Exhibit 2
I. Interim Consolidated Financial Statements and Other Information
1. Interim Consolidated Financial Statements
(1) Interim Consolidated Balance Sheets
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FY2004 interim FY2005 interim Summarized consolidated
balance sheet of FY2004
(As of September 30, 2004) (As of September 30, 2005) (As of March 31, 2005)
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Amount Percentage Amount Percentage Amount Percentage
(in million (%) (in million (%) (in million (%)
Notes yen) yen) yen)
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(Assets)
Cash and cash equivalents 139,911 135,226 120,986
Trade receivable, net Note 3 86,222 59,038 56,702
Inventories Note 4 32,687 34,471 29,585
Deferred tax assets 12,411 15,329 13,673
Other current assets Note 7 2,504 4,156 2,985
----------- ----------- -----------
Total current assets 273,735 78.2 248,220 77.6 223,931 75.5
Investment securities Note 6 6,882 2.0 7,687 2.4 7,772 2.6
Property, plant and equipment, net Note 5, 51,938 14.8 51,423 16.1 51,364 17.3
10
Deferred tax assets 11,781 3.4 7,629 2.4 8,438 2.9
Intangible assets, net 3,334 1.0 2,930 0.9 3,090 1.0
Other assets 2,281 0.6 2,180 0.6 2,174 0.7
----------- ----------- -----------
Total assets 349,951 100.0 320,069 100.0 296,769 100.0
----------- ----------- -----------
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-1-
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FY2004 interim FY2005 interim Summarized consolidated
balance sheet of FY2004
(As of September 30, 2004) (As of September 30, 2005) (As of March 31, 2005)
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Amount Percentage Amount Percentage Amount Percentage
(in million (%) (in million (%) (in million (%)
Notes yen) yen) yen)
- ------------------------------------------------------------------------------------------------------------------------------------
(Liabilities)
Current portion of long-term debt Note 10 4,543 20,047 20,043
Trade accounts payable 24,985 29,577 23,196
Income taxes payable 5,025 9,110 7,278
Accrued expenses 8,809 11,039 13,865
Accrued warranty expenses 4,746 4,180 4,090
Deferred revenue 4,252 4,654 2,220
Other current liabilities Note 7 5,109 2,923 3,302
----------- ----------- -----------
Total current liabilities 57,469 16.4 81,530 25.5 73,994 24.9
Long-term debt, excluding current portion Note 10 20,062 5.7 15 0.0 40 0.0
Accrued pension and severance cost 18,866 5.4 12,361 3.9 12,605 4.3
Other liabilities 3,512 1.1 3,561 1.1 3,381 1.1
----------- ----------- -----------
Total liabilities 99,909 28.6 97,467 30.5 90,020 30.3
----------- ----------- -----------
(Minority interests)
Minority interests 114 0.0 - - - -
(Stockholders' equity)
Common stock 32,363 9.3 32,363 10.1 32,363 10.9
Capital surplus Note 2 33,732 9.6 36,018 11.3 35,263 11.9
(o)
Retained earnings 202,661 57.9 222,213 69.4 210,121 70.8
Accumulated other comprehensive income Note 6, (6,157) (1.8) (2,865) (0.9) (4,878) (1.6)
(loss) 11
Treasury stock (12,671) (3.6) (65,127) (20.4) (66,120) (22.3)
----------- ----------- -----------
Total stockholders' equity 249,928 71.4 222,602 69.5 206,749 69.7
----------- ----------- -----------
Total liabilities and stockholders' equity 349,951 100.0 320,069 100.0 296,769 100.0
----------- ----------- -----------
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Notes FY2004 interim FY2005 interim FY2004
(As of September 30, 2004) (As of September 30, 2005) (As of March 31, 2005)
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Supplemental data for stockholders' equity
Common stock - Authorized 220,000,000 shares 220,000,000 shares 220,000,000 shares
Common stock - Issued 99,783,385 shares 99,783,385 shares 99,783,385 shares
Treasury stock 1,479,992 shares 7,249,303 shares 7,359,770 shares
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-2-
(2) Interim Consolidated Statements of Operations
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FY2004 interim FY2005 interim Summarized consolidated
statement of
operations of FY2004
(April 1, 2004 through (April 1, 2005 through (April 1, 2004 through
September 30, 2004) September 30, 2005) March 31, 2005)
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Amount Percentage Amount Percentage Amount Percentage
Notes (in million yen) (%) (in million yen) (%) (in million yen) (%)
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Net sales 146,589 100.0 107,099 100.0 239,439 100.0
Cost of sales 68,238 46.6 51,714 48.3 115,994 48.4
--------- --------- ---------
Gross profit 78,351 53.4 55,385 51.7 123,445 51.6
Research and development 12,087 8.2 12,877 12.0 26,280 11.0
expenses
Selling, general and administrative Note 21,603 14.8 19,848 18.5 36,446 15.2
expenses 2(j,n,o)
--------- --------- ---------
Operating income 44,661 30.4 22,660 21.2 60,719 25.4
Other income (expense):
Interest and dividends income 212 715 597
Interest expense (225) (205) (441)
Minority interests (85) - (84)
Other Note 6, 1,522 1,424 1.0 1,332 1,842 1.7 1,017 1,089 0.4
7 ----------------- ----------------- -----------------
Income before income taxes 46,085 31.4 24,502 22.9 61,808 25.8
Income Taxes 18,271 12.4 9,888 9.3 23,730 9.9
--------- --------- ---------
Net income 27,814 19.0 14,614 13.6 38,078 15.9
--------- --------- ---------
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- ------------------------------------------------------------------------------------------------------------------------------------
FY2004 interim FY2005 interim FY2004
(April 1, 2004 through (April 1, 2005 through (April 1, 2004 through
September 30, 2004) September 30, 2005) March 31, 2005)
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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 282.96 158.06 389.54
Diluted 282.37 157.51 388.51
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-3-
(3) Interim Consolidated Statements of Stockholders' Equity
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FY2004 interim FY2005 interim Consolidated statement of
stockholders'
equity of FY2004
(April 1, 2004 through (April 1, 2005 through (April 1, 2004 through
September 30, 2004) September 30, 2005) March 31, 2005)
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Notes Amount Amount Amount
(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 35,263 32,973
Stock option compensation expense Note 2 759 755 2,290
(o)
------------------------------------------------------------------------------
Balance at end of period 33,732 36,018 35,263
------------------------------------------------------------------------------
Retained earnings :
Balance at beginning of period 177,404 210,121 177,404
Net income 27,814 14,614 38,078
Cash dividends (2,458) (2,311) (4,915)
Loss on disposal of treasury stock (99) (211) (446)
------------------------------------------------------------------------------
Balance at end of period 202,661 222,213 210,121
------------------------------------------------------------------------------
Accumulated other comprehensive Note 6,
income (loss) : 11
Balance at beginning of period (8,061) (4,878) (8,061)
Other comprehensive income, net of tax 1,904 2,013 3,183
------------------------------------------------------------------------------
Balance at end of period (6,157) (2,865) (4,878)
------------------------------------------------------------------------------
Treasury stock :
Balance at beginning of period (12,911) (66,120) (12,911)
Treasury stock purchased (11) (14) (54,513)
Exercise of stock options 249 1,006 1,302
Treasury stock sold 2 1 2
------------------------------------------------------------------------------
Balance at end of period (12,671) (65,127) (66,120)
------------------------------------------------------------------------------
Total stockholders' equity 249,928 222,602 206,749
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- ------------------------------------------------------------------------------------------------------------------------------------
FY2004 interim FY2005 interim Consolidated statement of
stockholders'
equity of FY2004
(April 1, 2004 through (April 1, 2005 through (April 1, 2004 through
September 30, 2004) September 30, 2005) March 31, 2005)
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Notes Amount Amount Amount
(in million yen) (in million yen) (in million yen)
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Disclosure of comprehensive income:
Net income 27,814 14,614 38,078
Other comprehensive income, 1,904 2,013 3,183
net of tax
------------------------------------------------------------------------------
Total comprehensive income 29,718 16,627 41,261
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-4-
(4) Interim Consolidated Statements of Cash Flows
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FY2004 interim FY2005 interim Summarized consolidated
statement of
cash flows of FY2004
(April 1, 2004 through (April 1, 2005 through (April 1, 2004 through
September 30, 2004) September 30, 2005) March 31, 2005)
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Amount Amount Amount
Notes (in million yen) (in million yen) (in million yen)
- -----------------------------------------------------------------------------------------------------------------------------------
I Cash flows from operating activities:
Net income 27,814 14,614 38,078
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,035 3,962 8,285
Deferred income taxes 13,081 (679) 13,540
Stock option compensation expense 759 755 2,290
Decrease (increase) in trade (8,544) (1,826) 20,953
accounts receivable
Decrease (increase) in inventories 17,171 (4,670) 20,218
Increase (decrease) in trade (14,455) 5,805 (16,375)
accounts payable
Increase (decrease) in income taxes 1,074 1,792 3,311
payable
Increase (decrease) in accrued (196) (2,864) 4,445
expenses
Increase (decrease) in accrued 1,625 50 969
warranty expenses
Increase (decrease) in deferred (514) 2,268 (2,456)
revenue
Increase (decrease) in accrued
pension and severance cost 876 (243) (3,409)
Other Note 6 1,819 (2,166) 478
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Net cash provided by operating 44,545 16,798 90,327
activities
---------------------------------------------------------------------------
II Cash flows from investing activities:
Proceeds from sale of available-for-
sale marketable securities 634 2,964 1,428
Proceeds from sale of non- 45 - 50
marketable securities
Purchases of non-marketable - (1,900) -
securities
Proceeds from sale of property, plant 31 190 132
and equipment
Purchases of intangible assets (204) (238) (470)
Purchases of property, plant and (4,818) (3,776) (8,738)
equipment
Other (996) (58) (652)
---------------------------------------------------------------------------
Net cash used in investing (5,308) (2,818) (8,250)
activities
---------------------------------------------------------------------------
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-5-
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FY2004 interim FY2005 interim Summarized consolidated
statement of
cash flows of FY2004
(April 1, 2004 through (April 1, 2005 through (April 1, 2004 through
September 30, 2004) September 30, 2005) March 31, 2005)
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Amount Amount Amount
Notes (in million yen) (in million yen) (in million yen)
- -----------------------------------------------------------------------------------------------------------------------------------
III Cash flows from financing activities:
Principal payments on long-term debt (21) (21) (4,543)
Proceeds from sale of treasury stock - 796 939
Payments to acquire treasury stock (7) (12) (54,511)
Dividends paid (2,453) (2,307) (4,907)
Other 226 13 (14)
---------------------------------------------------------------------------
Net cash used in financing (2,255) (1,531) (63,036)
activities
---------------------------------------------------------------------------
IV Net effect of exchange rate changes on 1,783 1,791 799
cash and cash equivalents
---------------------------------------------------------------------------
V Net change in cash and cash 38,765 14,240 19,840
equivalents
VI Cash and cash equivalents at 101,146 120,986 101,146
beginning of period
---------------------------------------------------------------------------
VII Cash and cash equivalents at end of 139,911 135,226 120,986
period
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- -----------------------------------------------------------------------------------------------------------------------------------
FY2004 interim FY2005 interim Summarized consolidated
statement of
cash flows of FY2004
(April 1, 2004 through (April 1, 2005 through (April 1, 2004 through
September 30, 2004) September 30, 2005) March 31, 2005)
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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 3,678 8,004 6,740
Interest 225 205 447
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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 the
accounts of Advantest Corporation and its majority-owned subsidiaries. Advantest
is not involved with any variable interest entities as, defined by FASB
Interpretation No. 46 (revised December 2003) "Consolidation of Variable
Interest Entities". All significant intercompany balances and transactions have
been eliminated in consolidation.
The following table sets forth the number of consolidated
subsidiaries and equity method affiliates of Advantest:
---------------------------- ---------------------- ------------------ ---------------------
FY2005 interim FY2004
(As of September 30, (As of March 31,
2005) 2005) Increase (decrease)
---------------------------- ---------------------- ------------------ ---------------------
Domestic 23 22 1
------------------ ---------------------- ------------------ ---------------------
Overseas 17 17 0
------------------ ---------------------- ------------------ ---------------------
Consolidated subsidiaries 40 39 1
---------------------------- ---------------------- ------------------ ---------------------
Equity method affiliates - - -
---------------------------- ---------------------- ------------------ ---------------------
Total 40 39 1
---------------------------- ---------------------- ------------------ ---------------------
Changes in the scope of consolidation:
Newly included (1): Advantest Technology Solutions Corporation *1
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ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
*1 Advantest Technology Solutions Corporation was established on July 1,
2005 as a subsidiary to conduct semiconductor design validation
system business.
(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.
(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.
(vii) Stock-based compensation
In accordance with the fair value recognition provisions of
SFAS No. 123 (revised 2004) ("SFAS No. 123R"), "Share Based Payment",
stock-based compensation expense evaluated at fair value 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
The company and subsidiaries (collectively "Advantest")
manufacture and sell semiconductor and component test system product
group and mechatronics-related product group such as test handlers and
device interfaces. Advantest also engages in research and development
activities and provides maintenance and support services associated
with these products.
In conjunction with its business and organizational
restructuring, effective April 1, 2004, 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 the business by 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 test systems
for memory semiconductors for memory semiconductor devices and test
systems for SoC semiconductors for non memory semiconductor devices.
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.
(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. 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 an allowance for doubtful accounts to ensure
that trade receivables are not overstated due to uncollectability,
which represents Advantest's best estimate of the amount of probable
credit losses in Advantest's existing trade receivables. 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 by the equity method. All
significant intercompany profits from affiliates have been eliminated.
(f) Investment Securities
Investment securities at September 30, 2004, September 30, 2005
and March 31, 2005 consist of marketable and non-marketable equity
securities. Advantest classifies its marketable equity securities as
available-for-sale.
Available-for-sale securities are recorded at fair value.
Unrealized gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and are
reported as a 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 an impairment loss. 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 exists include: the degree of change in ratio of market
prices per share to book value per share at the date of evaluation
compared to that of the 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
-10-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
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 average cost method.
Non-marketable investment securities are carried at cost. On a
periodic basis, Advantest evaluates the investments for the possible
impairment. If the fair value of the 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 a new cost basis for the security is
established.
(g) Derivative Financial Instruments
Derivative financial instruments are accounted for under
Statement of Financial Accounting Standards ("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, 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.
Advantest uses foreign exchange forward contracts to manage
currency exposure, resulting from changes in foreign currency exchange
rates, on trade receivables. However, these contracts do not qualify
for hedge accounting since they do not meet the hedging criteria
specified 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
-11-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
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.
Depreciation is computed principally using the declining-balance
method except for buildings 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. 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 (other than
investment securities), 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 Semiconductor Test Systems are capitalized
subsequent to the attainment of 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 on a straight-line over the
estimated useful life, which is generally five years. The cost of
computer software under capital leases is amortized straight-line
-12-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
over the lease term.
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 evaluates the impairment of 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 undiscounted 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.
(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 and support
during warranty periods, estimated repair and support expenses over
the warranty period are accrued based on the historical ratio of
actual repair and support 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. 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.
(m) Revenue Recognition
In accordance with the guidance provided by the Securities and
Exchange Commission's Staff Accounting Bulletin No. 104, "Revenue
Recognition," Advantest recognizes revenue when there is persuasive
evidence of an arrangement, title and risk of loss have passed,
delivery has occurred or the services have been rendered, the sales
price is fixed or determinable and collection of the related
receivable is reasonably assured.
-13-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Revenue from Sales of Products
------------------------------
Revenue from sales of products which require installation work is
recognized when the related installation work is completed. The
revenue recognized upon completion of installation is limited to the
amount that is payable based on customer acceptance. 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.
For equipment sales involving software that is more than
incidental to the product, revenue is recognized when persuasive
evidence of an arrangement exists, delivery has occurred, the sales
price is fixed or determinable, and collection of the related
receivable is probable in accordance with American Institute of
Certified Public Accountant ("AICPA") Statement of Position ("SOP")
No. 97-2, "Software Revenue Recognition," as amended by SOP No. 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, With Respect
to Certain Transactions." Revenue for the separate elements is only
recognized when the functionality of the undelivered element is not
essential to the delivered element.
Revenue from Long-term Service contracts
----------------------------------------
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 primarily 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.
Advantest enters into certain revenue arrangements with multiple
deliverables, which include combination of 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.
-14-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(n) Research and Development
Research and development costs are expensed as incurred.
(o) Stock-Based Compensation
Advantest measures its stock-based compensation cost based on the
fair value method as defined in SFAS No. 123 (revised 2004) ("No.
123R") Share-Based Payment, and recognized such cost as an expense in
the statements of income. Advantest has retrospectively applied this
accounting method effective April 1, 2004 by using the "modified
retrospective" approach prescribed by the said statement in the fiscal
year ended March 2005.
The SFAS No. 123R Share-Based Payment was released after
Advantest filed its interim report. For this reason, until the
previous interim consolidated period, Advantest accounted for its
stock-based compensation cost based on the intrinsic value method
prescribed by Accounting Principle Board Opinion No.25, "Accounting
for Stock Issued to Employees" and related interpretations as allowed
under the SFAS No.123 "Accounting for Stock-Based Compensation".
Advantest had not recognized its stock-based compensation cost in the
statements of income for the previous interim fiscal period. As such,
in connection with the retrospective application of the SFAS No.123R
Share- Based Payment effective April 1, 2004, the interim consolidated
financial statements for the previous interim period have been
restated.
Due to the restatement made to the interim consolidated financial
statements for the previous interim period, selling, general and
administrative expense increased by (Y)759 million. Operating income,
net income before income taxes and interim net income for the previous
decreased by the same amount. Basic interim net income per share
decreased by (Y)7.72, and diluted net income per share decreased by
(Y)7.70. Capital surplus increased and retained earnings decreased by
(Y)759 million in the interim consolidated balance sheet at the end of
the previous interim. Comprehensive income for the previous interim
period decreased by the same amount accordingly. Due to a decrease of
(Y)759 million in interim net income, the interim consolidated cash
flow statement for the previous interim period has been restated as
well.
The impacts on the segment information have been discussed in the
notes to the segment information.
A fair value for stock options is calculated based on the
Black-Scholes Option Pricing Model.
Stock-based compensation expenses recognized are (Y)759 million
in FY 2004 Interim, (Y)755 million in FY 2005 Interim, and (Y)2,290
million in FY 2004.
A weighted average fair value per share for stock options that
were granted in FY 2004 Interim and FY 2005 Interim were (Y)2,991 and
(Y)2,930, respectively. These figures were calculated
-15-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
based on the Black-Scholes Option Pricing Model by using the following
weighted average estimates.
FY 2004 Interim FY 2005 Interim
------------------- -------------------
Expected dividend yield 0.6% 0.5%
Risk free interest rate 0.6% 0.7%
Volatility 56.6% 51.1%
Expected life 4 years 4 years
(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 records a valuation
allowance to reduce the deferred tax assets to the amount that is more
likely than not realizable.
(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 year.
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, 2004, September 30, 2005 and March 31, 2005,
Advantest had outstanding stock options and warrants exercisable into
1,799,500, 7,000 and 7,000 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, assets and liabilities of non-Japanese subsidiaries,
which have a functional currency other than the Japanese yen, are
translated at the rate of exchange on the balance sheet date. Revenue
and expense accounts are translated at the average rate of exchange in
effect during the year. Resulting translation adjustments are included
as a component of accumulated other comprehensive income (loss).
-16-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(s) Foreign Currency Transactions
Assets and liabilities denominated in foreign currencies at the
balance sheet date are translated at the applicable current rate
prevailing at that date. All revenue and expenses associated with
foreign currencies are converted at the rate 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 operations.
(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
receivables, inventories and deferred tax assets, various accruals
such as accrued warranty expenses, and assets and obligations related
to employees retirement and severance plans. Actual results could
differ from those estimates.
(Note 3) Trade Receivables
Trade receivables at September 30, 2004, September 30, 2005 and March
31, 2005 are as follows:
Yen (Millions)
----------
September 30, September 30, March 31,
------------- ------------- ---------
2004 2005 2005
---- ---- ----
Notes 10,455 4,713 14,133
Accounts 78,239 56,489 44,743
--------- --------- ---------
88,694 61,202 58,876
Less allowance for doubtful 2,472 2,164 2,174
accounts --------- --------- ---------
86,222 59,038 56,702
========= ========= =========
-17-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 4) Inventories
Inventories at September 30, 2004, September 30, 2005 and March 31,
2005 are composed of the following:
Yen (Millions)
----------
September 30, September 30, March 31,
------------- ------------- ---------
2004 2005 2005
---- ---- ----
Finished goods 7,804 12,188 7,347
Work in process 18,589 15,980 16,879
Raw materials and supplies 6,294 6,303 5,359
--------- --------- ---------
32,687 34,471 29,585
========= ========= =========
-18-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 5) Property, Plant and Equipment
Property, plant and equipment at September 30, 2004, September 30,
2005 and March 31,2005 are composed of the following:
Yen (Millions)
----------
September 30, September 30, March 31,
------------- ------------- ---------
2004 2005 2005
---- ---- ----
Land 19,200 19,168 19,192
Buildings 49,579 49,806 49,641
Machinery and equipment 26,290 29,726 27,162
Furniture and fixtures 22,610 23,792 22,934
Construction in progress 861 195 349
--------- --------- ---------
118,540 122,687 119,278
Less accumulated depreciation 66,602 71,264 67,914
--------- --------- ---------
51,938 51,423 51,364
========= ========= =========
(Note 6) Investment Securities
Marketable securities consist of equity securities. The acquisition
cost, gross unrealized gains, gross unrealized losses and fair value at
September 30, 2004, September 30, 2005 and March 31, 2005 were as follows:
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
-19-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Yen (Millions)
--------------
September 30, 2005
------------------
Gross Gross
Acquisition unrealized unrealized
cost gains losses Fair value
---- ----- ------ ----------
Noncurrent:
Available-for-sale:
Equity securities 1,784 2,560 - 4,344
-20-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Yen (Millions)
--------------
March 31, 2005
--------------
Gross Gross
Acquisition unrealized unrealized
cost gains losses Fair value
---- ----- ------ ----------
Noncurrent:
Available-for-sale:
Equity securities 3,803 2,516 - 6,328
Gross realized gains and losses on available-for-sale equity
securities for the six months periods ended September 30, 2004 and
September 30, 2005, and for the year ended March 31, 2005 were as follows:
Yen (Millions) Yen (Millions)
-------------- --------------
September 30, 2004 September 30, 2005
------------------ ------------------
Gross Gross Gross Gross
realized realized realized realized
gains losses gains losses
----- ------ ----- ------
Noncurrent:
Available-for-sale:
Equity securities 629 - 934 -
Yen (Millions)
--------------
March 31, 2005
--------------
Gross Gross
realized realized
gains losses
----- ------
Noncurrent:
Available-for-sale:
Equity securities 934 -
Gross realized gains and losses based on the averaged cost method are
included in "other income (expense)" in the interim consolidated statements
of operations and the consolidated statements of operations, and "other" in
net cash provided by operating activities in the interim consolidated
statements of cash flows and the consolidated statements of cash flows.
Proceeds from the sale of available-for-sale equity securities for the
six months periods ended September 30, 2004 and September 30, 2005, and for
the year ended March 31, 2005 were (Y)634 million, (Y)2,964 million and
(Y)1,428 million, respectively.
As of September 30, 2005, there was no available-for-sale equity
security in an unrealized loss position.
-21-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Advantest maintains non-marketable investment securities, which are
recorded at cost. The carrying amounts of non-marketable investment
securities were (Y)2,595 million, (Y)3,343 million and (Y)1,444 million at
September 30, 2004, September 30, 2005 and March 31, 2005, respectively.
Investments with an aggregate cost of (Y)3,343 million did not have
indicators of impairment and Advantest did not identify any events or
changes in circumstances that might have had significant adverse effect on
the fair value of those investments.
(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.
Advantest had foreign exchange forward contracts to exchange
currencies among Japanese yen, U.S. dollars and Euro at September 30, 2004,
September 30, 2005 and March 31, 2005. The notional amounts of these
contracts were (Y)7,983 million, (Y)13,621 million and (Y)7,603 million at
September 30, 2004, September 30, 2005 and March 31, 2005.
The carrying amounts and estimated fair values of Advantest's foreign
exchange forward contracts at September 30, 2004, September 30, 2005 and
March 31, 2005 were as follows:
Yen (Millions) Yen (Millions)
-------------- --------------
September 30, 2004 September 30, 2005
------------------ ------------------
Carrying Fair Carrying Fair
amount Value amount value
------ ----- ------ -----
Financial assets:
Foreign exchange forward contracts 30 30 28 28
Financial liabilities:
Foreign exchange forward contracts 10 10 118 118
-22-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Yen (Millions)
--------------
March 31, 2005
--------------
Carrying Fair
amount value
------ -----
Financial assets:
Foreign exchange forward contracts 1 1
Financial liabilities:
Foreign Exchange forward contracts 49 49
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).
(Note 8) Leases - Lessor
Advantest provides leases that enable its customers to use
semiconductor test systems. All leases are classified as operating leases.
Future minimum lease income under noncancelable operating leases as of
September 30, 2004, September 30, 2005 and March 31, 2005 are as follows:
Yen (Millions)
------------------------------------------------------------------
September 30, 2004 September 30, 2005 March 31, 2005
-------------------- -------------------- ------------------
Within one year 1,379 1,912 1,549
After one year 919 1,189 1,116
-------------------- -------------------- ------------------
Total minimum lease income 2,298 3,101 2,665
==================== ==================== ==================
(Note 9) Leases - Lessee
Advantest has several noncancelable 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, 2004, September 30, 2005 and March 31, 2005 are as follows:
-23-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Yen (Millions)
------------------------------------------------------------------
September 30, 2004 September 30, 2005 March 31, 2005
-------------------- -------------------- ------------------
Within one year 174 308 329
After one year 377 619 379
-------------------- -------------------- ------------------
Total minimum lease payments 551 927 708
==================== ==================== ==================
(Note 10) Assets Pledged as Collateral and Secured Liabilities
As of September 30, 2004, September 30, 2005 and March 31, 2005,
property, plant and equipment with a carrying amount of (Y)398 million,
(Y)388 million and (Y)393 million was pledged as collateral for certain
debt obligations in the amount of (Y)31 million, (Y)17 million and (Y)24
million, respectively.
-24-
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) at September 30, 2004, September 30, 2005 and
March 31, 2005 are as follows:
Yen (Millions)
----------
September September March 31,
--------- --------- ---------
30, 2004 30, 2005 2005
-------- -------- ----
Foreign currency translation adjustments (5,720) (4,393) (6,452)
Net unrealized gains on securities 746 1,528 1,574
Minimum pension liability adjustments (1,183) - -
-------- -------- --------
Other comprehensive income (loss) (6,157) (2,865) (4,878)
======== ======== ========
(Note 12) Accrued Pension and Severance Cost
The components of net periodic benefit cost recognized for the six
months periods ended September 30, 2004 and September 30, 2005, and for the
year ended March 31, 2005 were as follows:
Yen
(Millions)
----------
FY2004 FY2005 FY2005
------ ------ ------
interim interim
------- -------
Components of net periodic benefit cost:
Service cost 875 830 1,710
Interest cost 427 283 853
Expected return on plan assets (292) (239) (583)
Amortization of unrecognized:
Net actuarial (gain) or loss 280 124 547
Prior service cost (58) (114) (144)
Settlement loss - - 2,799
----- ---- -----
Net periodic benefit cost 1,232 884 5,182
===== ==== =====
-25-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 13) Operating Segment and Geographic Information
(Operating Segment Information)
The Company and subsidiaries (collectively "Advantest") manufacture
and sell semiconductor and component test system product group and
mechatronics-related product group such as test handlers and device
interfaces. Advantest also engages in research and development activities
and provides maintenance and support services associated with these
products. In accordance with SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", Advantest has three operating and
reportable segments, which are the design, manufacturing, and sale of
semiconductor and component test system, mechatronics system and services,
support and others. These operating segments are determined based on the
nature of the products and the markets.
Operating segment information during FY2004 interim, FY2005 interim
and FY2004 are as follows:
Yen (Millions)
--------------
------------------------------------------------------------------------
Semiconductor
and Component Mechatronics Services, Elimination
Test System System Support and and corporate Total
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 37,790 9,950 765 (3,085) 45,420
Yen (Millions)
--------------
------------------------------------------------------------------------
Semiconductor
and Component Mechatronics Services, Elimination
Test System System Support and and corporate Total
Business Business Others
--------------- -------------- ------------- --------------- -----------
FY2005 Interim:
Net sales to
unaffiliated customers 78,244 20,320 8,535 - 107,099
Inter-segment 2,588 161 - (2,749) -
--------------- -------------- ------------- --------------- -----------
Sales 80,832 20,481 8,535 (2,749) 107,099
Operating income 21,003 4,591 1,950 (4,129) 23,415
-26-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Yen (Millions)
--------------
------------------------------------------------------------------------
Semiconductor
and Component Mechatronics Services, Elimination
Test System System Support and and corporate Total
Business Business Others
--------------- -------------- ------------- --------------- -----------
FY2004:
Net sales to
unaffiliated customers 173,938 45,821 19,680 - 239,439
Inter-segment 6,747 574 - (7,321) -
--------------- -------------- ------------- --------------- -----------
Sales 180,685 46,395 19,680 (7,321) 239,439
Operating income 50,624 13,662 3,402 (7,996) 59,692
Adjustments to operating income in Corporate principally represent
corporate general and administrative expenses and research and development
expenses related to fundamental research activities that are not allocated
to operating segments.
The operating income in the business segment information for FY2004
interim and FY2005 interim do not match the consolidated statements of
operations as the business segment information does not include the stock
option cost of (Y)759 million and (Y)755 million. The operating income in
the business segment information for FY2004 do not match the consolidated
statements of operations as the business segment information does not
include a net gain on settlement of substitutional portions of EPF of
(Y)3,317 million and the stock option cost of (Y)2,290 million. Profit and
loss from these are not included in management's analysis of results.
(Geographic Segment Information / Based on Location of Customers)
Net sales to unaffiliated customers in FY2004 interim, FY2005 interim
and FY2004 are as follows:
Yen (Millions)
----------
FY2004 FY2005 FY2004
------ ------ ------
interim interim
------- -------
Japan 37,669 34,607 60,025
Americas 13,494 11,452 23,024
Europe 7,557 7,117 12,270
Asia 87,869 53,923 144,120
------- ------- -------
Total 146,589 107,099 239,439
======= ======= =======
(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:
-27-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(1) Americas U.S., Costa Rica, etc.
(2) Europe Portugal, Israel, Italy, etc.
(3) Asia Taiwan, South Korea, Malaysia, etc.
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 FY2004 interim, FY2005 interim and FY2004, 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)
- --------------------------------------------------------------------------------------------------------------
FY2004 interim
(April 1, 2004 through
September 30, 2004)
--------------------------------------------------------------------------------
Elimination
Japan Americas Europe Asia Total and Consolidated
corporate
- --------------------------------------------------------------------------------------------------------------
Net sales
(1)Sales to unaffiliated 60,205 38,685 8,754 38,945 146,589 - 146,589
customers
(2)Inter-segment 64,367 1,224 449 3,843 69,883 (69,883) -
- --------------------------------------------------------------------------------------------------------------
Total 124,572 39,909 9,203 42,788 216,472 (69,883) 146,589
- --------------------------------------------------------------------------------------------------------------
Operating expenses 89,910 34,380 7,634 36,934 168,858 (66,930) 101,928
- --------------------------------------------------------------------------------------------------------------
Operating income (loss) 34,662 5,529 1,569 5,854 47,614 (2,953) 44,661
- --------------------------------------------------------------------------------------------------------------
(In millions of yen)
- --------------------------------------------------------------------------------------------------------------
FY2005 interim
(April 1, 2005 through
September 30, 2005)
--------------------------------------------------------------------------------
Elimination
Japan Americas Europe Asia Total and Consolidated
corporate
- --------------------------------------------------------------------------------------------------------------
Net sales
(1)Sales to unaffiliated 54,121 28,257 6,982 17,739 107,099 - 107,099
customers
(2)Inter-segment 53,079 1,558 665 3,552 58,854 (58,854) -
- --------------------------------------------------------------------------------------------------------------
-28-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
- --------------------------------------------------------------------------------------------------------------
Total 107,200 29,815 7,647 21,291 165,953 (58,854) 107,099
- --------------------------------------------------------------------------------------------------------------
Operating expenses 79,295 28,071 7,007 19,402 133,775 (49,336) 84,439
- --------------------------------------------------------------------------------------------------------------
Operating income (loss) 27,905 1,744 640 1,889 32,178 (9,518) 22,660
- --------------------------------------------------------------------------------------------------------------
-29-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(In millions of yen)
- --------------------------------------------------------------------------------------------------------------
FY2004
(April 1, 2004 through
March 31, 2005)
--------------------------------------------------------------------------------
Elimination
Japan Americas Europe Asia Total and Consolidated
corporate
- --------------------------------------------------------------------------------------------------------------
Net sales
(1)Sales to unaffiliated 110,095 55,877 16,307 57,160 239,439 - 239,439
customers
(2)Inter-segment 101,609 2,601 934 7,523 112,667 (112,667) -
- --------------------------------------------------------------------------------------------------------------
Total 211,704 58,478 17,241 64,683 352,106 (112,667) 239,439
- --------------------------------------------------------------------------------------------------------------
Operating expenses 160,283 54,388 15,333 56,621 286,625 (107,905) 178,720
- --------------------------------------------------------------------------------------------------------------
Operating income (loss) 51,421 4,090 1,908 8,062 65,481 (4,762) 60,719
- --------------------------------------------------------------------------------------------------------------
(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. Adjustments to operating income (loss) included in Corporate
mainly consist of research and development expenses for basic
research activities, which are not allocated to corporate general
administrative expenses and segment by geographic area. In
addition, during this interim period, stock option compensation
expense of (Y)759 million and (Y)755 million in FY 2004 interim
and FY2005 interim, respectively are included in Corporate
operating expenses. For FY2004, Corporate operating expenses
include the temporary profit of (Y)3,317 million which arose from
a return of the substitutional portion of its Employee's Pension
Fund Plans and the stock option compensation expense of (Y)2,290
million.
-30-
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 for the six months
periods ended September 30, 2004 and September 30, 2005, and for the year
ended March 31, 2005:
Yen (Millions)
except for per share data
FY2004 interim FY2005 interim FY2004
-------------- -------------- ------
Numerator:
Net income 27,814 14,614 38,078
----------------- ----------------- ---------------
Denominator:
Basic weighted average shares of
common stock outstanding 98,295,932 92,458,229 97,750,345
Dilutive effect of exercise of
stock options and warrants 206,598 320,756 260,394
----------------- ----------------- ---------------
Diluted weighted average shares of
common stock outstanding 98,502,530 92,778,985 98,010,739
----------------- ----------------- ---------------
Basic net income per share 282.96 158.06 389.54
Diluted net income per share 282.37 157.51 388.51
----------------- ----------------- ---------------
Cash dividends per share 25.00 25.00 50.00
----------------- ----------------- ----------------
Cash dividends per share are computed based on dividends declared with
respect to earnings for the periods.
(Note 15) Commitments and Contingent Liabilities
In November 2002, the FASB issued FIN 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, an interpretation of SFAS No. 5, 57, and 107 and
rescission of FASB Interpretation No. 34". FIN 45 requires that a liability
be recorded in the guarantor's balance sheet upon issuance of a guarantee.
The initial recognition and measurement provisions of FIN 45 were
applicable to guarantees issued or modified after December 31, 2002.
Advantest provides guarantees to third parties mainly for customers
lease obligations. Advantest would be required to satisfy customers lease
obligations in the event of default. The maximum amount of undiscounted
payments is (Y)316 million and (Y)387 million at September 30, 2005 and
March 31, 2005, respectively. The guarantees are collateralized by the
leased equipment. At September 30, 2005 and March 31, 2005, Advantest has
not accrued any obligation with respect to such guarantees as it estimates
the fair value of its obligations to be insignificant.
-31-
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Advantest is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on
Advantest's consolidated financial position, results of operations, or cash
flows.
2. Other information
Not applicable.