basis of an
available-for-sale security for possible impairment. Factors considered
in assessing whether an indication of other than temporary impairment
- 10 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
exists include: the degree of change in ratio of market prices per
share to book value per share at date of evaluation compared to that of
at date of acquisition, the financial condition and prospects of each
investee company, industry conditions in which the investee company
operates, the period of time the fair value of an available-for-sale
security has been below the cost basis of the investment and other
relevant factors.
Impairment to be recognized is measured based on the amount by
which the carrying amount of the investment exceeds the fair value of
the investment. Fair value is determined based on quoted market prices,
projected discounted cash flow or other valuation techniques as
appropriate.
The cost of a security sold or the amount reclassified out of
accumulated other comprehensive income (loss) into earnings is
determined by the specific identification method.
Other investment securities are carried at cost. On a periodical
basis, Advantest considers the necessity of impairment. If the value of
the other investment securities is estimated to have declined and such
decline is judged to be other than temporary, Advantest recognizes the
impairment of the investment and the carrying value is reduced to its
fair value. The impairment is charged to earnings and new cost basis
for the security is established.
(g) Derivative Financial Instruments
Derivative financial instruments are accounted for under SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities",
and SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an amendment of FASB Statement No. 133".
SFAS No. 133, as amended, standardizes the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts. Under SFAS No. 133, as amended, entities are required to
carry all derivative instruments in the consolidated balance sheets at
fair value. The accounting for changes in the fair value (that is,
gains or losses) of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and, if
so, on the reason for holding the instrument. If certain conditions are
met, entities may elect to designate a derivative instrument as a hedge
of exposures to changes in fair values, cash flows, or foreign
currencies. If the hedged exposure is a fair value exposure, the gain
or loss on the derivative instrument is recognized in earnings in the
period of change together with the offsetting loss or gain on the
hedged item attributable to the risk being hedged. If the hedged
exposure is a cash flow exposure, the effective portion of the gain or
loss on the derivative instrument is reported initially as a component
of other comprehensive income (loss) and subsequently reclassified into
earnings when the forecasted transaction affects earnings. Any amounts
excluded from the assessment of hedge effectiveness as well as the
ineffective portion of the gain or loss are reported in earnings
immediately. If the derivative instrument is not designated as a hedge,
the gain or loss is recognized in earnings in the period of change.
- 11 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Advantest uses foreign exchange forward contracts to manage
currency exposure, resulting from changes in foreign currency exchange
rates, on trade accounts receivable. However, these contracts do not
qualify for hedge accounting since they do not meet the hedging
criteria specified by SFAS No. 133.
Foreign exchange forward contracts generally have maturities of
several months. These contracts are used to reduce Advantest's risk
associated with exchange rate movements, 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 forward
contracts are recognized in earnings under the caption of other income
(expense).
Advantest does not, as a matter of policy, enter into derivative
transactions for the purpose of speculation.
(h) Property, Plant and Equipment
Property, plant and equipment is stated at cost. Equipment under
capital leases is stated at the present value of minimum lease
payments.
Depreciation is computed principally using the declining-balance
method except for buildings and machinery and equipment under capital
leases for the Company and its domestic subsidiaries and the
straight-line method over estimated useful lives of the assets for
foreign subsidiaries. Buildings are principally depreciated using the
straight-line method over their estimated useful lives. Depreciation
for machinery and equipment under capital leases is computed using the
straight-line method over the lease term. The depreciation period for
significant assets ranges from 15 years to 50 years for buildings, 4
years to 10 years for machinery and equipment, and 2 years to 5 years
for furniture and fixtures.
(i) Intangible Assets and Other Assets
Intangible assets principally consist of licenses, goodwill and
computer software for internal-use, including computer software under
capital leases. Other assets consist of investments, security deposits
and prepaid expenses, of which no one individual item was material to
the consolidated financial statements of Advantest.
Advantest capitalizes certain costs incurred to purchase or
develop software for internal-use. Costs incurred to develop software
for internal-use are expensed as incurred during the preliminary
project stage, which includes costs for making strategic decisions
about the project, determining performance and system requirements and
vendor demonstration cost. Costs incurred subsequent to the preliminary
project stage through implementation are capitalized. Advantest also
expenses costs incurred for internal-use software projects in the post
implementation stage such as costs for training and maintenance.
Costs incurred to develop software to be included with and sold as
part of the Company's automated test equipment are capitalized
subsequent to the attainment of
- 12 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
technological feasibility in accordance with the provisions of SFAS No.
86, "Accounting for the Costs of Computer Software to Be Sold, Leased,
or Otherwise Marketed". To date, costs incurred subsequent to the
attainment of technological feasibility have been insignificant and,
therefore, have been charged directly to expense. Costs incurred prior
to reaching technological feasibility are expensed as incurred.
The cost of software is amortized straight-line over the estimated
useful life, which is generally five years. The cost of computer
software under capital leases is amortized straight-line over the lease
term. The remaining weighted average life of software at September 30,
2004 is 2.3 years.
Business combinations are accounted for using the purchase method
in accordance with SFAS No. 141, "Business Combinations". SFAS No. 141
establishes certain criteria for the recognition of intangible assets
separately from goodwill. Under SFAS No. 142, "Goodwill and Other
Intangible Assets", goodwill is no longer amortized, but instead is
tested for impairment at least annually. Intangible assets with
definite useful lives are amortized over their respective estimated
useful lives and reviewed for impairment in accordance with SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets".
Any recognized intangible assets determined to have an indefinite
useful life are not amortized, but instead are tested for impairment
until its life is determined to be no longer indefinite.
(j) Impairment of Long-Lived Assets
Advantest accounts for long-lived assets in accordance with the
provisions of SFAS No. 144. SFAS No. 144 requires that long-lived
assets and certain identifiable intangibles with definite useful lives
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the fair value of
the assets.
For the year ended March 31, 2004, one of the former independent
cash flow-generating units, measuring instruments' assets group
reported operating losses for two consecutive years, and future
operating results of the assets group was not expected to be
profitable, due to the customers' continuously inactive industries such
as wireless communications. Since the carrying amount of the assets
group was higher than the undiscounted net cash flows expected to
result from the use and eventual disposition of the assets group,
Advantest adjusted its carrying amount to the recoverable amount. The
recoverable amount was based on the observable market price and
Advantest's cash flow analysis. Total recognized impairment loss was
(Y)3,030 million and is included in selling, general and administrative
expenses for the year ended March 31, 2004. The impairment loss
consisted of (Y)1,226 million from buildings, (Y)175 million from
machinery and equipment, (Y)683 million from furniture and fixtures,
(Y)681 million from software, and (Y)265 million from other assets.
- 13 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(k) 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.
(l) Accrued Pension and Severance Cost
The Company and certain of its domestic subsidiaries have
retirement and severance defined benefit plans covering substantially
all of their employees. The benefits are based on years of service and
the employee's compensation and vest after one year of service. Prior
service cost that results from amendments to the plan is amortized over
the average remaining service period of the employees expected to
receive benefits. Unrecognized net gain and loss is also amortized over
the average remaining service period of the employees expected to
receive benefits.
The Company and certain of its consolidated domestic subsidiaries
received approval from the Minister of Health and Labor to be exempted
from obligation for benefits related to future employee service on
August 1, 2003 and received approval to be exempted from obligation for
benefits related to prior employee service on October 1, 2004 for the
substitutional portion of its Employees' Pension Fund plans as part of
the transfer of its Employees' Pension Fund plans to the Defined
Benefit Corporate Pension plans pursuant to the Defined Benefit
Corporate Pension Law. Advantest and certain of its consolidated
domestic subsidiaries expect to recognize, upon completion of the
transfer to the Japanese government of the substitutional portion, any
loss or gains resulting therefrom in accordance with Emerging Issues
Task Force Issue No. 03-2 (EITF 03-2), "Accounting for the Transfer to
the Japanese Government of the Substitutional Portion of Employee
Pension Fund Liabilities." Accordingly, there has been no effect on
Advantest's interim consolidated financial statements for the 6 months
period ended September 30, 2004.
(m) Revenue Recognition
Revenue from Sales of Products
------------------------------
Revenue from sales of products which require installation work is
recognized when the related installation work is completed and the
equipment is accepted by the customer. Revenue from sales of products
and component which do not require installation work by Advantest is
recognized upon shipment if the terms of the sale are free on board
("FOB") shipping point or upon delivery if the terms are FOB
destination, which coincide with the passage of title and risk of loss.
Advantest utilizes distributors to market certain of its products which
do not require installation work. Advantest recognizes revenues from
sales of products to distributors upon shipment or delivery of products
to the distributors, which coincide with the passage of title and risk
of loss.
- 14 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Service fee
-----------
Revenue from fixed-price, long-term service contracts is
recognized on the straight-line basis over the contract term.
Operating lease
---------------
Revenue from operating leases is mainly recognized on the
straight-line basis over the lease term.
Multiple deliverables
---------------------
Multiple Deliverables are accounted for under the Emerging Issues
Task Force Issue No. 00-21 ("EITF 00-21"), "Revenue Arrangements with
Multiple Deliverables". EITF 00-21 addresses how to determine whether
an arrangement involving multiple deliverables contains more than one
unit of accounting. In applying EITF 00-21, separate contracts with the
same entity or related parties that are entered into at or near the
same time are presumed to have been negotiated as a package and should,
therefore, be evaluated as a single arrangement in considering whether
there are one or more units of accounting. That presumption may be
overcome if there is sufficient evidence to the contrary. EITF 00-21
also addresses how consideration should be measured and allocated to
the separate units of accounting in the arrangement.
Advantest enters into certain revenue arrangements with multiple
deliverables, which include combination of automated test equipment,
installation and warranty services. As those installation or warranty
services are not interchangeable to be provided by Advantest or other
parties and as fair values of those services are not determinable,
these elements are not considered to qualify for separate accounting
under EITF 00-21 and accordingly Advantest treats them as a single unit
of accounting.
Advantest adopted the provisions of EITF 00-21 for the
transactions entered into on and after July 1, 2003. The effect on
Advantest's consolidated financial statements from the adoption of such
provisions was insignificant.
(n) Research and Development
Research and development costs are expensed as incurred.
(o) Stock-Based Compensation
Advantest applies the intrinsic value-based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations including FASB Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB Opinion No. 25", in accounting
for its stock-based compensation plans. As such, stock-based
compensation cost would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise
price. SFAS No. 123, "Accounting for Stock-Based
- 15 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure, an amendment of FASB Statement
No. 123", establishes accounting and disclosure requirements using a
fair value-based method of accounting for stock-based employee
compensation plans. As allowed by SFAS No. 123, Advantest has elected
to continue to apply the intrinsic value-based method of accounting
described above, and has adopted the disclosure requirements of SFAS
No. 123, as amended.
Had Advantest determined stock-based compensation cost using the
fair value-based method at the grant date for its stock options and
warrants under SFAS No. 123, Advantest's net income and net income per
share would have been reduced to the pro forma amounts indicated below:
Yen
(Millions) except for per
share data
-------------------------------------------------------
September 30, September 30, March 31,
2003 2004 2004
---- ---- ----
Net income:
As reported 2,453 28,573 17,329
Less: stock-based employee
compensation cost
(net of related tax effect) (1,941) (2,276) (1,963)
-------- -------- --------
Pro forma 512 26,297 15,366
======= ======= =======
Basic net income per share:
As reported 24.96 290.68 176.37
Pro forma 5.21 267.52 156.39
Diluted net income per share:
As reported 24.94 290.07 176.02
Pro forma 5.20 266.96 156.08
No compensation expense was reflected in net income for the six
months periods ended September 30, 2003 and September 30, 2004, and for
the year ended March 31, 2004.
(p) Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date. Advantest
- 16 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
recognizes valuation allowance to reduce deferred tax assets to their
net realizable value if it is more likely than not that some portion or
all of the deferred tax assets will be realized.
(q) Net Income per Share
Basic net income per share is calculated by dividing net income by
the weighted average number of shares outstanding during the accounting
period. Diluted net income per share is calculated by dividing net
income by the sum of the weighted average number of shares plus
additional shares that would have been outstanding if potential
dilutive shares had been issued for granted stock options and warrants.
At September 30, 2003, September 30, 2004 and March 31, 2004,
Advantest had outstanding stock options and warrants exercisable into
1,133,800, 1,799,500 and 329,500 shares of common stock, respectively,
which could potentially dilute net income per share in future periods.
(r) Translation of Foreign Financial Statements
Foreign currency financial statements have been translated in
accordance with SFAS No. 52, "Foreign Currency Translation". Under SFAS
No. 52, the balance sheet accounts of non-Japanese subsidiaries, which
are denominated in currencies other than the Japanese yen, are
translated at rates of exchange on the balance sheet date. Revenue and
expense accounts are translated at average rates of exchange in effect
during the period. Resulting translation adjustments are included as a
separate component of other comprehensive income (loss).
(s) Foreign Currency Transactions
Assets and liabilities denominated in foreign currencies are
translated at the applicable current rates on the balance sheet date.
All revenue and expenses associated with foreign currencies are
converted at the rates of exchange prevailing when such transactions
occur. The resulting exchange gains or losses are reflected in other
income (expense) in the accompanying consolidated statements of income.
(t) Use of Estimates
Management of Advantest has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
consolidated financial statement and the reported amounts of revenues
and expenses during the period to prepare these consolidated financial
statements in conformity with accounting principles generally accepted
in the United States of America. Significant items subject to such
estimates and assumptions include valuation allowances for trade
accounts receivables, inventories and deferred tax assets, and assets
and obligations related to employees retirement and severance plans.
Actual results could differ from those estimates.
- 17 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(u) Reclassifications
Certain reclassifications have been made to the consolidated
financial statements for FY2003 interim and FY2003 to conform to
presentation used for FY2004 interim.
(Note 3) Trade accounts receivable
The allowance for doubtful accounts was deducted from trade accounts
receivable was (Y)2,214 million, (Y)2,472 million and (Y)2,464 million as of
September 30, 2003, September 30, 2004, and March 31, 2004, respectively.
(Note 4) Inventories
Inventories are composed of the following:
Yen (Millions)
--------------
September 30, September 30, March 31,
2003 2004 2004
---- ---- ----
Finished goods 9,434 7,804 14,819
Work in process 16,016 18,589 25,433
Raw materials 8,896 6,294 9,171
--------- --------- ---------
34,346 32,687 49,423
========= ========= =========
(Note 5) Property, Plant and Equipment
Property, plant and equipment is composed of the following:
Yen (Millions)
--------------
September 30, September 30, March 31,
2003 2004 2004
---- ---- ----
Land 19,189 19,200 19,174
Buildings 50,931 49,579 49,368
Machinery and equipment 25,639 26,290 24,660
Furniture and fixtures 26,470 22,610 21,200
Construction in progress 641 861 647
--------- --------- ---------
122,870 118,540 115,049
Less accumulated depreciation 69,182 66,602 64,533
--------- --------- ---------
53,688 51,938 50,516
========= ========= =========
- 18 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 6) Investment Securities
The acquisition cost, gross unrealized gains, gross unrealized losses
and fair value of marketable equity securities at September 30, 2003,
September 30, 2004 and March 31, 2004 were as follows:
Yen (Millions)
September 30, 2003
------------------
Gross Gross
Acquisition unrealized unrealized
cost gains losses Fair value
---- ----- ------ ----------
Noncurrent:
Available-for-sale:
Equity securities 1,846 1,099 7 2,938
Yen (Millions)
September 30, 2004
------------------
Gross Gross
Acquisition unrealized unrealized
cost gains losses Fair value
---- ----- ------ ----------
Noncurrent:
Available-for-sale:
Equity securities 3,177 1,440 319 4,287
Yen (Millions)
March 31, 2004
--------------
Gross Gross
Acquisition unrealized unrealized
cost gains losses Fair value
---- ----- ------ ----------
Noncurrent:
Available-for-sale:
Equity securities 2,238 2,093 1 4,311
- 19 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Gross realized gains and losses on available-for-sale equity securities
for the six months periods ended September 30, 2003 and September 30, 2004,
and for the year ended March 31, 2004 were as follows:
Yen (Millions) Yen (Millions)
-------------- --------------
September 30, 2003 September 30, 2004
------------------ ------------------
Gross Gross Gross Gross
realized realized realized realized
gains losses gains losses
----- ------ ----- ------
Noncurrent:
Available-for-sale:
Equity securities 174 - 629 -
Yen (Millions)
--------------
March 31, 2004
--------------
Gross Gross
realized realized
gains losses
----- ------
Noncurrent:
Available-for-sale:
Equity securities 178 2
Gross realized gains and losses are included in "other income
(expense)" in the interim consolidated statements of income and the
consolidated statements of income, and "other" in "cash flows from operating
activities" in the interim consolidated statements of cash flows and the
consolidated statements of cash flows.
Advantest maintains long-term investment securities, issued by
nonpublic companies, which are recorded at cost. The carrying amounts of
these securities were (Y)4,542 million, (Y)2,595 million and (Y)3,641
million at September 30, 2003, September 30, 2004 and March 31, 2004,
respectively.
(Note 7) Derivative Financial Instruments
Derivative financial instruments are utilized by Advantest primarily to
reduce foreign currency exchange risk. Advantest does not hold or issue
financial instruments for trading purposes. Advantest generally does not
require or place collateral for these financial instruments.
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.
- 20 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Advantest had foreign exchange forward contracts to exchange currencies
among Japanese yen, U.S. dollars and Euro at September 30, 2003, September
30, 2004 and March 31, 2004. The notional amounts of these contracts were
(Y)300 million, (Y)7,983 million and (Y)8,736 million at September 30, 2003,
September 30, 2004 and March 31, 2004.
The carrying amounts and estimated fair values of Advantest's foreign
exchange forward contracts at September 30, 2003, September 30, 2004 and
March 31, 2004 were as follows:
Yen (Millions) Yen (Millions)
-------------- --------------
September 30, 2003 September 30, 2004
------------------ ------------------
Carrying Fair Carrying Fair
amount value amount value
------ ----- ------ -----
Financial assets:
Foreign exchange forward contracts - - 30 30
Financial liabilities:
Foreign exchange forward contracts 15 15 10 10
Yen (Millions)
--------------
March 31, 2004
--------------
Carrying Fair
amount value
------ -----
Financial assets:
Foreign exchange forward contracts 91 91
Financial liabilities:
Foreign exchange forward contracts 105 105
These contracts do not qualify for hedge accounting since they do not
meet the hedging criteria specified by SFAS No. 133. Changes in fair value
are recognized in earnings under the caption of other income (expense).
- 21 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 8) Leases - Lessor
Advantest provides leases that enable its customers to acquire
semiconductor test equipment. All leases are classified as operating leases.
Future minimum lease income from equipment on noncancelable operating
leases as of September 30, 2003, September 30, 2004 and March 31, 2004 are
as follows:
Yen (Millions)
------------------------------------------------------------------------
September 30, 2003 September 30, 2004 March 31, 2004
--------------------- --------------------- ---------------------
Within one year 1,021 1,379 967
After one year 502 919 638
--------------------- --------------------- ---------------------
Total minimum lease income 1,523 2,298 1,605
===================== ===================== =====================
(Note 9) Leases - Lessee
Advantest has several operating leases, primarily for office space and
office equipment.
Future minimum lease payments under noncancelable operating leases
(with initial or remaining lease terms in excess of one year) as of
September 30, 2003, September 30, 2004 and March 31, 2004 are as follows:
Yen (Millions)
------------------------------------------------------------------------
September 30, 2003 September 30, 2004 March 31, 2004
--------------------- --------------------- ---------------------
Within one year 343 174 320
After one year 637 377 564
--------------------- --------------------- ---------------------
Total minimum lease payments 980 551 884
===================== ===================== =====================
(Note 10) Assets Pledged as Collateral and Secured Liabilities
As of September 30, 2003, September 30, 2004 and March 31, 2004,
property, plant and equipment with a carrying amount of (Y)409 million,
(Y)398 million and (Y)403 million was pledged as collateral for certain debt
obligations in the amount of (Y)46 million, (Y)31 million and (Y)38 million,
respectively.
- 22 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 11) Other Comprehensive Income (Loss)
The accumulated balances for each classification of other comprehensive
income (loss) are as follows:
Yen
(Millions)
----------
FY2003 FY2004 FY2003
------ ------ ------
interim interim
------- -------
Foreign currency translation adjustments (6,488) (5,720) (8,087)
Net unrealized gains on securities: 615 746 1,422
Minimum pension liability adjustments -- (1,183) (1,396)
------- ------ -------
Other comprehensive income (loss) (5,873) (6,157) (8,061)
======= ======= =======
(Note 12) Accrued Pension and Severance Cost
The components of net periodic benefit cost recognized for the six
months periods ended September 30, 2003 and September 30, 2004, and for the
year ended March 31, 2004 were as follows:
Yen
(Millions)
----------
FY2003 FY2004 FY2003
------ ------ ------
interim interim
------- -------
Components of net periodic benefit cost:
Service cost 924 875 1,691
Interest cost 430 427 860
Expected return on plan assets (247) (292) (495)
Amortization of unrecognized:
Net transition obligation 107 -- 214
Net actuarial gain or loss 158 280 317
Prior service cost (58) (58) (116)
---- --- ----
Net periodic benefit cost 1,314 1,232 2,471
===== ===== =====
- 23 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 13) Operating Segment and Geographic Information
(Operating Segment Information)
Advantest manufactures and sells mechatronics-related products such as
semiconductor and component test system, test handlers and device
interfaces. Advantest also engages in research and development activities
and provides maintenance and support services associated with these
products. In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", Advantest has three operating and
reportable segments. These operating segments are determined based on the
nature of the products and the markets.
Since this interim period, Advantest, in conjunction with its business
and organizational restructuring, reclassified its two previous segments,
automated test equipment and measuring instruments business segments, into
three business segments: semi-conductor and component test system;
mechatronics system; and services, support and others. Accordingly, the
consolidated financial statements for FY2003 interim as well as for FY 2003
have been restated based on the three new business segments.
Operating segment information during FY2003 interim, FY2004 interim and
FY2003 are as follows:
Yen (Millions)
--------------
---------------------------------------------------------------------------
Semiconductor
and Component Mechatronics Services, Elimination Total
Test System System Support and and corporate
Business Business Others
--------------- -------------- ----------- --------------- -----------
FY2003 Interim:
Net sales to
unaffiliated customers 39,272 13,065 9,949 -- 62,286
Inter-segment 1,689 196 -- (1,885) --
-------- -------- ------- -------- --------
Sales 40,961 13,261 9,949 (1,885) 62,286
Operating income (loss) 3,601 3,194 575 (2,931) 4,439
Yen (Millions)
--------------
---------------------------------------------------------------------------
Semiconductor
and Component Mechatronics Services, Elimination Total
Test System System Support and and corporate
Business Business Others
--------------- -------------- ----------- --------------- -----------
FY2004 Interim:
Net sales to
unaffiliated customers 107,920 27,794 10,875 -- 146,589
Inter-segment 5,252 306 -- (5,558) --
-------- -------- ------- -------- --------
Sales 113,172 28,100 10,875 (5,558) 146,589
Operating income (loss) 37,790 9,950 765 (3,085) 45,420
- 24 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Yen (Millions)
--------------
---------------------------------------------------------------------------
Semiconductor
and Component Mechatronics Services, Elimination Total
Test System System Support and and corporate
Business Business Others
--------------- -------------- ----------- --------------- -----------
FY2003:
Net sales to
unaffiliated customers 119,765 33,988 20,465 -- 174,218
Inter-segment 3,724 237 -- (3,961) --
----------- ---------- ----------- ------------- ---------
Sales 123,489 34,225 20,465 (3,961) 174,218
Operating income (loss) 28,690 11,233 (2,587) (6,376) 30,960
Adjustments to operating income (loss) included under "elimination and
corporate" were (Y)4,172 million in FY2003 interim, (Y)4,008 million in
FY2004 interim and (Y)8,525 million in FY2003. They consist primarily of
expenses for fundamental research activities and costs of the
administrative operations of headquarters.
(Geographic Segment Information / Based on Location of Customers)
Net sales to unaffiliated customers in FY2003 interim, FY2004 interim
and FY2003 are as follows:
Yen (Millions)
--------------
FY2003 FY2004 FY2003
------ ------ ------
interim interim
------- -------
Japan 24,819 37,669 57,990
Americas 3,879 13,494 16,264
Europe 4,514 7,557 10,401
Asia 29,074 87,869 89,563
------- -------- -------
Total 62,286 146,589 174,218
======= ======== =======
(Note) 1. Net sales from unaffiliated customers are based on the
customer's location.
2. Each of the segments include primarily the following countries or
regions:
(1) Americas U.S., Costa Rica, Canada, etc.
(2) Europe Germany, Italy, Portugal, etc.
(3) Asia Taiwan, South Korea, China, etc.
- 25 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Supplemental Segment Information
(Geographic Segment Information / Based on Location of Advantest and its
Affiliates)
The following table sets forth the net sales and operating income
(loss) in FY2003 interim, FY2004 interim and FY2003, classified by location
of office from which product was shipped. This information is provided as
supplement information in addition to the requirements of SFAS No. 131 in
consideration of the disclosure requirements under the Securities Exchange
Law of Japan.
(In millions of yen)
- -------------------------------------------------------------------------------------------------------------------------
FY2003 interim
(April 1, 2003 through
September 30, 2003)
---------------------------------------------------------------------------------------------
Elimination
Japan Americas Europe Asia Total and Consolidated
corporate
- -------------------------------------------------------------------------------------------------------------------------
Net sales
(1) Sales to unaffiliated 36,269 10,140 5,855 10,022 62,286 - 62,286
customers
(2) Inter-segment 18,682 1,120 301 1,808 21,911 (21,911) -
- -------------------------------------------------------------------------------------------------------------------------
Total 54,951 11,260 6,156 11,830 84,197 (21,911) 62,286
- -------------------------------------------------------------------------------------------------------------------------
Operating expenses 50,005 10,988 5,259 10,960 77,212 (19,365) 57,847
- -------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 4,946 272 897 870 6,985 (2,546) 4,439
- -------------------------------------------------------------------------------------------------------------------------
(In millions of yen)
- -------------------------------------------------------------------------------------------------------------------------
FY2004 interim
(April 1, 2004 through
September 30, 2004)
---------------------------------------------------------------------------------------------
Elimination
Japan Americas Europe Asia Total and Consolidated
corporate
- -------------------------------------------------------------------------------------------------------------------------
Net sales
(1) Sales to unaffiliated 60,206 38,685 8,754 38,944 146,589 -- 146,589
customers
(2) Inter-segment 64,368 1,224 448 3,843 69,883 (69,883) --
- -------------------------------------------------------------------------------------------------------------------------
Total 124,574 39,909 9,202 42,787 216,472 (69,883) 146,589
- -------------------------------------------------------------------------------------------------------------------------
Operating expenses 89,912 34,380 7,633 36,933 168,858 (67,689) 101,169
- -------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 34,662 5,529 1,569 5,854 47,614 (2,194) 45,420
- -------------------------------------------------------------------------------------------------------------------------
- 26 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(In millions of yen)
- -------------------------------------------------------------------------------------------------------------------------
FY2003
(April 1, 2003 through
March 31, 2004)
---------------------------------------------------------------------------------------------
Elimination
Japan Americas Europe Asia Total and Consolidated
corporate
- -------------------------------------------------------------------------------------------------------------------------
Net sales
(1) Sales to unaffiliated 91,860 29,641 15,322 37,395 174,218 -- 174,218
customers
(2) Inter-segment 68,143 2,134 728 4,051 75,056 (75,056) --
- -------------------------------------------------------------------------------------------------------------------------
Total 160,003 31,775 16,050 41,446 249,274 (75,056) 174,218
- -------------------------------------------------------------------------------------------------------------------------
Operating expenses 128,421 29,593 13,945 36,443 208,402 (65,144) 143,258
- -------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 31,582 2,182 2,105 5,003 40,872 (9,912) 30,960
- -------------------------------------------------------------------------------------------------------------------------
(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., etc.
(2) Europe Germany, France, etc.
(3) Asia South Korea, Taiwan, Singapore, etc.
3. General corporate operating expenses included under "elimination
and corporate" were (Y)4,172 million in FY2003 interim, (Y)4,008
million in FY2004 interim and (Y)8,525 million in FY2003. They
consist primarily of expenses for fundamental research activities
and costs of the administrative operations of headquarters.
- 27 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 14) Per Share Data
The following table sets forth the computation of basic and diluted net
income per share and cash dividends per share:
Yen (Millions)
except for per share data
-------------------------
FY2003 interim FY2004 interim FY2003
-------------- -------------- ------
Numerator:
Net income 2,453 28,573 17,329
------------ ------------ -----------
Denominator:
Basic weighted average shares 98,245,709 98,295,932 98,250,830
Dilutive effect of exercise of
stock options and warrants 101,630 206,598 195,306
------------ ------------ -----------
Diluted weighted average shares 98,347,339 98,502,530 98,446,136
------------ ------------ -----------
Basic net income per share 24.96 290.68 176.37
Diluted net income per share 24.94 290.07 176.02
------------ ------------ -----------
Cash dividends per share 15.00 25.00 40.00
------------ ------------ -----------
Cash dividends per share are computed based on dividends declared with
respect to earnings for the periods.
(Note 15) Commitments
Advantest provides guarantees to third parties mainly for customers
lease obligations. At September 30, 2004 and March 31, 2004, these
guarantees amounted to (Y)493 million and (Y)569 million, respectively.
Advantest would be required to satisfy customers lease obligations in the
event of default. The guarantees are collateralized by the leased equipment.
At September 30, 2004 and March 31, 2004, Advantest has not accrued any
obligation with respect to such guarantees as it estimates the fair value of
its obligations to be insignificant.
(2) Other information
Not applicable.
- 28 -