I. Interim Consolidated Financial Statements and Other Information
1. Interim Consolidated Financial Statements
(1) Interim Consolidated Balance Sheets
- --------------------------------------------------------------------------------------------------------------------
FY2005 interim FY2006 interim FY2005
(As of September 30, (As of September 30,
2005) 2006) (As of March 31, 2006)
- --------------------------------------------------------------------------------------------------------------------
Amount Percentage Amount Percentage Amount Percentage
(in (in (in
million million million
Notes yen) (%) yen) (%) yen) (%)
- --------------------------------------------------------------------------------------------------------------------
(Assets)
Cash and cash equivalents 135,226 163,635 157,925
Trade receivable, net Note 3 59,038 67,336 69,567
Inventories Note 4 34,471 27,040 29,911
Deferred tax assets 15,329 12,471 13,708
Other current assets 4,156 2,626 4,522
------------ ------------ ------------
Total current assets 248,220 77.6 273,108 78.7 275,633 78.6
Investment securities Note 6 7,687 2.4 11,423 3.3 12,273 3.5
Property, plant and equipment, net Note 5, 51,423 16.1 50,002 14.4 50,793 14.5
10
Deferred tax assets 7,629 2.4 7,783 2.2 7,378 2.1
Intangible assets, net 2,930 0.9 2,973 0.9 2,858 0.8
Other assets 2,180 0.6 1,800 0.5 1,841 0.5
------------ ------------ ------------
Total assets 320,069 100.0 347,089 100.0 350,776 100.0
------------ ------------ ------------
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- 1 -
- --------------------------------------------------------------------------------------------------------------------
FY2005 interim FY2006 interim FY2005
(As of September 30, (As of September 30,
2005) 2006) (As of March 31, 2006)
- --------------------------------------------------------------------------------------------------------------------
Amount Percentage Amount Percentage Amount Percentage
(in (in (in
million million million
Notes yen) (%) yen) (%) yen) (%)
- --------------------------------------------------------------------------------------------------------------------
(Liabilities)
Current portion of long-term debt Note 10 20,047 10 30
Trade accounts payable 29,577 22,915 32,584
Income taxes payable 9,110 10,831 19,970
Accrued expenses 11,039 11,780 12,781
Accrued warranty expenses 4,180 4,373 4,776
Deferred revenue 4,654 620 2,979
Other current liabilities 2,923 2,912 3,625
------------ ------------ -------------
Total current liabilities 81,530 25.5 53,441 15.4 76,745 21.9
Long-term debt, excluding current Note 10 15 0.0 5 0.0 10 0.0
portion
Accrued pension and severance cost 12,361 3.9 11,420 3.3 12,292 3.5
Other liabilities 3,561 1.1 3,550 1.0 3,802 1.1
------------ ------------ -------------
Total liabilities 97,467 30.5 68,416 19.7 92,849 26.5
------------ ------------ -------------
(Stockholders' equity)
Common stock 32,363 10.1 32,363 9.3 32,363 9.2
Capital surplus Note 2 36,018 11.3 37,702 10.9 37,147 10.6
(o)
Retained earnings 222,213 69.4 262,875 75.7 245,090 69.9
Accumulated other comprehensive Note 6, (2,865) (0.9) 1,757 0.5 1,344 0.3
income (loss) 11
Treasury stock (65,127) (20.4) (56,024) (16.1) (58,017) (16.5)
------------ ------------ -------------
Total stockholders' equity 222,602 69.5 278,673 80.3 257,927 73.5
------------ ------------ -------------
Total liabilities and 320,069 100.0 347,089 100.0 350,776 100.0
stockholders' equity
------------ ------------ -------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Notes FY2005 interim FY2006 interim FY2005
(As of September 30, (As of September 30, (As of March 31, 2006)
2005) 2006)
- --------------------------------------------------------------------------------------------------------------------
Supplemental data for
stockholders' equity
Common stock-Authorized Note 16 440,000,000 shares 440,000,000 shares 440,000,000 shares
Common stock-Issued Note 16 199,566,770 shares 199,566,770 shares 199,566,770 shares
Treasury stock Note 16 14,498,606 shares 12,468,808 shares 12,913,472 shares
- --------------------------------------------------------------------------------------------------------------------
- 2 -
(2) Interim Consolidated Statements of Income
- --------------------------------------------------------------------------------------------------------------------
FY2005 interim FY2006 interim FY2005
(April 1, 2005 through (April 1, 2006 through (April 1, 2005 through
September 30, 2005) September 30, 2006) March 31, 2006)
- --------------------------------------------------------------------------------------------------------------------
Notes Amount Percentage Amount Percentage Amount Percentage
(in (in (in
million million million
yen) (%) yen) (%) yen) (%)
- --------------------------------------------------------------------------------------------------------------------
Net sales 107,099 100.0 120,492 100.0 253,922 100.0
Cost of sales 51,714 48.3 55,493 46.1 121,429 47.8
---------- --------- ---------
Gross profit 55,385 51.7 64,999 53.9 132,493 52.2
Research and development 12,877 12.0 14,121 11.7 26,927 10.6
expenses
Selling, general and Note 2 19,848 18.5 18,679 15.5 41,108 16.2
administrative expenses (j,n,o)
---------- --------- ---------
Operating income 22,660 21.2 32,199 26.7 64,458 25.4
Other income (expense):
Interest and dividends 715 1,384 1,760
income
Interest expense (205) (8) (290)
Other Note 1,332 1,842 1.7 376 1,752 1.5 1,526 2,996 1.2
6, 7
----------------- ------------------ ------------------
Income before income taxes 24,502 22.9 33,951 28.2 67,454 26.6
Income Taxes 9,888 9.3 11,747 9.8 26,080 10.3
---------- --------- ---------
Net income 14,614 13.6 22,204 18.4 41,374 16.3
---------- --------- ---------
- --------------------------------------------------------------------------------------------------------------------
FY2005 interim FY2006 interim FY2005
(April 1, 2005 through (April 1, 2006 through (April 1, 2005 through
September 30, 2005) September 30, 2006) March 31, 2006)
- --------------------------------------------------------------------------------------------------------------------
Notes Amount Amount Amount
(in yen) (in yen) (in yen)
- --------------------------------------------------------------------------------------------------------------------
Net income per share Note 14
Basic 79.03 118.79 223.17
Diluted 78.75 118.03 221.98
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- 3 -
(3) Interim Consolidated Statements of Stockholders' Equity
- --------------------------------------------------------------------------------------------------------------------
Accumulated
other
Capital Retained comprehensive Treasury
Common Stock surplus earnings income (loss) stock Total
- --------------------------------------------------------------------------------------------------------------------
Notes Amount Amount Amount Amount Amount Amount
(in million (in million (in million (in million (in million (in million
yen) yen) yen) yen) yen) yen)
====================================================================================================================
Balance at March 31, 2005 32,363 35,263 210,121 (4,878) (66,120) 206,749
- --------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 14,614 14,614
Other comprehensive Note
income (loss) 6, 11
Foreign currency
translation
adjustments 2,058 2,058
Net unrealized gains
and losses on
securities (45) (45)
--------------
Total comprehensive 16,627
income
--------------
Cash dividends (2,311) (2,311)
Stock option compensation Note 2 755 755
expense (o)
Exercise of stock options 1,006 1,006
and others
Treasury stock purchased (14) (14)
Treasury stock sold (211) 1 (210)
- --------------------------------------------------------------------------------------------------------------------
Balance at September 30, 32,363 36,018 222,213 (2,865) (65,127) 222,602
2005
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2006 32,363 37,147 245,090 1,344 (58,017) 257,927
- --------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 22,204 22,204
Other comprehensive Note
income (loss) 6, 11
Foreign currency
translation
adjustments 813 813
Net unrealized gains
and losses on
securities (400) (400)
--------------
Total comprehensive 22,617
income
--------------
Cash dividends (4,200) (4,200)
Stock option compensation Note 2 648 648
expense (o)
Exercise of stock options (93) 2,004 1,911
and others
Treasury stock purchased (18) (18)
Treasury stock sold (219) 7 (212)
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Balance at September 30, 32,363 37,702 262,875 1,757 (56,024) 278,673
2006
- --------------------------------------------------------------------------------------------------------------------
- 4 -
- --------------------------------------------------------------------------------------------------------------------
Accumulated
other
Capital Retained comprehensive Treasury
Common Stock surplus earnings income (loss) stock Total
- --------------------------------------------------------------------------------------------------------------------
Amount Amount Amount Amount Amount Amount
Notes (in million (in million (in million (in million (in million (in million
yen) yen) yen) yen) yen) yen)
====================================================================================================================
Balance at March 31, 2005 32,363 35,263 210,121 (4,878) (66,120) 206,749
- --------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 41,374 41,374
Other comprehensive Note
income (loss) 6, 11
Foreign currency
translation
adjustments 5,074 5,074
Net unrealized gains
and losses on
securities 1,148 1,148
--------------
Total comprehensive
income 47,596
--------------
Cash dividends (4,625) (4,625)
Stock option compensation Note 2 1,884 1,884
expense (o)
Exercise of stock options 8,157 8,157
and others
Treasury stock purchased (55) (55)
Treasury stock sold (1,780) 1 (1,779)
- --------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2006 32,363 37,147 245,090 1,344 (58,017) 257,927
- --------------------------------------------------------------------------------------------------------------------
- 5 -
(4) Interim Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------------------------------------------
FY2005 interim FY2006 interim FY2005
(April 1, 2005 through (April 1, 2006 through (April 1, 2005 through
September 30, 2005) September 30, 2006) March 31, 2006)
- --------------------------------------------------------------------------------------------------------------------
Notes Amount Amount Amount
(in million yen) (in million yen) (in million yen)
- --------------------------------------------------------------------------------------------------------------------
I Cash flows from operating
activities:
Net income 14,614 22,204 41,374
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 3,962 3,810 8,275
Deferred income taxes (679) 915 1,005
Stock option compensation 755 648 1,884
expense
Changes in assets and
liabilities:
Trade receivables (1,826) 2,180 (11,072)
Inventories (4,670) 2,835 108
Trade accounts payable 5,805 (9,390) 7,627
Income taxes payable 1,792 (9,156) 12,506
Accrued expenses (2,864) (1,013) (1,261)
Accrued warranty expenses 50 (403) 610
Deferred revenue 2,268 (2,329) 548
Accrued pension and (243) (873) (329)
severance cost
Other Note 6 (2,166) 2,763 (1,795)
-------------------------------------------------------------------------
Net cash provided by 16,798 12,191 59,480
operating activities
-------------------------------------------------------------------------
II Cash flows from investing
activities:
Proceeds from sale of
available-for-sale
marketable securities 2,964 -- 2,977
Purchases of marketable -- -- (2,256)
securities
Purchases of non-marketable (1,900) -- (1,900)
securities
Proceeds from sale of 190 63 258
property, plant and equipment
Purchases of intangible (238) (449) (523)
assets
Purchases of property, plant (3,776) (4,105) (7,071)
and equipment
Other (58) (33) (27)
-------------------------------------------------------------------------
Net cash used in investing (2,818) (4,524) (8,542)
activities
-------------------------------------------------------------------------
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- 6 -
- --------------------------------------------------------------------------------------------------------------------
FY2005 interim FY2006 interim FY2005
(April 1, 2005 through (April 1, 2006 through (April 1, 2005 through
September 30, 2005) September 30, 2006) March 31, 2006)
- --------------------------------------------------------------------------------------------------------------------
Notes Amount Amount Amount
(in million yen) (in million yen) (in million yen)
- --------------------------------------------------------------------------------------------------------------------
III Cash flows from financing
activities:
Principal payments on (21) (25) (20,043)
long-term debt
Proceeds from sale of 796 1,698 6,378
treasury stock
Payments to acquire treasury (12) (18) (57)
stock
Dividends paid (2,307) (4,193) (4,622)
Other 13 (4) 8
-------------------------------------------------------------------------
Net cash used in financing (1,531) (2,542) (18,336)
activities
-------------------------------------------------------------------------
IV Net effect of exchange rate 1,791 585 4,337
changes on cash and cash
equivalents
-------------------------------------------------------------------------
V Net change in cash and cash 14,240 5,710 36,939
equivalents
VI Cash and cash equivalents at 120,986 157,925 120,986
beginning of period
-------------------------------------------------------------------------
VII Cash and cash equivalents at 135,226 163,635 157,925
end of period
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
FY2005 interim FY2006 interim FY2005
(April 1, 2005 through (April 1, 2006 through (April 1, 2005 through
September 30, 2005) September 30, 2006) March 31, 2006)
- --------------------------------------------------------------------------------------------------------------------
Notes Amount Amount Amount
(in million yen) (in million yen) (in million yen)
- --------------------------------------------------------------------------------------------------------------------
Supplemental data:
Cash paid during the interim
period and the year for:
Income taxes 8,004 19,301 12,096
Interest 205 9 401
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- 7 -
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:
- -------------------------------------------------------------------------------
FY2006 interim FY2005
(As of September 30, As of March 31, Increase
2006) 2006) (decrease)
- -------------------------------------------------------------------------------
Domestic 23 23 0
---------------------------------------------------------------------
Overseas 17 17 0
---------------------------------------------------------------------
Consolidated subsidiaries 40 40 0
- -------------------------------------------------------------------------------
Equity method affiliates -- -- --
- -------------------------------------------------------------------------------
Total 40 40 0
- -------------------------------------------------------------------------------
- 8 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(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, property, plant 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.
(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.
- 9 -
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.
Description of the business by segment is as follows:
The semiconductor and component test system segment provides
customers with test system products for the semiconductor industry and
the electronic parts industry. Product lines provided 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 segment provides product lines such as
test handlers, mechatronic-applied products, for handling
semiconductor devices, device interfaces that serve as interfaces with
the devices that are measured and operations related to
nano-technology products.
The services, support and others segment consists of
comprehensive customer solutions provided in connection with the above
segments, support services, equipment lease business and others.
(b) Cash Equivalents
Cash equivalents primarily 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.
- 10 -
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, 2005, September 30, 2006
and March 31, 2006 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, 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
determined based on quoted market prices, projected discounted cash
flow or other valuation techniques as appropriate.
- 11 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
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 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 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.
- 12 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(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. 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 generally
capitalized subsequent to the attainment of technological feasibility
until shipment of software in accordance with the provisions of SFAS
No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed". Costs incurred subsequently are
expensed as incurred. Costs incurred prior to reaching technological
feasibility are expensed as incurred.
The cost of software is amortized on a straight-line basis over
the estimated useful life, which is generally from 3 years to 5 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.
- 13 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(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.
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.
- 14 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
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.
(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 recognizes such cost as an expense in
the statements of income. The fair value for stock options is
calculated based on the Black-Scholes Option Pricing Model.
Stock-based compensation expenses recognized were (Y)755 million
in FY 2005 Interim, (Y)648 million in FY 2006 Interim, and (Y)1,884
million in FY 2005.
The weighted average fair value per share for stock options that
were granted in FY 2005 Interim, FY 2006 Interim and FY 2005 were
(Y)1,465, (Y)1,232 and (Y)1,219, respectively. These figures were
calculated based on the Black-Scholes Option Pricing Model by using
the following weighted average estimates.
- 15 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
On October 1, 2006, a one to two stock split was made to shares
of the common stock in respect of shareholders recorded in the
register as of September 30, 2006. The weighted average fair value per
share before stock split that were granted in FY 2005 Interim, FY 2006
Interim and FY 2005 were (Y)2,930, (Y)2,464 and (Y)2,437,
respectively.
FY2005 interim FY2006 interim FY2005
-------------- -------------- ---------
Expected dividend yield 0.5% 0.5% 0.5%
Risk free interest rate 0.7% 1.0% 0.4%
Volatility 51.1% 34.2% 51.0%
Expected life 4 years 2.4 years 2.4 years
Prior to FY2005 interim, the Company had used certain assumptions
to determine the expected term of the Company's stock option plan.
However, because of the changes in grantees' exercise behaviors for
the year ended March 31, 2006, the previous assumptions no longer
provide a reasonable expected term. Accordingly, the Company
determined the expected term for stock options granted after April 1,
2005 by using the "simplified" method accepted by the SEC Staff
Accounting Bulletin(SAB) No.107. Under this method, the expected term
is assumed to be the mid-point between the vesting date and the end of
the contractual term. The use of the simplified method is only
permitted for stock options granted through December 31, 2007.
(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.
At September 30, 2005, September 30, 2006 and March 31, 2006,
Advantest had outstanding stock options exercisable into 14,000,
1,581,980 and 3,980 shares of common stock, respectively, which were
anti-dilutive and excluded from the calculation of diluted net income
per share but could potentially dilute net income per share in future
periods.
- 16 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(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).
(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 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
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.
- 17 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 3) Trade Receivables
Trade receivables at September 30, 2005, September 30, 2006 and March
31, 2006 are as follows:
Yen (Millions)
--------------
September 30, September 30, March 31,
2005 2006 2006
------------------------------------------------
Notes 4,713 2,857 4,905
Accounts 56,489 66,534 66,779
------ ------ ------
61,202 69,391 71,684
Less allowance for doubtful 2,164 2,055 2,117
accounts
------ ------ ------
59,038 67,336 69,567
====== ====== ======
(Note 4) Inventories
Inventories at September 30, 2005, September 30, 2006 and March 31,
2006 are composed of the following:
Yen (Millions)
--------------
September 30, September 30, March 31,
2005 2006 2006
------------------------------------------------
Finished goods 12,188 6,001 6,974
Work in process 15,980 15,698 15,944
Raw materials and supplies 6,303 5,341 6,993
------ ------ ------
34,471 27,040 29,911
====== ====== ======
- 18 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 5) Property, Plant and Equipment
Property, plant and equipment at September 30, 2005, September 30,
2006 and March 31, 2006 are composed of the following:
Yen (Millions)
--------------
September 30, September 30, March 31,
2005 2006 2006
----------------------------------------
Land 19,168 18,995 18,995
Buildings 49,806 49,181 49,175
Machinery and equipment 29,726 30,150 30,350
Furniture and fixtures 23,792 25,236 24,335
Construction in progress 195 243 69
------- ------- -------
122,687 123,805 122,924
Less accumulated depreciation 71,264 73,803 72,131
------- ------- -------
51,423 50,002 50,793
======= ======= =======
(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, 2005, September 30, 2006 and March 31, 2006 were as follows:
Yen (Millions)
--------------
September 30, September 30, March 31,
2005 2006 2006
----------------------------------------
Noncurrent:
Available-for-sale:
Equity securities
Acquisition cost 1,784 4,315 4,424
Gross unrealized gains 2,560 3,885 4,559
Gross unrealized losses - 5 8
Fair value 4,344 8,195 8,975
- 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, 2005 and
September 30, 2006, and for the year ended March 31, 2006 were as follows:
Yen (Millions) Yen (Millions)
---------------------- ---------------------
September 30, 2005 September 30, 2006
---------------------- ---------------------
Gross Gross Gross Gross
realized realized realized realized
gains losses gains losses
----- ------ ----- ------
Noncurrent:
Available-for-sale:
Equity securities 934 - - -
Yen (Millions)
------------------------
March 31, 2006
------------------------
Gross Gross
realized realized
gains losses
----- ------
Noncurrent:
Available-for-sale:
Equity securities 1,040 -
Gross realized gains and losses based on the averaged cost method are
included in "other income (expense)" in the interim consolidated statements
of income and the consolidated statements of income, 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, 2005 and for the year ended March
31, 2006 were (Y)2,964 million and (Y)2,977 million, respectively. For the
six months periods ended September 30, 2006, Advantest recognized
impairment losses of (Y)109 million on available-for-sale equity
securities, which were considered other-than-temporarily impaired and wrote
them down to the fair value.
Gross unrealized losses on available-for-sale equity securities and
the fair value of the related securities, aggregated by length of time that
individual securities have been in a continuous unrealized loss position,
at September 30, 2006, were as follows:
Yen (Millions)
--------------
Less than 12 months 12 months or longer
------------------- -------------------
Gross Gross
Fair unrealized Fair unrealized
value losses value losses
-----------------------------------------
Noncurrent:
Available-for-sale:
Equity securities 48 5 -- --
- 20 -
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)3,343 million, (Y)3,228 million and (Y)3,298 million at
September 30, 2005, September 30, 2006 and March 31, 2006, respectively.
For the six months periods ended September 30, 2006, Advantest recognized
impairment losses of (Y)70 million on non-marketable investment securities,
which were considered other-than-temporarily impaired and wrote them down
to the fair value. The remaining investment securities with an aggregate
cost of (Y)3,128 million did not have indicators of impairment.
(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, 2005,
September 30, 2006 and March 31, 2006. The notional amounts of these
contracts were (Y)13,621 million, (Y)6,753 million and (Y)10,929 million at
September 30, 2005, September 30, 2006 and March 31, 2006.
The carrying amounts and estimated fair values of Advantest's foreign
exchange forward contracts at September 30, 2005, September 30, 2006 and
March 31, 2006 were as follows:
Yen (Millions) Yen (Millions)
------------------------------------------
September 30, 2005 September 30, 2006
------------------------------------------
Carrying Fair Carrying Fair
amount value amount value
------ ----- ------ ------
Financial assets:
Foreign exchange forward contracts 28 28 30 30
Financial liabilities:
Foreign exchange forward contracts 118 118 27 27
- 21 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Yen (Millions)
--------------------
March 31, 2006
--------------------
Carrying Fair
amount value
-------- -----
Financial assets:
Foreign exchange forward contracts 57 57
Financial liabilities:
Foreign Exchange forward contracts 15 15
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, 2005, September 30, 2006 and March 31, 2006 are as follows:
Yen (Millions)
--------------
September 30, September 30, March 31,
2005 2006 2006
----------------------------------------------
Within one year 1,912 1,879 1,526
After one year 1,189 606 741
----- ----- -----
Total minimum lease income 3,101 2,485 2,267
===== ===== =====
- 22 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(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, 2005, September 30, 2006 and March 31, 2006 are as follows:
Yen (Millions)
--------------
September 30, 2005 September 30, 2006 March 31, 2006
------------------ ------------------ ---------------
Within one year 308 455 296
After one year 619 409 416
--- --- ---
Total minimum lease payments 927 864 712
=== === ===
(Note 10) Assets Pledged as Collateral and Secured Liabilities
As of September 30, 2005, property, plant and equipment with a
carrying amount of (Y)388 million was pledged as collateral for certain
debt obligations in the amount of (Y)17 million.
(Note 11) Other Comprehensive Income (Loss)
The accumulated balances for each classification of other
comprehensive income (loss) at September 30, 2005, September 30, 2006 and
March 31, 2006 are as follows:
Yen (Millions)
--------------
September September March
30, 2005 30, 2006 31, 2006
--------- ---------- ---------
Foreign currency translation adjustments (4,393) (565) (1,378)
Net unrealized gains and losses on securities 1,528 2,322 2,722
------- ----- -------
Other comprehensive income (loss) (2,865) 1,757 1,344
======= ===== =======
- 23 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 12) Accrued Pension and Severance Cost
The components of net periodic benefit cost recognized for the six
months periods ended September 30, 2005 and September 30, 2006, and for the
year ended March 31, 2006 were as follows:
Yen
(Millions)
----------
FY2005 FY2006 FY2005
interim interim
-------- ---------- ------------
Components of net periodic benefit cost:
Service cost 830 721 1,843
Interest cost 283 301 565
Expected return on plan assets (239) (323) (478)
Amortization of unrecognized:
Net actuarial (gain) or loss 124 37 249
Prior service cost (114) (114) (229)
----- ----- ------
Net periodic benefit cost 884 622 1,950
===== ===== ======
- 24 -
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 FY2005 interim, FY2006
interim and FY2005 are as follows:
Yen (Millions)
---------------------------------------------------------------------------
Semiconductor
and Component Mechatronics Services, Elimination Total
Test System System Support and and corporate
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
Yen (Millions)
---------------------------------------------------------------------------
Semiconductor
and Component Mechatronics Services, Elimination Total
Test System System Support and and corporate
Business Business Others
--------------------------------------------- -----------------------------
FY2006 Interim:
Net sales to
unaffiliated customers 84,305 26,527 9,660 -- 120,492
Inter-segment 1,669 128 -- (1,797) --
--------------------------------------------- -----------------------------
Sales 85,974 26,655 9,660 (1,797) 120,492
Operating income 26,536 7,554 1,411 (2,654) 32,847
- 25 -
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
--------------------------------------------- -----------------------------
FY2005:
Net sales to
unaffiliated customers 187,136 47,724 19,062 -- 253,922
Inter-segment 4,279 536 -- (4,815) --
--------------------------------------------- -----------------------------
Sales 191,415 48,260 19,062 (4,815) 253,922
Operating income 57,517 11,966 3,853 (6,994) 66,342
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
FY2005 interim, FY2006 interim and FY2005 do not match the
consolidated statements of income as the business segment information
does not include the stock option cost of (Y)755 million, (Y)648
million and (Y)1,884 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 FY2005 interim, FY2006
interim and FY2005 are as follows:
Yen (Millions)
--------------
FY2005 interim FY2006 interim FY2005
-------------- -------------- ------
Japan 34,607 48,206 81,140
Americas 11,452 6,136 25,516
Europe 7,117 4,876 14,558
Asia 53,923 61,274 132,708
------- ------- -------
Total 107,099 120,492 253,922
======= ======= =======
(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., Canada, etc.
(2) Europe Ireland, Italy, Portugal, etc.
(3) Asia Taiwan, South Korea, China, etc.
- 26 -
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 FY2005 interim, FY2006 interim and FY2005, classified by location
of office from which product was shipped. This information is provided as
supplemental 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)
- ---------------------------------------------------------------------------------------------------------------------
FY2005 interim
April 1, 2005 through
September 30, 2005
- ---------------------------------------------------------------------------------------------------------------------
Japan Americas Europe Asia Total Elimination
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) --
- ---------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------
(In millions of yen)
- ---------------------------------------------------------------------------------------------------------------------
FY2006 interim
April 1, 2006 through
September 30, 2006
- ---------------------------------------------------------------------------------------------------------------------
Japan Americas Europe Asia Total Elimination
and Consolidated
corporate
- ---------------------------------------------------------------------------------------------------------------------
Net sales
(1)Sales to unaffiliated 69,791 12,483 6,547 31,671 120,492 -- 120,492
customers
(2)Inter-segment 36,606 2,395 641 3,466 43,108 (43,108) --
- ---------------------------------------------------------------------------------------------------------------------
Total 106,397 14,878 7,188 35,137 163,600 (43,108) 120,492
- ---------------------------------------------------------------------------------------------------------------------
Operating expenses 79,960 12,946 6,419 29,559 128,884 (40,591) 88,293
- ---------------------------------------------------------------------------------------------------------------------
Operating income (loss) 26,437 1,932 769 5,578 34,716 (2,517) 32,199
- ---------------------------------------------------------------------------------------------------------------------
- 27 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(In millions of yen)
- ---------------------------------------------------------------------------------------------------------------------
FY2005
April 1, 2005 through
March 31, 2006
- ---------------------------------------------------------------------------------------------------------------------
Japan Americas Europe Asia Total Elimination
and Consolidated
corporate
- ---------------------------------------------------------------------------------------------------------------------
Net sales
(1)Sales to unaffiliated 119,996 53,834 18,505 61,587 253,922 -- 253,922
customers
(2)Inter-segment 111,958 3,605 1,312 7,000 123,875 (123,875) --
- ---------------------------------------------------------------------------------------------------------------------
Total 231,954 57,439 19,817 68,587 377,797 (123,875) 253,922
- ---------------------------------------------------------------------------------------------------------------------
Operating expenses 169,426 54,399 17,810 62,691 304,326 (114,862) 189,464
- ---------------------------------------------------------------------------------------------------------------------
Operating income (loss) 62,528 3,040 2,007 5,896 73,471 (9,013) 64,458
- ---------------------------------------------------------------------------------------------------------------------
(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, stock option compensation expense of (Y)755 million,
(Y)648 million and (Y)1,884 million in FY 2005 interim, FY 2006
interim and FY2005, respectively are included in Corporate
operating expenses.
- 28 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 14) Per Share Data
As resolved at the Board of Directors' Meeting held on July 26, 2006,
a one to two stock split was made on October 1, 2006, to shares of the
common stock in respect of shareholders listed in the register as of
September 30, 2006.
Basic and diluted net income per share was calculated based on the
number of issued and outstanding shares after such stock split for all
fiscal periods presented.
The following table sets forth the computation of basic and diluted
net income per share for the six months periods ended September 30, 2005
and September 30, 2006, and for the year ended March 31, 2006:
Yen (Millions)
except for per share data
-------------------------
FY2005 interim FY2006 interim FY2005
--------------------- ------------------- ------------------
Numerator:
Net income 14,614 22,204 41,374
--------------------- ------------------- ------------------
Denominator:
Basic weighted average shares of common
stock outstanding 184,916,458 186,911,714 185,389,026
Dilutive effect of exercise of
stock options 641,512 1,215,246 994,054
--------------------- ------------------- ------------------
Diluted weighted average shares of common
stock outstanding 185,557,970 188,126,960 186,383,080
--------------------- ------------------- ------------------
Basic net income per share 79.03 118.79 223.17
Diluted net income per share 78.75 118.03 221.98
--------------------- ------------------- ------------------
(Note 15) Commitments and Contingent Liabilities
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)140 million at September 30, 2006. The guarantees are
collateralized by the leased equipment. At September 30, 2006, Advantest
has not accrued any obligation with respect to such guarantees as it
estimates the fair value of its obligations to be insignificant.
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.
- 29 -
ADVANTEST CORPORATION
AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
(Note 16) Significant event after the balance sheet date
Pursuant to resolution by the Board of Directors dated July 26, 2006,
Advantest has made, on October 1, 2006, a one to two stock split per share
of the common stock applicable to shareholders recorded in the register as
of September 30, 2006.
Share numbers and per share information contained in the Interim
Consolidated Financial Statements (net assets per share, basic net income
per share and diluted net income per share for all fiscal periods
presented) reflect such stock split.
2. Other information
Not applicable.
- 30 -