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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2002
Commission file number 2-68279
KABUSHIKI KAISHA RICOH
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(Exact name of registrant as specified in its charter)
RICOH COMPANY, LTD.
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(Translation of registrant's name into English)
Japan
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(Jurisdiction of incorporation or organization)
15-5, 1-Chome, Minami-Aoyama, Minato-ku, Tokyo 107-8544, Japan
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(Address of principal executive offices)
Securities registered or to be registered pursuant to
Section 12(b) of the Act.
Title of each class Name of each exchange
on which registered
None None
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Securities registered or to be registered pursuant
to Section 12(g) of the Act.
None
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(Title of Class)
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act.
Common Stock*
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(Title of Class)
* American Depositary Receipts evidence American Depositary Shares, each
American Depositary Share representing 5 shares of Common Stock of Ricoh
Company, Ltd.
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1
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report.
Common stock outstanding as of March 31, 2002 : 727,086,738
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No .
--- ---
Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 Item 18 x .
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The exchange rates for the Japanese yen and U.S. dollars based on the noon
buying rates for cable transfers in yen in New York City as certified for
customs purposes by the Federal Reserve Bank of New York, was 121.28 yen =
U.S.$1.00 on June 24, 2002.
As used herein, the "Company" refers to Ricoh Company, Ltd., the
registrant, and "Ricoh" refers to the Company and its consolidated subsidiaries,
unless the context otherwise indicates.
Ricoh's fiscal year end is March 31. In this document "fiscal 2002" refers
to Ricoh's fiscal year ended March 31, 2002, and other fiscal years of Ricoh are
referred to in a corresponding manner.
Cautionary Statement with Respect to Forward-Looking Statements
Statements made in this annual report with respect to Ricoh's current
plans, estimates, strategies and beliefs and other statements that are not
historical facts are forward-looking statements about the future performance of
Ricoh. Forward-looking statements include but are not limited to those using
words such as "believe," "expect," "plans," "strategy," "prospects," "forecast,"
"estimate," "project," "anticipate," "may" or "might" and words of similar
meaning in connection with a discussion of future operations or financial
performance. From time to time, oral or written forward-looking statements may
also be included in other materials released to the public. These statements are
based on management's assumptions and beliefs in light of the information
currently available to it. Ricoh cautions you that a number of important risks
and uncertainties could cause actual results to differ materially from those
discussed in the forward-looking statements, and therefore you should not place
undue reliance on them. You also should not rely on any obligation of Ricoh to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Ricoh disclaims any such obligation.
Risks and uncertainties that might affect Ricoh include, but are not limited to
(i) general economic conditions in Ricoh's markets, particularly levels of
consumer spending; (ii) exchange rates, particularly between the yen and the
U.S. dollar, euro, and other currencies in which Ricoh makes significant sales
or in which Ricoh's assets and liabilities are denominated; (iii) Ricoh's
ability to continue to design and develop and win acceptance of its products and
services, which are offered in highly competitive markets characterized by
continual new product introductions, rapid development in technology, and
subjective and changing consumer preferences, (iv) Ricoh's ability to implement
successfully the strategy for its Office Equipment business; (v) Ricoh's ability
to compete and develop and implement successful sales and distribution
strategies in light of internet and other technological developments in and
affecting its businesses; (vi) Ricoh's continued ability to devote sufficient
resources to research and development and capital expenditures; (vii) the
success of Ricoh's joint ventures and alliances; and (viii) the outcome of
contingencies.
Important information regarding risks and uncertainties is also set forth
elsewhere in this annual report, including in "Risk Factors" included in "Item
3. Key Information", "Item 4. Information on the Company", "Item 5. Operating
and Financial Review and Prospects", and "Item 11. Quantitative and Qualitative
Disclosures About Market Risk."
2
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key information
(a) Selected financial data
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Millions of yen except per share amounts and number of shares
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Year ended March 31
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1998 1999 2000 2001 2002
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Net sales:
Japan 831,339 820,975 873,170 930,433 902,655
Overseas 572,009 605,024 573,987 607,829 769,685
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Total 1,403,348 1,425,999 1,447,157 1,538,262 1,672,340
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Operating income 89,707 73,547 88,921 105,105 129,695
Net income 30,131 30,655 41,928 53,228 61,614
Per American Depositary Share:
Net income (Basic) 224.85 221.65 303.05 384.25 441.35
Net income (Diluted) 206.75 204.70 280.30 355.10 412.30
Total Assets 1,660,496 1,628,017 1,543,320 1,704,791 1,832,928
Shareholder's equity 475,005 487,459 541,506 556,728 633,020
Common Stock 102,820 102,849 103,112 103,434 120,461
Average Number of shares
outstanding 669,959,029 691,591,721 691,744,901 692,616,894 698,025,167
Cash dividends declared
Per American Depositary Share:
Interim 27.50 27.50 27.50 30.00 30.00
($0.21) ($0.23) ($0.29) ($0.27) ($0.24)
Year-end 27.50 27.50 27.50 30.00 35.00
($0.20) ($0.23) ($0.26) ($0.28) -
At year-end:
Cash and cash equivalents 141,334 130,655 111,838 64,457 142,508
Capital investments 94,117 70,469 58,356 73,329 75,676
Long-term indebtedness 295,536 344,580 307,962 217,743 332,995
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In the preceding table, cash dividends declared in U.S. dollars are based
on the exchange rates at each respective payment date, using the noon buying
rates for cable transfer in yen in New York City as
3
certified for customs purposes by the Federal Reserve Bank of New York.
Accordingly, as of June 27, 2002, cash dividend declared in U.S. dollars per
share at March 31, 2002 is not available as it is to be paid on June 28, 2002.
The following table sets forth the exchange rates for the Japanese yen and
U.S. dollars based on the noon buying rates for cable transfers in yen in New
York City as certified for customs purposes by the Federal Reserve Bank of New
York during the last five fiscal years and previous six months:
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Year ended March 31
1998 1999 2000 2001 2002
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Year-end 133.29 118.43 102.73 125.54 132.70
Average 123.57 128.19 109.96 111.65 125.64
High 111.42 108.83 101.53 104.19 115.89
Low 133.29 147.14 124.45 125.54 134.77
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2002
December January February March April May
-------- ------- -------- ------ ------ ------
High 123.90 130.93 132.26 127.07 128.13 123.08
Low 131.47 134.64 134.77 133.46 133.40 128.66
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Notes to Selected Financial Data:
1. Each American Depositary Share represents five shares of Common Stock.
All per share amounts previously presented have been restated to
conform to the provisions SFAS128 "Earnings Per Share." (See Note 14
to the Consolidated Financial Statements)
2. Long-term indebtedness includes convertible bonds and debentures. (See
Note 10 to the Consolidated Financial Statements)
(b) Capitalization and indebtedness
Not applicable.
(c) Reasons for the offer and use of proceeds
Not applicable.
(d) Risk factors
This section contains forward-looking statements that are subject to the
"Cautionary Statement with Respect to Forward-Looking Statements" appearing
elsewhere in this annual report. Risks to Ricoh are also discussed elsewhere in
this annual report, including without limitation in "Item 4. Information on the
Company", "Item 5. Operating and Financial Review and Prospects" and in the
other sections of the annual report referred to in the "Cautionary Statement
with Respect to Forward-Looking Statements."
4
RICOH'S SUCCESS WILL DEPEND ON ITS ABILITY TO RESPOND TO RAPID TECHNOLOGICAL
CHANGES IN THE INDUSTRY.
The document imaging and management industry, including the copier
industry, is characterized by rapid technological changes. Ricoh's success will
depend on its ability to respond to such technological changes in the industry,
which often result in the need for frequent and timely product enhancements and
short product life cycles. The process of developing new products or
technologies is inherently complex and uncertain and there are a number of risks
for Ricoh, including the following:
- There is no assurance that products or technologies which will gain
market acceptance can be anticipated successfully;
- There is no assurance that long-term investments and commitment of
significant resources will result in successful new products or
technologies;
- There is no assurance to that the necessary raw materials and parts
can be procured from suppliers at competitive prices in connection
with the new products or technologies;
- There is no assurance that any newly developed product or technology
can be successfully marketed; and
- New competition may arise in connection with the production and
distribution of new products.
There is no assurance that Ricoh will be able to respond adequately to
changes in the industry, and Ricoh's failure to respond adequately, including to
any of the risks described above may reduce Ricoh's future growth and
profitability and may adversely affect Ricoh's financial results and condition.
Digital Technology
Among the various technologies, Ricoh believes the successful development
of digital technology is one of the most essential factors in attaining a
competitive advantage in the document imaging and management industry. While
Ricoh considers itself a leader in digital technology, Ricoh believes that the
importance of digital technology used in office equipment, including copiers,
printers, facsimiles and scanners, will continue to grow. Among numerous Ricoh
products taking advantage of digital technology, most of Ricoh's plain paper
copiers sold in Japan and the majority of plain paper copiers sold overseas are
already digital. Ricoh, however, believes that the digital technology used in
connection with digital copiers and other digital products will continue to
develop and that competition with respect to digital products will intensify.
There is no assurance that Ricoh will be in the forefront of digital copier
technology, and the failure of Ricoh to adequately develop its digital
technology may adversely affect Ricoh's financial results and condition.
Multi-Functional Equipment
Ricoh believes that the document imaging and management industry is moving
towards a multi-functional office environment where various office equipment
(including copiers, facsimiles, computers, printers and scanners) become
increasingly interdependent through use of digital technology and in response to
initiatives for a "paperless office". As a result, certain existing office
equipment may either consolidate into multi-functional equipment or may link
together electronically, to perform various office functions. Some of Ricoh's
products may become obsolete while other products may require substantial
product enhancements requiring technologies currently unavailable within Ricoh.
There is no assurance that Ricoh will be able to successfully adjust to such
changes.
5
RICOH MUST SUCCESSFULLY OPERATE IN HIGHLY COMPETITIVE MARKETS.
The document imaging and management industry, including the copier
industry, is intensely competitive. Ricoh expects to face increased competition
in the various markets in which it operates. Ricoh's competitors include larger
manufacturers and distributors of office equipment as well as office superstores
and consumer electronics chains. In addition, as digital and other new
technology develops and as new office equipment products gain increased market
acceptance, Ricoh may find itself competing with new industries, including
computer software and hardware manufacturers and distributors. Accordingly, it
is possible that new competitors or alliances among existing competitors may
emerge and rapidly acquire significant market share. While Ricoh believes it is
a leading global manufacturer and distributor in the document imaging and
management industry, there is no assurance that it will compete effectively in
the future. Pricing pressures or loss of potential customers resulting from
Ricoh's failure to compete effectively may adversely affect Ricoh's financial
results and condition.
RICOH IS SUBJECT TO THE RISKS OF INTERNATIONAL OPERATIONS AND THE RISKS OF
OVERSEAS EXPANSION.
A substantial portion of Ricoh's manufacturing and marketing activity is
conducted outside Japan, including in the United States, Europe, and in
developing and emerging markets such as the People's Republic of China. There
are a number of risks inherent in doing business in such overseas markets,
including the following:
unexpected legal or regulatory changes;
unfavorable political or economical factors;
difficulties in recruiting and retaining personnel, and managing
international operations;
fluctuations in currency exchange rates; and
potentially adverse tax consequences.
Ricoh's inability to manage successfully the risks inherent in its
international activities could adversely affect its business, financial
condition and operating results. While Ricoh plans to continue to expand the
proportion of its sales made outside of Japan, there can be no assurance that
Ricoh's overseas expansion will be successful or have a positive effect on
Ricoh's financial results and condition.
ECONOMIC TRENDS IN RICOH'S MAJOR MARKETS MAY ADVERSELY AFFECT RICOH'S SALES.
Demand for Ricoh's products are affected by cyclical changes in the economy
of Ricoh's major markets, including Japan, the United States and Europe.
Economic downturns and declines in consumption in Ricoh's major markets may
adversely affect the level of sales and Ricoh's financial results and condition.
FOREIGN EXCHANGE FLUCTUATIONS CAN AFFECT RICOH'S RESULTS BECAUSE OF TRANSLATION
OF RESULTS INTO YEN AND BECAUSE SALES AND EXPENSES IN DIFFERENT CURRENCIES CAN
AFFECT RESULTS.
Local currency denominated financial results in each of the Company's
subsidiaries around the world are translated into yen by applying the average
market rate during each financial period and recorded on Ricoh's consolidated
profit and loss statement. Local currency-denominated assets and
liabilities/stockholder's equity are translated into yen by applying the market
rate at the end of each financial period and recorded on Ricoh's consolidated
balance sheets. Accordingly, the results, assets, and liabilities/stockholders'
equity are subject to foreign exchange fluctuations. In recent periods,
operating results reported in yen in accordance with U.S. GAAP have generally
been less favorable than those results in local currency.
6
In addition, operating profits and losses are highly sensitive to the
appreciation in the value of the yen because Ricoh's research and
development/production activities and headquarter functions are concentrated in
Japan so that the ratio of yen-denominated costs is quite high. Although Ricoh
engages in hedging transactions for actual requirements to minimize the negative
effects from short-term fluctuations of foreign exchange rates among major
currencies such as the U.S. dollar, euro and yen, mid-to-long-term volatile
changes of the exchange rate levels make it difficult for Ricoh to execute
planned procurement, production, logistics, and sales activities and may
adversely affect Ricoh's financial results and condition.
RICOH IS SUBJECT TO GOVERNMENT REGULATION THAT CAN LIMIT ITS ACTIVITIES OR
INCREASE COSTS OF OPERATIONS.
Various regulations by governments in countries in which Ricoh does
business, such as required business/investment approvals, export regulations and
tariffs, as well as commercial, antitrust, patent, consumer and business
taxation, exchange control, and environmental/recycling laws and regulations,
apply to Ricoh. If Ricoh is unable to comply with these regulations, they can
serve to limit Ricoh's activities. In addition, even if Ricoh is able to comply,
these regulations can result in increased costs. In either event Ricoh's
financial results and financial condition may be adversely affected.
RICOH MAY BE ADVERSELY AFFECTED BY ITS EMPLOYEE BENEFIT OBLIGATIONS.
Regarding benefit obligations and plan assets, Ricoh funds and accrues the
cost of benefits to the sufficient level based on conservative accounting
policies. However, if returns from investment assets decrease due to conditions
in, for example, stock or bond markets, additional funding and accruals may be
required, and such funding and accruals may adversely affect Ricoh's financial
results and condition.
7
Item 4. Information on the Company
(a) History and development of the Company
The Company was originally incorporated as a kabushiki kaisha on February
6, 1936 under Japanese law under the name Riken Kankoshi Kabushiki Kaisha as a
manufacturer and distributor of sensitized paper for use in copiers. Since its
incorporation, Ricoh has expanded into related businesses in the office
equipment field. It now manufactures and markets copiers and related supplies,
communications and information systems, and other equipment, including optical
equipment, educational equipment, semiconductor and metering instruments.
Historical highlights
February 1936 Riken Kankoshi Co., Ltd. is formed to make and market sensitized paper.
March 1938 The Company's name is changed to Riken Optical Co., Ltd., starts making and
selling optical devices and equipment.
May 1949 The Company lists on the Tokyo and Osaka Stock Exchanges.
April 1954 The Company establishes optical device and equipment plant in Ohmori, Ohta-ku,
Tokyo (now Ohmori plant).
May 1955 The Company begins manufacturing and selling desktop copiers.
April 1960 The Company starts operations at paper plant in Numazu, Shizuoka, which integrates
everything from raw to sensitized paper production (now Numazu plant).
March 1961 The Company establishes sensitized paper plant in Ikeda, Osaka.
October 1961 The Company lists on first sections of the Tokyo and Osaka Stock Exchanges.
February 1963 The Company establishes Ricoh of America, Inc. (a subsidiary, now Ricoh Corporation).
April 1963 The Company changes corporate name to Ricoh Company, Ltd.
July 1967 The Company establishes Tohoku Ricoh Co., Ltd. (a subsidiary) in Shibata-gun, Miyagi.
March 1971 The Company completes manufacturing facility in Atsugi, Kanagawa Prefecture (now Atsugi plant),
to which it transfers some office equipment production from the Ohmori plant.
November 1971 The Company sets up Ricoh Nederland B.V. (a subsidiary, now Ricoh Europe B.V.).
January 1973 The Company establishes Ricoh Electronics, Inc. (a subsidiary) in the United States.
September 1973 The Company lists on the Amsterdam Stock Exchange.
December 1976 The Company forms Ricoh Leasing Co., Ltd. (a subsidiary).
March 1977 The Company relocates headquarters to Minato-ku, Tokyo.
July 1978 The Company lists on the Frankfurt Stock Exchange.
December 1978 The Company establishes Ricoh Business Machines, Ltd. (a subsidiary, now Ricoh Hong Kong Ltd.).
March 1981 The Company constructs Electronic Technologies Development Center (now Ikeda plant) to develop
and make electronic devices.
October 1981 The Company lists on the Paris Stock Exchange.
May 1982 The Company establishes a copier consumables facility in Fukui prefecture (now Fukui plant), which
takes over some sensitized paper production from the Osaka plant.
October 1983 The Company inaugurates information technology equipment facility in Hatano, Kanagawa (now Hatano plant).
December 1983 The Company creates Ricoh UK Products Ltd. (a subsidiary)
8
October 1985 The Company builds copier plant in Gotenba, Shizuoka (now Gotemba plant), which takes over some of the
Atsugi plant's production.
April 1986 The Company opens R&D facility in Yokohama, Kanagawa (now Ricoh Research and Development Center),
to which it transfers some operations from the Ohmori plant.
April 1987 The Company establishes Ricoh Industrie France S.A. (a subsidiary)
April 1989 The Company sets up electronic devices facility in Yashiro-cho, Kato-gun, Hyogo (now Yashiro plant).
January 1991 The Company establishes Ricoh Asia Industry (Shenzhen) Ltd.(a subsidiary) in China.
March 1995 Ricoh Corporation (a subsidiary) acquires Savin Corporation, an American office equipment sales company.
September 1995 The Company acquires Gestetner Holdings PLC (now NRG Group PLC), a British office equipment sales company.
January 1996 Ricoh Leasing Co., Ltd. (a subsidiary) lists on Second Section of Tokyo Stock Exchange (now First Section).
December 1996 The Company establishes Ricoh Asia Pacific Pte. Ltd. (a subsidiary) in Singapore.
March 1997 The Company creates Ricoh Silicon Valley, Inc. (now Ricoh Innovations, Inc.) in the United States.
August 1999 Ricoh Hong Kong Ltd. buys Inchcape NRG Ltd., a Hong Kong-based office equipment sales company.
March 2000 Tohoku Ricoh Co., Ltd. lists on Second Section of Tokyo Stock Exchange.
January 2001 Ricoh Corporation acquires Lanier Worldwide, Inc., an American office equipment sales company.
Our registered office and head office are as follows:
Address Telephone number
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Registered office 3-6 Naka Magome 1-chome, Ohta-ku, Tokyo +81-3-3777-8111
143-8555, Japan
Head office 15-5, Minami Aoyama 1-chome, Minato-ku, Tokyo +81-3-3479-3111
107-8544, Japan
See "Item 3. Key information" for information on capital expenditures in
the past three years.
9
(b) Business overview
Ricoh considers itself as engaging in two segments, the Office Equipment
and the Other Businesses. For revenue reporting purposes, Office Equipment is
further divided into two product areas: Copiers and Related Supplies, and
Communications and Information Systems.
SALES BY PRODUCT LINE
2000 2001 2002
-------------------------- -------------------------- --------------------------
% of net % of net % of net
Millions of yen sales Millions of yen sales Millions of yen sales
--------------- -------- --------------- -------- --------------- --------
OFFICE EQUIPMENT
Copiers and Related Supplies 870,291 60.1% 915,333 59.5% 1,038,495 62.1%
Communications and Information Systems 382,779 26.5 423,041 27.5 446,894 26.7
OTHER BUSINESS 194,087 13.4 199,888 13.0 186,951 11.2
--------------- -------- --------------- -------- --------------- --------
Total 1,447,157 100.0% 1,538,262 100.0% 1,672,340 100.0%
--------------- -------- --------------- -------- --------------- --------
OFFICE EQUIPMENT SEGMENT-
Copiers and Related Supplies
This product area, which accounted for 62.1% of Ricoh's net sales in fiscal
2002, consists of copiers, related paper and chemicals, office printing machines
and electronic whiteboards.
The Company is one of the largest manufacturers and distributors of copiers
and related supplies in Japan, both in terms of the number of machines in use
and revenues.
Ricoh manufactures different types of copying machines: plain paper copiers
("PPCs") and diazo copiers. PPCs now account for substantially all copier sales.
PPCs use a drum or other medium coated with a photo conductive material on which
an image of the original document is projected optically and developed by the
application of a toner, which may be either in liquid or in dry powder form.
Ricoh produces a wide range of copiers with a variety of speeds and capabilities
such as double-sided printing, sorting, reducing and enlarging, and zoom
adjustment of copy sizes. Ricoh is a global leader in copiers and pioneered the
market for digital machines. Today's offices are increasingly computer-networked
to maximize efficiency. Demand for digital copiers is thus increasing rapidly,
both for black-and-white and color equipment. Ricoh offers a full line of
PC-connective, multifunctional models that draw on our years of expertise in
digital and color technologies to respond the focus of customer demand, which
continued to shift toward speed, networking, saving of the total costs of
ownership and office productivity enhancement. Overseas, Ricoh has rapidly
forged a solid position by releasing many new models under the Aficio brand.
Ricoh also supplies a comprehensive line of wide-format copiers and
duplicators. These machines have also sold well for their digital and networking
capabilities.
Communications and Information Systems
This product area accounted for 26.7% of Ricoh's net sales in fiscal 2002.
Ricoh's activities in this area encompass printers, scanners,
CD-Recordable/CD-ReWritable (CD-R/RW), Dynamic Versatile Disc (DVD) drives and
media, personal computers, software and services, and fax machines.
Ricoh is strengthening its capabilities in networked color laser printers
and in mid- and high-volume or
10
high-speed laser printers. In fiscal 2002, Ricoh had the highest market share in
Japan in these printer categories. In Japan, Ricoh greatly broadened the lineup
while reinforcing the sales structure and expanding marketing. As a result of
these efforts, Ricoh achieved significant growth.
Ricoh focuses heavily on CD-related technologies for storing multimedia
data. Ricoh helped formulate the global standards for CD-R and CD-RW media and
are a major player worldwide in both areas. In the year under review, Ricoh
enjoyed success with the MP5125A drive, which can handle CD-ROM, CD-R, CD-RW,
DVD-ROM and DVD Media.
In Japan, Ricoh enjoyed steady growth in packaging of document solutions
software and imaging equipment that allow customers to seamlessly manage
electronic and paper-based information. In terms of personal computers, Ricoh
decreased its marketing of PCs and servers, due to constrained corporate
spending on information technology in Japan.
The communication systems business also includes fax machines. In 1973,
Ricoh marketed the world's first high-speed facsimile equipment, with a
transmission speed of one minute. Since then, Ricoh has been manufacturing
various high-speed facsimile machines, including compact, low-priced models that
feature multiple functions and higher memory capacities.
The market for facsimile machines continues to mature, with demand shifting
to small and home offices seeking low-cost models. Corporate users tend to
prefer multifunctional, networkable fax machines and printers.
As in other areas of its operations, Ricoh has drawn on its Image
Communication strategy to create communications and information systems
solutions combining computer-connective equipment and software.
OTHER BUSINESSES SEGMENT-
This business category, which accounted for 11.2% of Ricoh's net sales in
fiscal 2002, includes photographic, educational, and measurement equipment.
Ricoh also offers finance and logistics services.
Ricoh pioneered the commercialization of digital cameras, which have
tremendous potential as "image capturing devices," reflecting their growing
importance as input tools.
Ricoh offers a wide range of electronic devices for image processing
applications. Ricoh also makes application specific integrated circuits (ASICs)
and application specific standard products (ASSPs), and develops electric design
automation (EDA), image capturing device (ICD) and its application.
Ricoh's sales expanded worldwide in fiscal 2002. Sales in Japan accounted
for 54.0% of all sales, and the Americas represented 20.4%, Europe 18.6%, and
all other areas 7.0%.
SALES BY GEOGRAPHIC AREA
2000 2001 2002
-------------------------- -------------------------- --------------------------
% of net % of net % of net
Millions of yen sales Millions of yen sales Millions of yen sales
--------------- -------- --------------- -------- --------------- --------
JAPAN 873,170 60.3% 930,433 60.5% 902,655 54.0%
THE AMERICAS 231,181 16.0 252,698 16.4 341,747 20.4
EUROPE 258,515 17.9 247,449 16.1 311,312 18.6
OTHER 84,291 5.8 107,682 7.0 116,626 7.0
--------------- -------- --------------- -------- --------------- --------
Total 1,447,157 100.0% 1,538,262 100.0% 1,672,340 100.0%
--------------- -------- --------------- -------- --------------- --------
11
JAPAN-
In marketing office equipment, frequent visits by salesmen are important
well as advertising. In addition, machine downtime is a high priority concern of
potential purchasers of such equipment. The management believes that Ricoh has
the largest distribution and service network for copiers in Japan. The network
was originally established in the 1950s, when Ricoh introduced diazo copiers in
Japan. With the subsequent introduction of electrostatic copiers in the 1960s
and PPCs in the 1970s, the distribution and service network was strengthened and
enlarged into a nationwide system.
Ricoh's distribution to end users in Japan is conducted through three
channels: (i) direct sales by Ricoh through approximately 50 subsidiaries and
affiliates; (ii) sales through independent office machine dealers; and (iii)
sales through independent stationery wholesalers, which in turn sell Ricoh's
copiers to stationery retailers. Ricoh estimates that over one-half of its unit
sales of copiers in Japan is through the first channel with the balance divided
between the second and the third channels. Ricoh responded swiftly to the
customer demand in Japan by establish fine regional headquarters, in the Tohoku,
Chubu, Kansai, Chugoku and Kyushu areas. The sales channels are coordinated by
those regional headquarters and the Company's 3 regional branches.
Approximately 60% of the retail sales of Ricoh's equipment are financed by
leases provided either by Ricoh Leasing Company, Ltd. (a subsidiary) or through
independent leasing companies. A high proportion of sales of Ricoh's products by
retail dealers is made on a trade-in basis with Ricoh reimbursing the dealer for
a part of the price paid for the replaced equipment.
Almost all of Ricoh's dealers and retailers sell Ricoh's products
exclusively. The full line of copying products which Ricoh offers provide
incentives for them to maintain an exclusive relationship with Ricoh. With a
view to maintaining a spirit of loyalty and cooperation, Ricoh frequently
communicates with its dealers and retailers and provides continuous education
programs to salesmen and servicemen to keep them abreast of changing technology
and new products. Over the past ten years there have been almost no terminations
by dealers and retailers of their exclusive relationships with Ricoh.
The service network includes service centers operated by Ricoh and its
affiliates and service outlets operated by other companies. Ricoh's total number
of salesmen and servicemen in Japan is approximately 20,000.
Ricoh began building nationwide capabilities for the Customer Support
System to enhance customer satisfaction and service efficiency. This system
allows Ricoh to remotely monitor copiers in the field and provide immediate
service.
OVERSEAS-
For the year ended March 31, 2002, Ricoh's international sales, which
includes products exported from Japan and products manufactured abroad, totaled
769,685 million yen, which equals 46.0% of net sales. Plain paper copiers and
related supplies accounted for more than three fourth of international sales.
Ricoh's overseas marketing activities could be classified into two classes:
sales operations using Ricoh's own brands marketed by overseas sales
subsidiaries, affiliates and independent dealers, and sales using OEM brands.
The successful acquisition of office equipment companies in the 1990's has
enhanced Ricoh's own channel marketing resources.
Ricoh has organized marketing to accommodate four operating regions other
than Japan: the Americas; Europe, Africa, and the Middle East; Asia and Oceania;
and China.
12
SEASONALITY-
Sales in Japan for the Office Equipment segment increase in March each year
due to the increased demand arising at the end of the fiscal year for most
Japanese companies.
SOURCES OF SUPPLY-
Ricoh pursues procurement of raw materials, parts, and components to be
used in the production of its products on a global basis. These items are
purchased from various suppliers around the world. Generally, Ricoh maintains
multiple suppliers for most significant categories of raw materials, parts and
components. Ricoh has not experienced any difficulty in obtaining raw materials,
parts and components and believes that it will be able to continue to obtain the
same in sufficient quantities to meet its needs. Ricoh also believes that there
is little risk of price volatility with respect to obtaining raw materials,
parts and components.
GOVERNMENT REGULATIONS-
Ricoh's business activities are subject to various governmental regulations
in countries in which it operates, including regulations relating to
business/investment approvals, export regulations, tariffs, antitrust,
intellectual property, consumer and business taxation, exchange controls, and
environmental and recycling requirements. Ricoh is also subject to environmental
regulation in the jurisdictions in which it operates, particularly those in
which it has manufacturing, research, or similar operations.
(c) Organizational structure
The Ricoh Group is comprised of 376 subsidiaries and 28 affiliates.
Ricoh's development, manufacturing, sales, and service activities center on
office equipment (copiers and related supplies and communications and
information systems), optical equipment, and other devices.
The Company is the core company of the Ricoh Group. The Company heads the
development of products. The Company and its subsidiaries and affiliates
maintain an integrated domestic and international manufacturing structure.
The following is a list of significant subsidiaries and affiliates.
13
- ----------------------------------------------------------------------------------------------------------------------
Proportion
Country of of ownership
Company Name Formation interest Main businesses
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
(Subsidiaries)
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Optical Industries Co., Ltd. Japan 100.0 Manufacturing optical equipment
- ----------------------------------------------------------------------------------------------------------------------
Tohoku Ricoh Co., Ltd. Japan 65.7 Manufacturing office equipment
(66.1)
- ----------------------------------------------------------------------------------------------------------------------
Hasama Ricoh, Inc. Japan 82.9 Manufacturing office equipment and
(100.0) related parts
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Unitechno Co., Ltd. Japan 100.0 Manufacturing parts for office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Elemex Corporation Japan 49.9 Manufacturing and sales of office
(50.9) equipment and minuteness equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Microelectronics Co., Ltd. Japan 100.0 Manufacturing parts for office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Keiki Co., Ltd. Japan 100.0 Manufacturing parts for office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Tohoku Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Chubu Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Kansai Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Chugoku Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Kyushu Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Hokkaido Ricoh Co., Ltd. Japan 97.8 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Miyagi Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Niigata Ricoh Co., Ltd. Japan 75.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Nagano Ricoh Co., Ltd. Japan 86.7 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Gunma Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Tochigi Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Saitama Ricoh Co., Ltd. Japan 58.3 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ibaraki Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Chiba Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Tokyo Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Nishi Tokyo Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Kanagawa Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Shizuoka Ricoh Co., Ltd. Japan 93.8 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Aichi Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Kyoto Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Osaka Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Hyogo Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Hiroshima Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Shikoku Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Fukuoka Ricoh Co., Ltd. Japan 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Technosystems Co., Ltd. Japan 100.0 Maintenance, service and Sale of office
equipment
- ----------------------------------------------------------------------------------------------------------------------
NBS Ricoh Co., Ltd. Japan 100.0 Sale of supply related to office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Logistics System Co., Ltd. Japan 85.2 Logistics services and custom clearances
(87.6)
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Leasing Co., Ltd. Japan 54.3 General leasing
(54.5)
- ----------------------------------------------------------------------------------------------------------------------
14
- ----------------------------------------------------------------------------------------------------------------------
Proportion
Country of of ownership
Company Name Formation interest Main businesses
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Engineering Co., Ltd. Japan 100.0 Facility management
- ----------------------------------------------------------------------------------------------------------------------
Ricoh San-Ai Service Co., Ltd. Japan 69.4 Advertisement and publishing, real estate
(74.5)
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Electronics, Inc. U.S.A. 100.0 Manufacturing office equipment and related
supply
- ----------------------------------------------------------------------------------------------------------------------
Ricoh UK Products Ltd. U.K. 100.0 Manufacturing office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Industrie France S.A. France 100.0 Manufacturing office equipment and related
supply
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Asia Industry (Shenzhen) Ltd. China 90.0 Manufacturing office equipment and
(100.0) related supply
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Corporation U.S.A. 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Lanier Worldwide, Inc. U.S.A. 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Europe B.V. Netherlands 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Deutschland GmbH Germany 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
NRG Group PLC U.K. 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh UK Ltd. U.K. 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh France S.A. France 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Italia S.p.A. Italy 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Hong Kong Ltd. Hong Kong, 100.0 Sale of office equipment
China
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Asia Industry Ltd. Hong Kong, 90.0 Sale of office equipment
China
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Asia Pacific Pte, Ltd. Singapore 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Australia Pty. Ltd. Australia 100.0 Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Ricoh Finance Nederland B.V. Netherlands 100.0 Corporate finance
- ----------------------------------------------------------------------------------------------------------------------
And 321 other subsidiaries
- ----------------------------------------------------------------------------------------------------------------------
(Affiliates)
- ----------------------------------------------------------------------------------------------------------------------
Coca-Cola West Japan Co., Ltd. Japan 20.8 Manufacturing and Sale of soft drink
(21.1)
- ----------------------------------------------------------------------------------------------------------------------
Sindo Ricoh Co., Ltd. Korea 20.5 Manufacturing and Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
Shanghai Ricoh Facsimile Co., Ltd. China 49.5 Manufacturing and Sale of office equipment
- ----------------------------------------------------------------------------------------------------------------------
And 25 other affiliates
- ----------------------------------------------------------------------------------------------------------------------
Note:
1. Proportion of ownership interest includes indirect ownership.
2. Figures in parentheses indicate portion of voting power different from
portion of ownership interest.
(d) Property, plants and equipment
Ricoh manufactures its products primarily in 15 plants in Japan and 7
plants overseas. Ricoh owns all of the buildings and the land on which its
plants are located, with the exception of certain leases of land and floor space
of certain of its subsidiaries. The following table gives certain information as
of March 31, 2002 regarding the Company's and its subsidiaries' production
facilities and other facilities.
15
- ----------------------------------------------------------------------------------------------------------------------
Name (Location) Floor space Principal activities and products manufactured
- ----------------------------------------------------------------------------------------------------------------------
(in thousands of
square meters)
In Japan:
Ricoh Company, Ltd.
Ohmori Plant (Tokyo) 44 Parts relating to copiers
Atsugi Plant (Kanagawa) 69 Office equipment and other products
Numazu Plant (Shizuoka) 75 Paper and toner
Ikeda Plant (Osaka) 17 Electronic devices
Hatano Plant (Kanagawa) 15 Printed circuit boards and electronic components
Fukui Plant (Fukui) 34 Papers and toner
Gotenba Plant (Shizuoka) 70 Copiers and data processing systems
Yashiro Plant (Hyogo) 31 Electronic devices
Aoyama head office (Tokyo) 9 Marketing of office equipment and head office
Research & Development Center (Yokohama) 17 Research and Development (R&D)
System Center (Tokyo) 10 Information system center, marketing of office equipment and
other business
Ginza office 11 Marketing of office equipment and other business
Shin-Yokohama office (Yokohama) 40 Marketing of office equipment and other business, related
services and R & D
Ricoh Optical Industries Co., Ltd. (Iwate) 18 Photographic equipment
Tohoku Ricoh Co., Ltd. (Miyagi) 55 Office equipment and parts relating to copiers
Hasama Ricoh , Inc. (Miyagi) 14 Parts relating to copiers and data processing equipment
Ricoh Unitechno Co., Ltd. (Saitama) 18 Facsimile and copiers
Ricoh Elemex Corporation. (Aichi) 47 Office equipment and measuring instruments
Ricoh Microelectronics Co., Ltd. (Tottori) 11 Printed circuit board
Ricoh Keiki Co., Ltd. (Saga) 10 Parts relating to copiers and data processing systems
Overseas:
Ricoh Electronics, Inc. 99 Copiers, parts relating to copiers, toner and thermal paper
(Irvine, Santa Ana and Tustin, California
and Georgia, U.S.A.)
Ricoh UK Products Ltd. 38 Copiers, parts relating to copiers and toner
(Telford, United Kingdom)
Ricoh Industries France S.A. (Colmar, France) 42 Copiers, facsimile equipment, parts
related to copiers and thermal paper
16
- ----------------------------------------------------------------------------------------------------------------------
Name (Location) Floor space Principal activities and products manufactured
- ----------------------------------------------------------------------------------------------------------------------
(in thousands of
square meters)
Taiwan Ricoh Co., Ltd. (Taiwan) 10 Photographic equipment
Ricoh Asia Industry (Shenzhen) Ltd. (China) 52 Copiers, parts relating to copiers, and toner
Ricoh Dianzhuang (Shenzhen) Electronics 6 Parts relating to copiers
Co., Ltd. (China)
GR Advanced Materials Ltd. 4 Supplies relating to duplicators
(London, United Kingdom)
- ----------------------------------------------------------------------------------------------------------------------
Ricoh considers its manufacturing facilities to be well maintained and
believes its plant capacity is adequate for its current needs, though successive
investment in manufacturing facilities is being made for its long-term success.
Item 5. Operating and Financial Review and Prospects
CRITICAL ACCOUNTING POLICIES
Ricoh's significant accounting policies are more fully described in Note 2
to its consolidated financial statements. Certain of accounting policies require
the application of significant judgment by management in selecting the
appropriate assumptions for calculating financial estimates. By their nature,
these judgments are subject to an inherent degree of uncertainty. These
judgments are based on Ricoh's historical experience, terms of existing
contracts, Ricoh's observance of trends in the industry, information provided by
its customers and information available from other outside sources, as
appropriate. Ricoh's significant accounting policies include:
Revenue Recognition - Ricoh recognizes revenue when it has persuasive
evidence of an arrangement, the product has been shipped to and received by
the customer or the services have been provided to the customer, the sales
price is fixed or determinable and collectibility is reasonable assured.
Reserve for Doubtful Accounts - Ricoh performs ongoing credit
evaluations of its customers and adjust credit limits based upon payment
history and the customer's current credit worthiness, as determined by
Ricoh's review of their current credit information. Ricoh continuously
monitors collections and payments from its customers and maintain a
provision for estimated credit losses based upon its historical experience
and any specific customer collection issues that Ricoh has identified.
While such credit losses have historically been within Ricoh's expectations
and the provisions established, Ricoh cannot guarantee that it will
continue to experience the same credit loss rates that it has in the past.
Pension - The determination of Ricoh's obligation and expense for
pension is dependent on its selection of certain assumptions used by
actuaries in calculating such amounts. Those assumptions are described by
Note 11 to the Consolidated Financial Statements and include, among others,
the discount rate, expected long-term rate of return on plan assets and
rates of increase in compensation. In accordance with generally accepted
accounting principles, actual results that differ from Ricoh's assumptions
are accumulated and amortized over future periods and therefore, generally
affect Ricoh's recognized expense and recorded obligation in such future
periods. While Ricoh believes that its assumptions are appropriate,
significant differences in its actual experience or significant changes in
its assumptions may materially affect Ricoh's pension and future expense.
Valuation of Long-Lived Assets and Goodwill - Ricoh periodically
reviews the carrying value of its long-lived assets and goodwill for
continued appropriateness. This review is based upon Ricoh's projections of
anticipated future cash flows. While Ricoh believes that its estimates of
future cash flows are reasonable, different assumptions regarding such cash
flows could materially affect Ricoh's evaluations.
Accounting for Income Taxes - As part of the process of preparing
Ricoh's consolidated financial statements, Ricoh is required to estimate
its income taxes in each of the jurisdictions in which Ricoh operates.
This process involves Ricoh estimating its current tax exposure together
with assessing temporary differences resulting from differing treatment of
items for tax and accounting purposes. These differences result in deferred
tax assets and liabilities, which are included within Ricoh's consolidated
balance sheet. Ricoh must then assess the likelihood that Ricoh's deferred
tax assets will be recovered from future taxable income, and, to the extent
Ricoh believes that recovery is not likely, Ricoh must establish a
valuation allowance. In the event that actual results differ from these
estimates or Ricoh adjusts these estimates in future periods Ricoh may need
to establish an additional valuation allowance which could materially
impact its financial position and results of operations.
17
IMPACT OF FOREIGN EXCHANGE FLUCTUATIONS AND BASIC COUNTERMEASURES
During fiscal 2002, the average value of the yen was 125.10 yen against the
U.S. dollar, and 110.60 yen against the euro, which was 13.1 percent lower
against the U.S. dollar and 10.1 percent lower against the euro, respectively,
compared with the previous year. Operating results on a local currency basis
described in "Operating results" show results of sales and operating revenue
("sales") and operating income obtained by applying the yen's monthly average
exchange rate in the previous year to monthly local currency-denominated sales,
cost of sales, and selling, general and administrative expenses for the fiscal
2002, assuming the value of the yen had remained the same.
(a) Operating results
FISCAL 2002 COMPARED TO FISCAL 2001
Ricoh continued to improve its performance in fiscal 2002, ended March 31,
2002. During the term, the Company stepped up its drive to transform itself into
a global solutions provider. It also cultivated new customers, particularly
major accounts, and increased its sales of network equipment and solutions
products. Net sales and net income, reached record highs, for the seventh and
eighth years, respectively
18
REVENUES
Net sales increased 8.7%, to 1,672.3 billion yen--the eighth consecutive
gain. Domestic sales dipped 3.0%, to 902.6 billion yen, but overseas sales
increased 26.6%, to 769.6 billion yen. Overseas sales would have risen 14.6% if
the previous year's exchange rates had remained unchanged. Domestic and overseas
sales represented 54.0% and 46.0%, respectively, of net sales.
In the office equipment category, multifunctional printers (MFPs) and laser
printers contributed mightily to sales in all Ricoh's markets. In addition,
useware and document management systems sold well in Japan. Internationally, the
prime performance contributors were digital monochrome and color plain-paper
copiers (PPCs). As a result of these factors, office equipment sales improved
11.0%, to 1,485.3 billion yen.
OPERATING INCOME
Operating income increased 23.4%, to 129.6 billion yen. This reflected
increased sales of high-value-added core offerings like digital PPCs and MFPs
and the impact of currency fluctuations. Ricoh enlarged its overseas sales
channel by on-going marketing efforts and its acquisition of Lanier Worldwide,
Inc. On the other hand, Ricoh made effort in ongoing-cost-cutting in Japan.
Gross profit improved 14.1%, to 699.9 billion yen and selling, general and
administrative expense increased 12.2%, to 570.2 billion yen.
INCOME BEFORE INCOME TAXES
Income before income taxes, minority interests and equity in earnings of
affiliates gained 16.6%, to 113.9 billion yen. The rise would have been greater
if not for declines in interest and dividend income amid sluggish financial
market conditions, foreign currency exchange loss, and an increase in net other
expenses.
NET INCOME
Net income increased 15.8%, to 61.6 billion yen--the 10th consecutive rise.
Total taxes were up 17.5%, to 51.1 billion yen. The effective tax rate for the
term was 44.9%, up 0.4 percentage point. The basic and diluted earnings per
share of common stock were 88.27 yen and 82.46 yen, respectively. These figures
were up 14.9% and 16.1%, respectively.
Subject to approval at the ordinary general meeting of shareholders on June
27, 2002, management increased cash dividends per share of common stock 1.00
yen, to 13.00 yen. This is in keeping with management's commitment to ensuring
solid shareholder returns.
SEGMENT INFORMATION
OPERATING SEGMENTS-
Office Equipment
COPIERS AND RELATED SUPPLIES
Segment sales advanced 13.5%, to 1,038.4 billion yen. This growth stemmed
largely from the launch in the core digital PPC and MFP categories of fast
models and high-value-added machines whose features improve efficiency, from
document input/output through information sharing and management. Overseas, key
factors were the first full-year contribution of Lanier Worldwide, Inc., which
Ricoh acquired near the end of the previous year as well as the lower yen.
COMMUNICATIONS AND INFORMATION SYSTEMS
In this segment, sales advanced 5.6%, to 446.8 billion yen. The main
contributors here were fast, high-resolution color laser printers and low-end
color laser printers.
19
(SOLUTIONS-BASED BUSINESS SEGMENTATION)
Ricoh has summarized results under the following business segments that
reflect its strategic direction as a document solutions provider.
(Imaging Solutions)
In this segment, sales gained 7.7%, to 934.1 billion yen. This was mainly
because of a stronger lineup that included both low-end and fast digital PPCs.
Domestic sales dropped in other product areas amid the Japanese recession and
declining demand. On the positive side, overseas sales soared for digital PPCs,
with color models also enjoying gains.
(Network Input/Output Systems)
Segment sales increased 31.5%, to 344.2 billion yen, reflecting a far
broader range of MFPs and color laser printers, complemented by printing
solutions. In Japan and overseas, the focus of customer demand continued to
shift toward speed, networking, lower total costs of ownership, and better
productivity. Ricoh responded to those trends by releasing new models and
stepping up marketing.
(Network System Solutions)
Sales in this segment were off 1.2%, to 206.9 billion yen. Ricoh focused on
useware, document management, and other solutions businesses in response to a
shift in customer demand away from standalone models toward systems for
networked offices. The sales decline in this segment was due to lower demand for
personal computers and servers owing to constrained corporate spending on
information technology in Japan.
Other Businesses
Category sales dropped 6.5%, to 186.9 billion yen. This was primarily
because of poor semiconductor and measurement equipment markets.
GEOGRAPHIC SEGMENTS-
Japan accounted for 54.0% of net sales. The Americas and Europe accounted
for 20.4% and 18.6%, respectively, and other areas 7.0%.
JAPAN
Domestic sales decreased 3.0%, to 902.6 billion yen. This was largely
because the Japanese economy remained in recession, causing companies to
constrain information technology spending and restructure. On the positive side,
Ricoh increased sales of printing systems 28.6%, with MFPs performing
particularly well on the strength of launches of new offerings and expanded
marketing in response to customer needs.
THE AMERICAS
Here, sales surged 35.2%, to 341.7 billion yen. After factoring out
exchange rate changes, sales would have increased 19.7%. This improvement was
largely because Ricoh expanded and reinforced its sales networks, particularly
in North America, thus increasing sales of core digital PPCs and MFPs. Lanier
Worldwide, Inc., which Ricoh acquired near the end of the previous year
contributed significantly to results through a successful strategy of expanding
digital equipment and strengthening sales to major accounts.
20
EUROPE
Sales in this region surged 25.8%, to 311.3 billion yen, and gained 15.2%
in local currency terms. This result reflected the strength of Ricoh's
multibrand strategy, with the Company maintaining strong sales and top market
shares in both digital PPCs and MFPs.
OTHERS
Sales in other areas improved 8.3%, to 116.6 billion yen, amid the shift to
digital and networked models. Ricoh aims to take advantage of China's admission
to the World Trade Organization and that nation's deregulation and initiatives
to open its market by strengthening its local sales network.
FISCAL 2001 COMPARED TO FISCAL 2000
Ricoh continued to deliver strong results in fiscal 2001. During the year,
the Company continued to broaden its product lineup, boost its market share in
key markets, and pursue restructuring. As a result of these factors, net sales
and net income reached record highs, for the sixth and seventh years,
respectively.
REVENUES
Net sales rose 6.3% to 1,538.3 billion yen. Domestic sales gained 6.6% to
930.4 billion yen. Overseas sales advanced 5.9% to 607.8 billion yen, and would
have increased 13.2% if the previous year's exchange rates had remained
unchanged. Domestic and overseas sales represented 60.5% and 39.5% respectively,
of net sales. In the office equipment category, multifunctional printers and
other printing solutions drove domestic sales. Overseas, Aficio brand offerings
continued to go from strength to strength, particularly in the United States.
Consequently, office equipment sales were up 6.8%, to 1,338.4 billion yen. The
average yen-dollar rate for the term was down about 1 yen, to 111 yen per U.S.
dollar. The yen-euro average declined significantly, by approximately 15 yen, to
100 yen per euro.
OPERATING INCOME
Operating income jumped 18.2%, to 105.1 billion yen. The gross profit ratio
slipped 0.2 percentage point, to 39.9%. Selling, general and administrative
expenses rose 3.5%, to 508.3 billion yen, reflecting significantly expanded
operations. Research and development costs rose 17.6%, to 78.2 billion yen owing
to significantly increased investments in start-of-the-art solutions projects.
These costs accounted for 5.1% of net sales, up 0.5 percentage point.
INCOME BEFORE INCOME TAXES
Income before income taxes, minority interests and equity in earnings of
affiliates increased 38.9% to 97.8 billion yen. Net interest and dividend income
was 258 million yen, compared with a net interest expense of 4.2 billion yen in
fiscal 2000.
NET INCOME
Net income increased 27.0% to 53.2 billion yen. Total taxes were up 53.4%
to 43.5 billion yen. The effective tax rate for the term was 44.5%, up 4.2
percentage points from the prior year. The basic and diluted earnings per share
of common stock were 76.85 yen and 71.02 yen, respectively. These figures were
up 26.8% and 26.7%, respectively. Parent company cash dividends per share of
common stock rose 1.00 yen to 12.00 yen, reflecting management's commitment to
delivering solid shareholder returns.
21
SEGMENT INFORMATION
OPERATING SEGMENTS-
OFFICE EQUIPMENT
Ricoh strengthened digital PPCs and printing solutions centered on MFPs to
meet customer needs. As a result, both net sales and operating income greatly
increased. Capital expenditure increased because of strategic investment in
production lines for new products and product development. The prominent
increase of total assets is due to the acquisition of Lanier Worldwide, Inc.
OTHER BUSINESSES
Owing to higher productivity through increased sales volume of
semiconductors, the operating income increased. Capital expenditure also
increased because of investment for higher semiconductor production.
GEOGRAPHIC SEGMENTS-
JAPAN
In addition to higher profitability of the core office equipment business,
the better optical disk and semiconductor businesses achieved large gains in
operating income.
THE AMERICAS
The operating income increased owing to stable growth of imaging systems.
On the other hand, the temporary costs of Lanier Worldwide, Inc. and increase in
R & D expenditure by Ricoh Innovations, Inc. resulted in a decrease of operating
income.
EUROPE
Ricoh has been strengthening and rearranging sales channels. As a result,
both sales and operating income steadily grew. On the other hand, the operating
income decreased because of temporary reduction in production volume due to
model changes in the UK manufacturing facility. Furthermore, the lower euro also
resulted in a decrease in operating income.
OTHERS
Ricoh was able to ascertain the effect of strengthened sales channels. As a
result of strengthened sales channels, both sales and operating income
increased.
(b) Liquidity and capital resources
Ricoh's principal sources of liquidity consist of a combination of cash and
cash equivalents on hand, cash provided from operations, commercial paper,
available borrowings under bank lines of credit and public debt offerings. As of
March 31, 2002, Ricoh had 142.5 billion yen in cash and cash equivalents and
580.7 billion yen unused lines of credit, of which 342.0 billion yen related to
commercial paper and medium-term notes programs. Under those lines of credit,
the Company and its certain subsidiaries are able to borrow from financial
institutions at local market based interest rates. The interest rates ranged
from 0% to 11.60% as of March 31, 2002. Almost all borrowings are unsecured. The
Company, Ricoh Leasing Co., Ltd. and certain foreign subsidiaries can issue
commercial paper or medium term notes. The range of interest rate of commercial
paper and medium term notes as of March 31, 2002 were from 0.048% to 2.244% and
from 0.06% to 3.89%, respectively.
Ricoh believes that its cash and cash equivalents and funds expected to be
generated from its operations are sufficient to meet its cash requirement at
least through fiscal year 2003. If Ricoh's revenue becomes significantly less
than expected, Ricoh believes current funds on hand will suffice
22
to finance its operations temporarily, along with sufficient unused lines of
credit from financial institutions with high credit ratings.
At the close of fiscal 2002, total assets were 1,832.9 billion yen, up 7.5%
from a year earlier. Changes in interest-bearing debt reflected a 60 billion yen
issue of straight bonds and Ricoh's sixth and eighth issues of convertible
bonds, which most investors converted on maturity. The equity ratio was up 1.8
percentage point from a year earlier, at 34.5%.
One of Ricoh's key management policies is to expand free cash flow and
continually bolster its financial position.
At the close of fiscal 2002, higher net income and depreciation and
amortization added 20.0 billion yen to cash flows from operating activities,
which were 135.3 billion yen. Changes in assets and liabilities included 17.2
billion yen deposited for the maturity of Ricoh's sixth and eighth convertible
bond issues by year-end. Changes would have been as in the previous fiscal year
if not for this factor. Most of those bonds were converted upon maturity. Thus,
net cash provided by operating activities increased 2.3%, to 105.1 billion yen.
Net cash used in investing activities decreased 4.9%, to 65.7 billion yen.
This was mainly because of spending to set up new manufacturing lines and
develop new products.
Consequently, the free cash flow generated by operating and investing
activities decreased 1.6%, to 39.3 billion yen.
Net cash provided by financing activities was 36.2 billion yen, compared
with 88.3 billion yen used in such activities a year earlier. The Company issued
fourth and fifth straight bonds in Japan market in preparation for long-term
business expansion, which totaled 60 billion yen. In Japan and overseas, the
subsidiaries tried to minimize borrowings from third parties for interest
expense savings and effective cash flow control. For example, Ricoh Leasing Co.,
Ltd. reduced borrowings in Japan and Ricoh Corporation (the head office of Ricoh
in the Americas) and its subsidiaries including Lanier Worldwide, Inc. cut
interest-bearing debt in the Americas.
As a result of these factors, cash and cash equivalents at the close of the
term were up 78.0 billion yen from a year earlier, at 142.5 billion yen.
The Company and Ricoh Leasing Co., Ltd. obtain ratings from a major rating
agency: Standard & Poor's Rating Services, a division of McGraw-Hill Companies,
Inc. ("S&P") and other local rating agency. As of March 31, 2002, the Company
and Ricoh Leasing Co., Ltd. were rated A/A-1 by S&P. Under the ratings Ricoh
Leasing Co., Ltd. and certain foreign subsidiaries issue commercial paper to
meet short-term funding requirements. Outstanding commercial paper totaled 63.8
billion yen, 57.3 billion yen as of March 31, 2001 and 2002, respectively. Lower
ratings generally increases commercial paper issuing costs and narrows access to
commercial paper markets, while Ricoh's rating outlook is 'Stable' by S&P. The
Company, Ricoh Leasing Co., Ltd. and certain foreign subsidiaries have issued
various types of bonds and medium term notes under those ratings. For more
details of those bonds, see Note 10 to the Consolidated financial statements.
Ricoh Leasing Co., Ltd uses an off-shore special purpose entity ("SPE") in
securitizing its lease receivables. Details of the securitization transactions
with SPEs are stated in the notes to financial statements. See Note 5 to the
Consolidated financial statements in the financial section.
Ricoh enters into various derivative financial instrument contracts in the
normal course of business and in connection with the management of its assets
and liabilities. Ricoh enters into foreign exchange contracts and foreign
currency options to hedge against the potentially adverse impacts of foreign
currency fluctuations on these assets and liabilities denominated in foreign
currencies. Ricoh enters into interest rate swap agreements to hedge against the
potential adverse impacts of fair value or cash flow fluctuations on interest of
its outstanding debt. Ricoh uses derivative instruments to reduce risk and
protect market value of assets and liabilities in conformity with the Ricoh's
policy. Ricoh does not use derivative financial instruments for trading or
speculative
23
purposes, nor is it a party to leveraged derivatives. Details of these
derivative contracts are stated in Item11. Quantitative and Quantitative
Disclosures About Market Risk.
Ricoh's financial policy is to assure adequate financing and liquidity for
its operations and to maintain the strength of its balance sheet.
Ricoh's financial condition remains strong. Ricoh believes that it
maintains sufficient liquidity through its cash and other liquid assets for its
present requirements, and that in order to fund ongoing operating requirements
and investments related to the expansion of existing businesses and the
development of new projects, it is able to secure adequate resources through its
access to financial and capital markets.
The following table lists Ricoh's contractual obligations and commitments
(other than operating leases that require cash outlays in the future) as of
March 31, 2002.
CONTRACTUAL OBLIGATION
- -------------------------------------------------------------------------------------------------------------
Expected maturity date
- -------------------------------------------------------------------------------------------------------------
(Millions of yen)
2008 and
Total 2003 2004 2005 2006 2007 thereafter
- -------------------------------------------------------------------------------------------------------------
Long-term Debt 393,547 65,906 55,280 71,054 92,924 55,140 53,243
Capital Lease Obligations 3,113 1,156 983 550 420 4 -
Unconditional Purchase Obligations 706 706 - - - - -
- -------------------------------------------------------------------------------------------------------------
Total 397,366 67,768 56,263 71,604 93,344 55,144 53,243
- -------------------------------------------------------------------------------------------------------------
Ricoh also had operating lease commitments with rental payments totaling
46.4 billion yen for the year ended March 31, 2002.
Ricoh has guarantees for its employees' housing loans. As of March 31,
2002, the total amount of such guarantees was 640 million yen.
(c) Research and development, patents and licenses
RESEARCH AND DEVELOPMENT
Ricoh has had a tradition of technological innovation and product
development since its formation.
At the present time, Ricoh's research and development is conducted at the
Ricoh Research and Development (R&D) Center in Kanagawa, Japan (the "Center"),
as its main R&D facility. The Center's activities include optics, new materials,
mechatronics, and computer simulation and environmental technologies. Ricoh also
conducts various specialized and peripheral research and development at the
Office System Research and Development Center in Kanagawa, the Manufacturing
Technology R&D Center in Kanagawa, the Optical Memory R&D Center in Kanagawa,
the Photonics R&D Center in Kanagawa, the Environmental Technology R&D Center in
Kanagawa, the Ricoh Toda Technical Center in Kanagawa, the General Electronics
R&D Center in Miyagi, the Imaging Technology Division in Tokyo, the Software
Research Center in Tokyo, the Chemical Products R&D Center in Shizuoka, and the
imaging LSI R&D Center in Osaka, Japan.
Ricoh Innovations, Inc. (formerly Ricoh Silicon Valley, Inc.), which was
founded in March 1997, handles research to support marketing in information
technologies for the digitally networked office. It also conducts R&D and makes
strategic investments in promising new business fields.
See Note 19 to the Consolidated Financial Statements for a summary of
Ricoh's research and development expenditures during each of the last three
fiscal years.
PATENTS AND LICENSES
Ricoh owns approximately 14,000 patents (the ratio of domestic to foreign
patents is about 70:30) and has licenses (both as licensor and as licensee)
under various agreements with Japanese and foreign manufacturers. During the
year ended March 31, 2002, Ricoh paid royalties of approximately 6.3 billion yen
and received royalties of approximately 5.0 billion yen. Although patents are
important to Ricoh, it does not believe that the expiration of any single patent
or group of related patents or of any license will materially affect the conduct
of its business.
24
Item 6. Directors, Senior Management and Employees
(a) Directors and senior management
Directors and Corporate Auditors of the Company as of June 27, 2002 were as
follows:
Name Current Position
(Date of birth) (Function/Business area) Date Business Experience
- --------------- ------------------------ --------- ---------------------------------
Hiroshi Hamada Chairman and Apr. 1957 Joined the Company
(April 28, 1933) Chief Executive Officer May 1975 General Manager of General
Manager Staff Office in Copiers
Division
May 1975 Director
June 1980 Managing Director
Apr. 1981 Executive Managing Director
Apr. 1983 President
Apr. 1996 Chairman and Chief Executive
Officer (Current)
Principal business activities and other principal directorships performed
outside Ricoh:
Vice Chairman of Japan Business Federation
Member of National Public Service Ethics Board
Member of National Commission on Educational Reform
Director of Saga Television Station Co., Ltd.
Director of Coca - Cola West Japan Co., Ltd.
Director of Nippon Venture Capital Co., Ltd.
Advisory board member of The Nomura Securities Co., Ltd.
Director of UFJ Holdings, Inc.
- --------------- ------------------------ --------- ---------------------------------
Masamitsu Sakurai President and Apr. 1966 Joined the Company
(January 8, 1942) Chief Operating Officer Apr. 1990 General Manager of Procurement
Division
June 1992 Director
June 1994 Managing Director
Apr. 1996 President and Chief Operating
Officer (Current)
Principal business activities and other principal directorships performed
outside Ricoh:
Vice Chairperson of Japan Association of Corporate Executives
Vice President of Japan Business Machine and Information System
Industries Association
Corporate Auditor of San-Ai Oil Co., Ltd.
Director of Millea Holdings, Inc.
25
Name Current Position
(Date of birth) (Function/Business area) Date Business Experience
- --------------- ------------------------ --------- ---------------------------------
Haruo Kamimoto Deputy President Apr. 1953 Joined the Company
(January 12, 1938) (Restructuring by Supply Feb. 1980 Manager of Copiers Division
Chain Management) June 1980 Director
(Customer Satisfaction June 1990 Managing Director
and Quality Control) June 1996 Executive Managing Director
(Corporate Environment) June 2000 Executive Vice President
(Corporate Citizenship (Current)
Promotion and Public Oct. 2001 Deputy president (Current)
Relations)
- --------------- ------------------------ --------- ---------------------------------
Tatsuo Hirakawa Deputy President Apr. 1960 Joined the Company
(November 17, 1937) (Corporate Planning, Jan. 1982 Deputy General Manager of
Investors Relations, Accounting and Management
Accounting and Division
Personnel) June 1983 Director
June 1990 Managing Director
June 1994 Executive Managing Director
June 2000 Executive Vice President
(Current)
Oct. 2001 Deputy president (Current)
Principal business activities and other principal directorships performed
outside Ricoh:
Corporate Auditor of Coca-Cola West Japan Co., Ltd.
- --------------- ------------------------ --------- ---------------------------------
Naoto Shibata Executive Managing Director Apr. 1961 Joined the Company
(December 16, 1938) (Legal and intellectual Apr. 1990 General Manager of Accounting
property) Division
June 1992 Director
Sep. 1995 Chairman of Gestetner Holdings
PLC (now NRG Group PLC)
June 1996 Managing Director
Apr. 1997 Chairman of Ricoh Europe B.V.
June 2000 Executive Managing Director
(Current)
June 2000 Executive Vice President
(Current)
26
Name Current Position
(Date of birth) (Function/Business area) Date Business Experience
- --------------- ------------------------ --------- ---------------------------------
Koichi Endo Executive Managing Director Apr. 1966 Joined the Company
(February 16, 1944) (Production, Procurement Oct. 1990 General Manager of Component
and IT & Solution) Division
(General Manager of June 1992 Director
Production Business June 1997 Managing Director
Group) Apr. 1998 General Manager of Production
Business Group (Current)
June 2000 Executive Managing Director
(Current)
June 2000 Executive Vice President
(Current)
Principal business activities and other principal directorships performed
outside Ricoh:
Director of Sindo Ricoh Co., Ltd.
Director of San-Ai Plant Construction Co., Ltd.
- --------------- ------------------------ --------- ---------------------------------
Masami Takeiri Exceptive Managing Director Apr. 1962 Joined the Company
(May 3, 1938) (International Marketing) Apr. 1994 General Manager of
(General Manager of International Marketing Group
International Marketing (Current)
Group) June 1994 Director
June 1998 Managing Director
June 2000 Executive Vice President
(Current)
June 2002 Exceptive Managing Director
Current)
Principal business activities and other principal directorships performed
outside Ricoh:
Director of Shanghai Ricoh Facsimile Co., Ltd.
- --------------- ------------------------ --------- ---------------------------------
Masayuki Matsumoto Exceptive Managing Director Apr. 1970 Joined the Company
(December 10, 1944) (Domestic sales) Jan. 1994 General Manager of General
("The Man" project) Manager Staff Office in Tokyo
(General Manager of Branch
Marketing Group) June 1994 Director
Oct. 1994 Managing Director
Oct. 1998 General Manager of Marketing
Group (Current)
June 2000 Executive Vice President
(Current)
June 2002 Exceptive Managing Director
(Current)
27
Name Current Position
(Date of birth) (Function/Business area) Date Business Experience
- --------------- ------------------------ --------- ---------------------------------
Makoto Hashimoto Managing Director Nov. 1972 Joined the Company
(August 26, 1945) (Planning, Development and Apr. 1993 General Manager of PPC
Design of Personal Division of Imaging System
Multimedia System) Business Group
(President of Personal June 1994 Director
MultiMedia Products Company) Apr. 1998 General Manager of Imaging
System Business Group
June 1998 Managing Director (Current)
June 2000 Executive Vice President
(Current)
June 2000 President of Personal MultiMedia
Products Company (Current)
- --------------- ------------------------ --------- ---------------------------------
Katsumi Yoshida Managing Director Apr. 1967 Joined the Company
(August 20, 1944) (Sales in the Americas) Apr. 1989 General Manager of Product
Division
Apr. 2000 President of Ricoh Corporation
(Current)
Apr. 2001 Executive Vice President
(Current)
June 2002 Managing Director (Current)
- --------------- ------------------------ --------- ---------------------------------
Kiyoshi Sakai Managing Director Apr. 1970 Joined the Company
(December 25, 1945) (Research and Development) Jan. 1996 General Manger of Corporate
(General Manager of Planning Division
Research and Development June 1996 Director
Group) Apr. 1999 General Manager of Research
(General Manager of New and Development Group
Business Development (Current)
Group) June 2000 Vice President
(Sub leader of Alpha Task June 2002 Senior Vice President (Current)
Force) June 2002 Managing Director (Current)
- --------------- ------------------------ --------- ---------------------------------
Josei Itoh Director Mar. 1953 Joined the Nippon Life
(May 25, 1929) (General Management) Insurance Company
July 1981 Director of said company
Mar. 1984 Managing Director of said
company
Mar. 1987 Executive Managing Director of
said company
Mar. 1988 Vice President of said company
July 1989 President of said company
Apr. 1997 Chairman of said company
(Current)
June 2000 Director of the Company (Current)
28
Name Current Position
(Date of birth) (Function/Business area) Date Business Experience
- --------------- ------------------------ --------- ---------------------------------
Nobuo Mii Director Apr. 1955 Joined the Nippon Hoso Kyokai
(July 4, 1931) (Technical of Information (Japan Broadcasting
and Communication) Corporation)
Jan. 1969 Joined IBM Japan Ltd.
Jan. 1969 Joined IBM Corporation
Mar. 1977 Director of IBM Japan Ltd.
Apr. 1990 Vice President of IBM Japan Ltd.
Oct. 1997 Managing Partner of IGNITE
Group (Current)
June 2000 Director of the Company
(Current)
- --------------- ------------------------ --------- ---------------------------------
Hisaaki Koga Corporate Auditor Apr. 1967 Joined the Company
(April 5, 1943) Apr. 1998 General Manager of General
Manager Staff Office in
Marketing Group
June 1998 Corporate Auditor of the Company
(Current)
- --------------- ------------------------ --------- ---------------------------------
Hideyuki Takamatsu Corporate Auditor Apr. 1966 Joined the Company
(May 21, 1942) Dec. 1997 Executive Managing Director of
San-Ai Co., Ltd.
June 1998 Corporate Auditor of the Company
(Current)
- --------------- ------------------------ --------- ---------------------------------
Kenji Matsuishi Corporate Auditor Apr. 1965 Graduated from the National
(July 24, 1937) Legal Training and Research
Institute.
Apr. 1965 Legal registration as a Japanese
attorney
Apr. 1965 Joined Takano & Higuchi Legal
Services
Feb. 1972 General Manager of Matsuishi
Legal Services (Current)
June 1994 Corporate Auditor of the Company
(Current)
- --------------- ------------------------ --------- ---------------------------------
Takehiko Wada Corporate Auditor Apr. 1958 Joined San-Ai Oil Co., Ltd.
(October 24, 1935) June 1985 Director of said company
June 1990 Managing Director of said
company
July 1994 Executive Managing Director of
said company
July 1999 President of said company
(Current)
June 2001 Corporate Auditor of the Company
(Current)
29
Directors and Corporate Auditors are elected at a general meeting of
shareholders for two and three years terms respectively, and may serve any
number of consecutive terms.
There are no arrangements or understandings between a Director or a
Corporate Auditor and any other person pursuant to which he was selected as a
Director or a Corporate Auditor.
The Board of Directors has appointed from among its members a Chairman, a
President, and one or more Vice Presidents, Executive Managing Directors and
Managing Directors.
Ricoh maintains an executive officer system. There are 36 such officers,
with the following roles:
Executive officers oversee operations under authority from the president
and are responsible to the president.
Group executive officers assist the president with management of the Ricoh
Group.
Executive Officers of the Company as of June 27, 2002 were as follows:
Current Position
Name (Function/Business area) Date Business Experience
- --------------------------- ------------------------------ ------------ -------------------------------------
Masamitsu Sakurai President and See above for his business experience and other
Chief Operating Officer information.
- --------------------------- ------------------------------ ------------ -------------------------------------
Haruo Kamimoto Executive Vice President See above for his business experience and other
(Customer Satisfaction and information.
Quality Control)
(Corporate Environment)
(Restructuring)
- --------------------------- ------------------------------ ------------ -------------------------------------
Tatuo Hirakawa Executive Vice President See above for his business experience and other
(Corporate Planning, Finance information.
and Personnel)
- --------------------------- ------------------------------ ------------ -------------------------------------
Naoto Shibata Executive Vice President See above for his business experience and other
(Legal and intellectual information.
property)
- --------------------------- ------------------------------ ------------ -------------------------------------
Koichi Endo Executive Vice President See above for his business experience and other
(General Manager of information.
Production Business Group)
- --------------------------- ------------------------------ ------------ -------------------------------------
Masami Takeiri Executive Vice President See above for his business experience and other
(General Manager of information.
International Marketing
Group)
- --------------------------- ------------------------------ ------------ -------------------------------------
Masayuki Matsumoto Executive Vice President See above for his business experience and other
(General Manager of information.
Marketing Group)
30
Current Position
Name (Function/Business area) Date Business Experience
- --------------------------- ------------------------------ ------------ -------------------------------------
Makoto Hashimoto Executive Vice President See above for his business experience and other
(President of Personal information.
MultiMedia Products Company)
- --------------------------- ------------------------------ ------------ -------------------------------------
Katsumi Yoshida Executive Vice President See above for his business experience and other
(President of Ricoh information.
Corporation)
(Chairman of Ricoh
Electronics, Inc.)
- --------------------------- ------------------------------ ------------ -------------------------------------
Kiyoshi Sakai Executive Vice President See above for his business experience and other
(General Manager of Research information.
and Development Group)
(General Manager of New
Business Development Group)
- --------------------------- ------------------------------ ------------ -------------------------------------
Terumoto Nonaka Executive Vice President Jan. 1988 Joined the Company
Born on October 28, 1947 (President of Electronic Oct. 2000 President of Electronic Devices
Devices Company) Company (Current)
June 2002 Executive Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Shiroh Kondoh Executive Vice President Apr. 1973 Joined the Company
Born on October 7, 1949 (General Manger of Imaging Oct. 2000 General Manager of Imaging System
System Business Group) Business Group (Current)
(General Manger of P&S Oct. 2000 General Manager of P&S Division
Division) (Current)
(General Manager of C&F Apr. 2001 General Manager of C&F Division 1
Division 1) (Current)
June 2002 Executive Vice President of the
Company (Current)
Principal business activities and other principal directorships performed
outside Ricoh:
Director of Shanghai Ricoh Facsimile Co., Ltd.
- --------------------------- ------------------------------ ------------ -------------------------------------
Kazuo Togashi Executive Vice President Apr. 1972 Joined the Company
Born on November 28, 1949 (Chairman of Ricoh Europe Apr. 1998 Chairman of Ricoh Espana, S.A.
B.V.) (Current)
(Chairman of NRG Group PLC) Apr. 1998 Chairman of Ricoh U.K. Ltd.
(Current)
May 2002 Chairman of Ricoh Europe B.V.
(Current)
May 2002 Chairman of NRG Group PLC (Current)
June 2002 Executive Vice President of the
Company (Current)
31
Current Position
Name (Function/Business area) Date Business Experience
- --------------------------- ------------------------------ ------------ -------------------------------------
Tadatoshi Sakamaki Senior Vice President Apr. 1967 Joined the Company
Born on April 23, 1942 (Deputy President of June 2000 Senior Vice President of the
Personal MultiMedia Company (Current)
Products Company) Apr. 2002 Deputy President of Personal
MultiMedia Products Company
(Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Kenji Hatanaka Senior Vice President Apr. 1969 Joined the Company
Born on July 1, 1946 (President of Ricoh Kansai Apr. 1998 General Manager of Osaka Branch
Co., Ltd.) (Current)
(General Manager of Osaka June 2000 Senior Vice President of the
Branch) Company (Current)
Jan. 2002 President of Ricoh Kansai Co., Ltd.
(Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Etsuo Kobayashi Senior Vice President Apr. 1970 Joined the Company
Born on July 4, 1947 (General Manager of Apr. 1998 General Manager of Personnel
Personnel Division) Division (Current)
June 2000 Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Hiroshi Tategami Senior Vice President Apr. 1962 Joined the Company
Born on March 31, 1941 (Deputy General Manager of June 2000 Senior Vice President of the
Production Business Group) Company (Current)
(General Manager of RS Oct. 2000 General Manager of RS
Products Division) Products Division (Current)
Oct. 2000 Deputy General Manager of
Production Business Group (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Hideko Kunii Senior Vice President May 1982 Joined the Company
Born on December 13, 1947 (General Manager of Software Oct. 1999 General Manager of Software
Research Center) Research Center (Current)
(Deputy General Manager June 2000 Senior Vice President of the
of P&S Products Division) Company (Current)
Oct. 2000 Deputy General Manager of P&S
Products Division (Current)
Principal business activities and other principaldirectorships performed
outside Ricoh:
President of Information Broadcasting Laboratories, Inc.
- --------------------------- ------------------------------ ------------ -------------------------------------
Kunio Taniguchi Senior Vice President Apr. 1972 Joined the Company
Born on December 18, 1948 (General Manager of Tokyo June 2000 Senior Vice President of the
Branch) Company (Current)
Oct. 2000 General Manager of Tokyo Branch
(Current)
32
Current Position
Name (Function/Business area) Date Business Experience
- --------------------------- ------------------------------ ------------ -------------------------------------
Zenji Miura Senior Vice President Apr. 1976 Joined the Company
Born on January 5, 1950 (General Manager of Oct. 2000 Senior Vice President of the
Accounting Division) Company (Current)
Oct. 2000 General Manager of Accounting
Division (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Hiroshi Kobayashi Senior Vice President Apr. 1974 Joined the Company
Born on July 2, 1948 (General Manager of Apr. 2002 General Manager of Corporate
Corporate Planning Division) Planning Division (Current)
June 2002 Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Hiroshi Tsuruga Senior Vice President Apr. 1971 Joined the Company
Born on November 18, 1948 (General Manger of Apr. 1999 General Manger of
Information/Technology and Information/Technology and Service
Service Division) Division (Current)
June 2002 Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Kiyoto Nagasawa Senior Vice President Apr. 1973 Joined the Company
Born on August 16, 1948 (General Manger of C&F Apr. 2001 General Manger of C&F Business
Business Division 2) Division 2 (Current)
May 2002 Director of Ricoh Creative
Development Co., Ltd. (Current)
June 2002 Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Yutaka Ebi Senior Vice President Apr. 1972 Joined the Company
Born on October 20, 1949 (General Manger of Imaging Apr. 2001 General Manger of Imaging
Technology Division) Technology Division (Current)
June 2002 Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Hiroo Matsuda Senior Vice President Apr. 1972 Joined the Company
Born on April 19, 1948 (General Manger of Major Apr. 2002 General Manger of Major Accounts
Accounts Marketing Division) Marketing Division (Current)
June 2002 Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Hiroshi Adachi Senior Vice President Apr. 1968 Joined the Company
Born on January 8, 1946 (President of Thermal Media Oct. 2000 President of Thermal Media Company
Company) (Current)
June 2002 Senior Vice President of the
Company (Current)
33
Current Position
Name (Function/Business area) Date Business Experience
- --------------------------- ------------------------------ ------------ -------------------------------------
Kouji Sawa Senior Vice President Apr. 1971 Joined the Company
Born on June 5, 1948 (General Manager of Apr. 1998 General Manger of Imaging System
Production Strategic Center) Component Production Division
(General Manger of Imaging (Current)
System Component Production Apr. 2000 General Manager of Production
Division) Strategic Center (Current)
(General Manager of Optical July 2001 General Manager of Optical
Component Development Component Development Division
Division) (Current)
June 2002 Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Itsuo Kawaji Group Senior Vice President Apr. 1961 Joined the Company
Born on September 12, 1938 (President of Ricoh Logistics Apr. 1997 President of Ricoh Logistics System
System Co., Ltd.) Co., Ltd. (Current)
June 2000 Group Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Takashi Nakamura Group Senior Vice President Apr. 1972 Joined the Company
Born on September 2, 1946 (President of Ricoh Elemex June 1998 Director of the Company
Corporation)
June 2000 Senior Vice President of the Company
Apr. 2002 Group Senior Vice President of the
Company (Current)
June 2002 President of Ricoh Elemex
Corporation (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Peter E. Hart Group Senior Vice President Mar. 1997 President of Ricoh Silicon Valley,
Born on February 27, 1941 (Chairman and President of Inc. (now Ricoh Innovations, Inc.)
Ricoh Innovations, Inc.) Feb. 2000 Chairman of Ricoh Silicon Valley,
Inc. (Current)
June 2000 Group Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Yuji Inoue Group Senior Vice President Apr. 1971 Joined the Company
Born on April 4, 1948 (President of Ricoh Leasing Oct. 1998 President of Ricoh Leasing Co.,
Co., Ltd.) Ltd. (Current)
June 2000 Group Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Masami Yoneyama Group Senior Vice President Mar. 1961 Joined the Company
Born on March 25, 1942 (Chairman of Ricoh Hong Kong June 2000 Senior Vice President of the Compnay
Ltd.) Oct. 2000 Group Senior Vice President
(Chairman of Ricoh (Current)
Electronic Technology Ltd. Oct. 2000 Chairman of Ricoh Hong Kong Ltd.
(China)) (Current)
Oct. 2000 Chairman of Ricoh Electronic
Technology Ltd. (China) (Current)
34
Current Position
Name (Function/Business area) Date Business Experience
- --------------------------- ------------------------------ ------------ -------------------------------------
Kazunori Azuma Group Senior Vice President Apr. 1971 Joined the Company
Born on February 11, 1949 (President of Ricoh June 2000 Senior Vice President of the Company
Technosystems Co., Ltd.) Oct. 2000 Group Executive Office of the
(General Manager of NI/SI Company (Current)
Business Center of Oct. 2000 President of Ricoh Technosystems
Marketing Group) Co., Ltd. (Current)
Apr. 2002 General Manager of NI/SI Business
Center of Marketing Group (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Bernard Decugis Group Senior Vice President Aug. 1993 President of Ricoh France S.A.
Born on October 23, 1942 (President of Ricoh France (Current)
S.A.) Apr. 2001 Group Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Jim Ivy Group Senior Vice President Feb. 2000 Vice President of Ricoh Corporation
Born on January 16,1951 (Vice President of Ricoh (Current)
Corporation) Apr. 2001 Group Senior Vice President of the
Company (Current)
- --------------------------- ------------------------------ ------------ -------------------------------------
Yoichi Shirahata Group Senior Vice President Mar. 1962 Joined the Company
Born on December 20, 1943 (President of Tohoku Ricoh June 2002 Group Senior Vice President of the
Co., Ltd.) Company (Current)
June 2002 President of Tohoku Ricoh Co., Ltd.
(Current)
There are no family relationships between any Director, Corporate Auditor
or Executive Officer and any other Director, Corporate Auditor or Executive
Officer of the Company.
(b) Compensation
The aggregate remuneration, including bonuses but excluding retirement
allowances, paid by the Company in the year ended March 31, 2002 to all those
Directors, Corporate Auditors and Executive Officers of the Company who served
during the year ended March 31, 2002 was 968 million yen.
In accordance with customary Japanese business practice, when a Director or
Corporate Auditor retires, a proposal to pay a lump-sum retirement allowance is
submitted to the shareholders for their approval. After shareholders' approval
is obtained, the amount of the retirement allowance for a Director or Corporate
Auditor is fixed by the Board of Directors or Board of Corporate Auditors and
generally reflects his remuneration and position at the time of retirement, the
length of his service as a Director or Corporate Auditor and his contribution to
the Company's performance.
(c) Board practices
Under the Japanese Commercial Code, all Directors and Corporate Auditors
shall be elected at the General Meeting of Shareholders. In general, under the
Articles of Incorporation of the Company, the terms of office of Directors shall
expire at the conclusion of the Ordinary General Meeting of
35
Shareholders held with respect to the last closing of accounts within two years
after their assumption of office, and the terms of office of Corporate Auditors
shall expire at the conclusion of the Ordinary General Meeting of Shareholders
held with respect to the last closing of accounts within three years after their
assumption of office. However, both the Directors and Corporate Auditors may
serve any number of consecutive terms.
From among the Directors, the Board of Directors shall elect one or more
Representative Directors. Each of the Representative Directors has the statutory
authority to represent the Company in the conduct of its affairs.
The Corporate Auditors of the Company are not required to be and are not
certified public accountants. However, at least one of the Corporate Auditors
must be a person who has not been a Director, general manager, or employee of
the Company or any of its subsidiaries during the five-year period immediately
prior to his assumption of office as a Corporate Auditor. The Corporate Auditors
may not at the same time be Directors, managers, or employees of the Company.
Each Corporate Auditor has the statutory duty to examine the financial
statements and business reports to be submitted by the Board of Directors at the
General Meeting of Shareholders and also to supervise the administration by the
Directors of the Company's affairs. Corporate Auditors are entitled and
obligated to participate in meetings of the Board of Directors but are not
entitled to vote. Under the "Law concerning Special Measures to the Commercial
Code with respect to Audit", the Board of Corporate Auditors has a statutory
duty to prepare and submit its audit report to the Board of Directors each year.
A Corporate Auditor may note his opinion in the audit report if it is different
from the opinion of the Board of Corporate Auditors that is expressed in the
audit report. The Board of Corporate Auditors is empowered to establish audit
principles, the method of examination by the Corporate Auditors of the Company's
affairs and financial position, and other matters concerning the performance of
the Corporate Auditors' duties. The Company does not have an audit committee.
There are no Director's service contracts with Ricoh providing for benefits
upon termination of service.
The Company does not have a remuneration committee.
(d) Employees
The table below provides information about employees.
- ---------------------------------------------------------------------------
As of March 31
2000 2001 2002
------ ------ ------
Categorized by Operating Segment
Office Equipment 57,896 65,591 65,359
Other 8,178 7,367 7,582
Headquarters 1,275 1,276 1,268
Total 67,349 74,234 74,209
Categorized by Geographic Location
Domestic 41,343 40,475 39,988
Overseas 26,006 33,759 34,221
Total 67,349 74,234 74,209
- ---------------------------------------------------------------------------
Because of the acquisition of Lanier Worldwide, Inc., there was an increase
of approximately seven thousand employees during the fiscal year ended March 31,
2001.
Ricoh believes it is one of the few companies with a base in Japan with a large
labor force which is not
36
unionized. There have been no significant labor disputes in the past fiscal year
and Ricoh knows of no efforts to organize a union. Ricoh generally believes its
employee relations to be good.
(e) Share ownership
The following table lists the number of shares owned by each director and
senior management. None of the Company's Directors, Corporate Auditors and
Executive Officers is the beneficial owner of more than 1% of the Company's
shares.
Name Position Number of Share
- ------------------ ------------------------------------- ---------------
Hiroshi Hamada Chairman and Chief Executive Officer 33,781
Masamitsu Sakurai President and Chief Operating Officer 6,000
Haruo Kamimoto Deputy President 23,747
Tatuo Hirakawa Deputy President 16,379
Naoto Shibata Exceptive Managing Director 10,000
Koichi Endo Exceptive Managing Director 10,747
Masami Takeiri Exceptive Managing Director 11,933
Masayuki Matsumoto Exceptive Managing Director 4,000
Makoto Hashimoto Managing Director 8,000
Katsumi Yoshida Managing Director 5,100
Kiyoshi Sakai Managing Director 3,000
Hisaaki Koga Corporate Auditor 4,253
Hideyuki Takamatsu Corporate Auditor 3,000
Kenji Matsuishi Corporate Auditor 2,173
Terumoto Nonaka Executive Vice President 6,050
Shiroh Kondoh Executive Vice President 1,000
Kazuo Togashi Executive Vice President 2,000
Tadatoshi Sakamaki Senior Vice President 5,211
Kenji Hatanaka Senior Vice President 3,000
Etsuo Kobayashi Senior Vice President 7,000
Hiroshi Tategami Senior Vice President 5,000
Hideko Kunii Senior Vice President 4,000
Zenji Miura Senior Vice President 1,000
Hiroshi Kobayashi Senior Vice President 1,241
Itsuo Kawaji Group Senior Vice President 6,273
Takashi Nakamura Group Senior Vice President 4,693
Yuji Inoue Group Senior Vice President 10,000
Masami Yoneyama Group Senior Vice President 10,000
Kazunori Azuma Group Senior Vice President 3,000
Yoichi Shirahata Group Senior Vice President 9,150
-------
Total 220,731
=======
All shares of Common Stock of the Company carry the same voting rights.
No options to purchase securities from the Company or any of its
subsidiaries were outstanding on June 27, 2002.
37
Item 7. Major Shareholders and Related Party Transactions
(a) Major shareholders
Major shareholders that are beneficial owners of 5% or more as of March 31,
2002 are as follows:
Number of
Title of Class Name Shares Owned Percentage of Class
(in thousands)
- --------------- --------------------------------- ----------------- -------------------
Common Stock Japan Trustee Services Bank, Ltd. 63,676 8.75%
Common Stock The Mitsubishi Trust and Banking 45,127 6.20
Corporation
The percentage of ownership held by The Mitsubishi Trust and Banking
Corporation increased from 3.65% to 6.20% during fiscal year 2002, while that
held by Nippon Life Insurance Company decreased from 5.52% to 4.47% during
fiscal year 2002.
As far as is known to the Company, there has not been any significant
change in the percentage ownership held by any major shareholders during the
past three years except as described above.
The major shareholders do not have different voting rights.
As of March 31,2002, 197,643 ADRs were held of record by 3 institutional
registered holders in the United States of America.
As far as is known to the Company, it is not directly or indirectly owned
or controlled by any other corporation or by the Japanese or any foreign
government.
As far as is known to the Company, there is no arrangement, the operation
of which may at a subsequent date result in a change in control of the Company.
(b) Related party transactions
In the ordinary course of business, Ricoh sells or purchases products,
materials, supplies and services to or from affiliated companies. See page F-19
"7. INVESTMENT IN AND ADVANCES TO AFFILIATES".
Ricoh loaned 35 million yen to its affiliates as forwarding capital at
floating rate linked to market interest as of March 31, 2002.
No Directors or Senior management were indebted to the Company or its
subsidiaries at any time during the latest three fiscal years.
(c) Interest of experts and counsel
Not applicable
38
Item 8. Financial Information
(a) Consolidated statements and other information
See "Item 18. Financial Statements" and pages F-1 through F-37.
Legal or arbitration proceedings
There are no material pending legal or arbitration proceedings to which
Ricoh is a party.
Dividend Policy
Ricoh endeavors to provide stable dividends by boosting profitability while
increasing retained earnings to reinforce its corporate structure and to
cultivate new businesses. Ricoh uses those retained earnings to strengthen core
businesses and invest in new fields from medium- and long-term perspectives. See
Item 10(b) "Dividends" for important information on the Company's dividend
payment procedure and restrictions.
(b) Significant changes
No significant changes have occurred since the date of the annual financial
statement included in this report.
Item 9. The offer and Listing
(a) Offer and listing details
The primary market for the Company's Common Stock is the Tokyo Stock
Exchange (the "TSE") in the form of original Common Stock.
The Company's Common Stock has been listed on the TSE since 1949, and in
Japan, is also listed on the Osaka Stock Exchange, the Nagoya Stock Exchange,
the Fukuoka Stock Exchange and the Sapporo Stock Exchange. In addition, the
Company's Common Stock is listed outside of Japan on the following stock
exchanges: Amsterdam, Frankfurt and Paris.
The following table sets forth for the periods indicated the reported high
and low sales prices of the Company's Common Stock on the TSE and reported high
and low sales prices per share of the Company's ADRs at Over-the-Counter Market.
39
Over-the-Counter Market Price Per
Tokyo Stock Exchange Price Per American Depositary Share
Share of Common Stock (5 shares of Common Stock)
(Yen) (U.S. Dollars)
------------------------------ ---------------------------------
High Low High Low
----- ----- ------ -----
Annual highs and lows
Fiscal 1998 1,900 1,270 79.52 48.71
Fiscal 1999 1,634 969 57.29 38.72
Fiscal 2000 2,525 1,078 111.79 44.28
Fiscal 2001 2,495 1,627 113.46 75.85
Fiscal 2002 2,735 1,563 108.00 77.50
Quarterly highs and lows
Fiscal 2001;
1st quarter 2,495 2,025 113.46 96.29
2nd quarter 2,290 1,862 106.36 87.45
3rd quarter 2,170 1,627 94.46 75.85
4th quarter 2,420 1,921 98.52 81.85
Fiscal 2002;
1st quarter 2,735 2,145 108.00 89.00
2nd quarter 2,650 1,563 106.41 77.50
3rd quarter 2,495 1,758 98.50 79.00
4th quarter 2,540 2,100 97.00 80.50
Monthly highs and lows
December 2001 2,495 2,220 98.50 90.50
January 2002 2,540 2,115 97.00 80.50
February 2002 2,445 2,100 88.00 83.50
March 2002 2,510 2,200 95.25 87.25
April 2002 2,470 2,210 95.25 84.50
May 2002 2,465 2,265 95.75 89.45
The Company's ADRs are traded on the over-the-counter market, and issued
and exchanged by the Bank of New York, as depositary.
(b) Plan of distribution
Not applicable.
(c) Markets
See Item 9 (a) for a list of the stock exchanges on which the securities
are listed.
See Item 10 (b) for certain information relating to the Common Stock of the
Company.
(d) Selling shareholders
Not applicable.
40
(e) Dilution
Not applicable.
(f) Expenses of the issue
Not applicable.
Item 10. Additional Information
(a) Share Capital
Not applicable.
(b) Memorandum and articles of association
Article 3 of the "Articles of Incorporation" of the Company provides the
following objectives of the Company:
1. Manufacture, sale and installation work and electrical communication work
of optical, office, audio, electric and measuring equipment, other general
machinery and equipment and accessories and supplies therefor.
2. Manufacture and sale of photographic sensitive materials and duplicating
papers.
3. Manufacture and sale of various raw materials for photographic sensitive
materials and of chemicals and of chemical industrial chemicals.
4. Manufacture, processing and sale of papers, pulps textiles, general
Merchandise and by-products thereof.
5. Investment in, or sale of the products of, other companies.
6. Import and Export of the goods described in any of the foregoing items and
other goods of every kind and description.
7. Brokerage business for casualty insurance and other insurance under the
Automobile Liability Security Law.
8. Any and all business incidental or relating to any of the foregoing items.
DIRECTORS
Under the Commercial Code, each Director has executive powers and duties to
manage the affairs of the Company and each Representative Director, who is
elected from among the Directors by the Board of Directors, has the statutory
authority to represent the Company in all respects. Under the Commercial Code,
the Directors must refrain from engaging in any business competing with the
Company unless approved by the Board of Directors and any Director who has a
material interest in the subject matter of a resolution to be taken by the Board
of Directors cannot vote in such resolution. The total amount of remuneration to
Directors and that to Statutory Auditors are subject to approval at the General
Meeting of Shareholders. Within such authorized amounts the Board of Directors
and the Board of Statutory Auditors respectively determine the compensation to
each Director and Statutory Auditor.
Except as stated below, neither the Commercial Code nor the Company's
Articles of Incorporation make a special provision as to the Director's or
Corporate Auditor's power to vote in connection with their compensation; or the
borrowing powers exercisable by a Representative Director (or a Director who is
given power by a Representative Director to exercise such powers), their
retirement age or requirement
41
to hold any shares of capital stock of the Company. The Commercial Code
specifically requires the resolution of the Board of Directors for a corporation
to acquire or dispose of material assets; to borrow substantial amount of money;
to employ or discharge from employment important employees, such as executive
officers; and to establish, change or abolish a material corporate organization
such as a branch office. The Regulations of the Board of Directors of the
Company require a resolution of the Board of Directors for the Company's
borrowing or lending of a large amount of money or giving of a guarantee in a
large amount. There is no written rule as to what constitutes a "large" amount
in these contexts. However, it has been the general practice of the Company's
Board of Directors to adopt a resolution for a borrowing or guaranteeing in an
amount not less than five billion yen or its equivalent.
Set forth below is certain information relating to the Common Stock of the
Company, including brief summaries of certain provisions of the Company's
Articles of Incorporation and Share Handling Regulations, as currently in
effect, and of the Commercial Code of Japan relating to a joint stock company
(Kabushiki Kaisha) and certain related legislation.
GENERAL
The presently authorized capital stock of the Company is 1,000,000,000
shares. Under the Commercial Code shares are transferable by delivery of share
certificates, but in order to assert shareholders' rights against the Company,
the transferee must generally have his name registered in the Company's register
of shareholders. Shareholders are required to file their names, addresses and
seals with The Chuo Mitsui Trust & Banking Co., Ltd., the transfer agent for the
Company's Common Stock, and shareholders not resident in Japan are required to
file a mailing address in Japan or appoint a resident proxy in Japan. These
requirements do not apply to the holders of ADRs. The central clearing system of
share certificates under the Law Concerning Central Clearing of Share
Certificates and Other Securities of Japan applies to the shares of Common Stock
of the Company. Pursuant to this system a holder of shares of Common Stock is
able to choose, at his discretion, to participate in this system and all
certificates of shares of Common Stock elected to be put into this system are
deposited with the central clearing system and all such shares are registered in
the name of the clearing house in the Company's register of shareholders. Each
participating shareholder is in turn registered in the register of beneficial
shareholders and treated the same way as shareholders registered in the
Company's register of shareholders.
DIVIDENDS
The Articles of Incorporation of the Company provide that the accounts
shall be closed on March 31 of each year and that dividends, if any, shall be
paid to the shareholders of record as of the end of such fiscal period. After
the close of the fiscal period, the Board of Directors prepares, among other
things, a proposed allocation of profits for dividends and other purposes; this
proposal is submitted to the Corporate Auditors of the Company and to
independent certified public accountants and then submitted for approval to the
ordinary general meeting of shareholders, which is normally held in June each
year. In addition to provisions for dividends, if any, and for the legal reserve
and other reserves, the allocation of profits customarily includes a bonus to
Directors and Corporate Auditors. In addition to annual dividends, the Board of
Directors of the Company may by its resolution declare a cash distribution
pursuant to Article 293-5 of the Commercial Code (an "interim dividend") to
shareholders who are registered in the Company's register of shareholders at the
end of each September 30, subject to the limitations described below.
The Commercial Code provides that, until the aggregate amount of the
Company's legal reserve and additional paid-in capital is at least one-quarter
of the Company's stated capital, the Company may not make any distribution of
profits by way of dividends in cash unless it has set aside in its legal reserve
an amount equal to at least one-tenth of any amount paid out as an
appropriation of retained earnings (including any payment by way of annual
dividend and bonuses to Directors and Corporate Auditors) or equal to one-tenth
of any interim dividend. The Commercial Code permits the Company to distribute
42
profits by way of dividends out of the excess of its net assets, on a
non-consolidated basis, over the aggregate of (i) its stated capital, (ii) its
additional paid-in capital, (iii) its accumulated legal reserve, (iv) the legal
reserve to be set aside in respect of the dividends concerned and any other
proposed payment by way of appropriation of retained earnings, (v) the excess,
if any, of unamortized expenses incurred in preparation for commencement of
business and in connection with research and development over the aggregate of
the amounts referred to in (ii), (iii) and (iv) above, and (vi) the increased
amount of net assets in its balance sheet due to the assignment of market value
to certain assets when the aggregate market value so assigned exceeds the
aggregate acquisition value of such assets. In the case of interim dividends,
the net assets are calculated by reference to the balance sheet as at the last
closing of the Company's accounts, and adjustments are made to reflect any
subsequent payment by way of appropriation of retained earnings and the related
transfer to legal reserve, any subsequent transfer of retained earnings to
stated capital and the aggregate purchase price of shares determined by a
resolution of the ordinary general meeting of shareholders authorizing it to
acquire its shares. Interim dividends may not be paid where there is a risk that
at the end of the fiscal year net assets might be less than the aggregate of the
amounts referred to in (i), (ii), (iii), (iv), (v) and (vi) above.
The Commercial Code, currently in effect, does not provide for "stock
dividends." However, under the Commercial Code, the shareholders may by
resolution transfer any amount which is distributable as dividends to stated
capital and the Board of Directors may by resolution issue additional shares by
way of a stock split, thus the same effect as a stock dividend can be achieved.
In Japan the "ex-dividend" date and the record date for dividends precede
the date of determination of the amount of the dividend to be paid.
TRANSFER OF CAPITAL SURPLUS AND LEGAL RESERVE TO STATED CAPITAL AND STOCK SPLITS
(FREE SHARE DISTRIBUTIONS)
When the Company issues new shares of Common Stock, the entire amount of
the issue price of such new shares is required to be accounted for as stated
capital, although the Company may account for an amount not exceeding one-half
of such issue price as capital surplus. The Board of Directors may transfer the
whole or any part of capital surplus and legal reserve to stated capital and
grant to shareholders additional shares of Common Stock free of charge by way of
a stock split with reference to the whole or any part of the amount of capital
surplus and legal reserve so transferred to stated capital.
GENERAL MEETING OF SHAREHOLDERS
The ordinary general meeting of shareholders to settle accounts of the
Company for each fiscal period is normally held in June each year in Ota-ku,
Tokyo, Japan. In addition, the Company may hold an extraordinary general meeting
of shareholders whenever necessary by giving at least two weeks' advance notice
to shareholders.
Notice of a shareholders' meeting setting forth the place, time and purpose
thereof, must be mailed to each shareholder having voting rights (or, in the
case of a non-resident shareholder, to his resident proxy or mailing address in
Japan) at least two weeks prior to the date set for the meeting. Such notice may
also be furnished to shareholders by electronic means with such shareholders'
consent.
Any shareholder holding at least 300 voting shares or 1% of the total
number of outstanding voting shares for six months or more may propose a matter
to be considered at a general meeting of shareholders by submitting a written
request to a Representative Director at least six weeks prior to the date set
for such meeting. Such request may be submitted by electronic means with the
Company's consent.
43
VOTING RIGHTS
A shareholder is entitled to one vote per share subject to the limitations
on voting rights set forth in the following paragraph below and "Unit" share
system -- Voting rights of a holder of shares representing less than one unit ".
Except as otherwise provided by law or by the Company's Articles of
Incorporation, a resolution can be adopted at a general meeting of shareholders
by a majority of the shares having voting rights represented at the meeting. The
Commercial Code and the Company's Articles of Incorporation provide, however,
that the quorum for the election of Directors and Corporate Auditors shall not
be less than one-third of the total number of outstanding shares having voting
rights. The Company's shareholders are not entitled to cumulative voting in the
election of Directors. A corporate shareholder, more than one-quarter of whose
outstanding voting shares are directly or indirectly owned by the Company, may
not exercise its voting rights in respect of the shares of the Company. The
Company has no voting rights with respect to its own Common Stock. Shareholders
may exercise their voting rights through proxies provided that the proxies are
also shareholders holding voting rights. The Company's shareholders also may
cast their votes in writing.
The Commercial Code provides that in order to amend the Articles of
Incorporation and in certain other instances, including an increase in the total
number of shares authorized to be issued, a reduction of the stated capital, the
removal of a Director or Corporate Auditor, dissolution, merger (with an
exception of a merger with a company of significantly small business) or
consolidation of a corporation, the transfer of the whole or an important part
of the business, the taking over of the whole of the business of any other
corporation, any offering of new shares at a "specially favorable" price (or any
offering of convertible bonds or debentures with "specially favorable"
conversion conditions or of bonds or debentures with warrants or rights to
subscribe for new shares with "specially favorable" conditions) to persons other
than shareholders, the quorum shall be a majority of the total number of shares
having voting rights outstanding and the approval of the holders of at least
two-thirds of the shares having voting rights represented at the meeting is
required (the "special shareholders resolution").
SUBSCRIPTION RIGHTS
Holders of the Company's Common Stock have no preemptive rights under its
Articles of Incorporation. Authorized but unissued shares may be issued at such
times and upon such terms as the Board of Directors determines, subject to the
limitations as to the offering of new shares at a "specially favorable" price
mentioned above. The Board of Directors may, however, determine that
shareholders shall be given subscription rights regarding a particular issue of
new shares, in which case such rights must be given on uniform terms to all
shareholders as at a record date of which not less than two weeks' public notice
must be given. Each of the shareholders to whom such rights are given must also
be given notice of the expiry thereof at least two weeks prior to the date on
which such rights expire.
Rights to subscribe for new shares may be made generally transferable by
the Board of Directors. Whether the Company will make subscription rights
generally transferable in future rights offerings will depend upon the
circumstances at the time of such offerings. If subscription rights are not made
generally transferable, transfers by a non-resident of Japan or a corporation
organized under the laws of a foreign country or whose principal office is
located in a foreign country will be enforceable against the Company and third
parties if the Company's consent to each such transfer is obtained. When such
consent is necessary in the future for the transfer of subscription rights, the
Company intends to consent, on request, to all such transfers by such a
non-resident or foreign corporation.
DILUTION
In the future it is possible that market conditions and other factors might
make a rights offering to shareholders substantially below the market price of
shares of Common Stock desirable. If the number of shares offered in a rights
offering is substantial in relation to the number of shares outstanding and the
44
market price exceeds the subscription price at the time of the offering, a
shareholder who does not exercise and is unable otherwise to realize the full
value of his subscription rights would suffer economic dilution of his equity
interest in the Company.
LIQUIDATION RIGHTS
In the event of a liquidation of the Company, the assets remaining after
payment of all debts and liquidation expenses and taxes will be distributed
among the shareholders in proportion to the respective numbers of shares held.
LIABILITY TO FURTHER CALLS OR ASSESSMENTS
All the Company's presently outstanding shares of Common Stock including
shares represented by the American Depository Shares are fully paid and
non-assessable.
TRANSFER AGENT
The Chuo Mitsui Trust and Banking Co., Ltd. is the transfer agent for the
Company's Common Stock; as such transfer agent, it keeps the Company's register
of shareholders in its office at 7-1,Kyobashi 1-chome, Chuo-ku, Tokyo, Japan,
and makes transfer of record ownership upon presentation of the certificates
representing the transferred shares.
RECORD DATE
March 31 is the record date for the Company's year-end dividends. The
shareholders who are registered as the holders of 1,000 shares or more in the
Company's register of shareholders at the end of each March 31 are also entitled
to exercise shareholders' rights at the ordinary general meeting of shareholders
with respect to the fiscal period ending on such March 31. September 30 is the
record date for interim dividends. In addition, the Company may set a record
date for determining the shareholders entitled to other rights and for other
purposes by giving at least two weeks' public notice.
The price of the shares generally goes ex-dividend or ex-rights on Japanese
stock exchanges on the third business day prior to a record date (or if the
record date is not a business day, the fourth business day prior thereto), for
the purpose of dividends or rights offerings.
REPURCHASE BY THE COMPANY OF ITS COMMON STOCK
The Company may repurchase shares (i) through the Tokyo Stock Exchange or
other stock exchange on which the shares are listed, if authorized by an
ordinary resolution of an ordinary general meeting of shareholders, (ii) by way
of tender offer, if authorized by an ordinary resolution of an ordinary general
meeting of shareholders, (iii) from a specific party, if authorized by special
resolution of an ordinary general meeting of shareholders, or (iv) from the
Company's own subsidiary, if authorized by a resolution of the Board of
Directors.
When such repurchase is made by the Company from a specific party other
than the Company's own subsidiary, shareholders may make a demand to a
Representative Director, five days or more prior to the relevant shareholders'
meeting, that the Company also repurchase the shares held by that shareholder.
Any repurchase of shares must satisfy certain requirements, including that the
total amount of the repurchase price may not exceed the amount of the retained
earnings available for annual dividend payments after taking into account any
reduction, if any, of the stated capital, additional paid-in capital
45
or legal reserve (if such reduction of the stated capital, additional paid-in
capital or legal reserve has been authorized pursuant to a resolution of the
relevant ordinary general meeting of shareholders), minus the amount to be paid
by way of appropriation of retained earnings for the relevant fiscal year and
the amount to be transferred to stated capital. If it is anticipated that the
net assets on the balance sheet as at the end of the relevant fiscal year will
be less than the aggregate amount of the stated capital, additional paid-in
capital and other items as described in (i) through (vi) in "Dividends" above,
the Company may not repurchase shares. The Company may hold its own shares so
repurchased without restriction. The Company may cancel its own shares that it
holds by a resolution of the Board of Directors. The Company may otherwise
dispose of its own shares by a resolution of the Board of Directors.
"UNIT" SHARE SYSTEM (TANGENKABU-SEIDO)
Pursuant to the Commercial Code the Company has adopted 1,000 shares as one
unit of shares.
TRANSFERABILITY OF SHARES REPRESENTING LESS THAN ONE UNIT
As adopted in the Company's Articles of Incorporation, the Company will not
issue certificates for shares representing less than one unit. Since the
transfer of shares normally requires delivery of the certificates therefor,
fractions of a unit for which no share certificates are issued are not
transferable. Shares representing less than one unit for which share
certificates have been issued continue to be transferable.
RIGHT OF A HOLDER OF SHARES REPRESENTING LESS THAN ONE UNIT TO REQUIRE THE
COMPANY TO PURCHASE SUCH SHARES
A holder of shares representing less than one unit may at any time require
the Company to purchase such shares at their last reported sale price on the
Tokyo Stock Exchange on the day when such request is made less applicable
brokerage commission. The usual securities transfer tax is applicable to such
transactions.
OTHER RIGHTS OF A HOLDER OF SHARES REPRESENTING LESS THAN ONE UNIT
A holder of shares representing less than one unit has certain rights in
respect of such shares, including the following: (i) the right to receive
dividends (including interim dividends), (ii) the right to receive shares and/or
cash by way of a stock split or upon consolidation or subdivision of shares or
upon a capital decrease or merger of the Company, (iii) the right to be allotted
subscription rights with respect to new shares, convertible bonds and bonds with
warrants to subscribe for shares when such rights are granted to shareholders,
(iv) the right to participate in the distribution of surplus assets in the event
of the liquidation of the Company, (v) the right to request to inspect certain
corporate documents, including minutes of the Board of Directors meeting, (vi)
the right to file a derivative action on behalf of the Company and (vii) the
right to file an action seeking to invalidate certain events, including issuance
of new shares and corporate merger. Other rights, including voting rights,
cannot be exercised with respect to shares representing less than one unit.
VOTING RIGHTS OF A HOLDER OF SHARES REPRESENTING LESS THAN ONE UNIT
A holder of shares representing less than one unit cannot exercise any
voting rights with respect to such shares. A holder of shares representing one
or more whole units will have one vote for each such unit, except as stated in
"Voting rights" above.
46
(c) Material contracts
Not applicable.
(d) Exchange controls
Effective April 1 1998, the Foreign Exchange and Foreign Trade Control Law
was amended and the title of the statute was changed to the Foreign Exchange and
Foreign Trade Law (the "Exchange Law"). Under the amended Exchange Law all
aspects of regulations on foreign exchange and foreign trade transactions which
were subject to licensing or other approval or prior notification requirements
are, with minor exceptions relating to certain inward direct investment (which
is not applicable to the Company's shares), substituted by the post facto
reporting requirements. However, the Minister of Finance has the power to impose
a licensing requirement for certain transactions in limited circumstances.
(e) Taxation
JAPANESE TAXATION
Generally, a non-resident of Japan or a non-Japanese corporation is subject
to Japanese withholding tax on dividends paid by a Japanese corporation. Stock
splits in themselves (whether for the purpose of making a free distribution or
dividend in shares), subject as set out below, are not subject to Japanese
income tax. However, a transfer of retained earnings or legal reserve (but not
capital surplus) to stated capital is treated as a dividend payment to
shareholders for Japanese tax purposes and is, in general, subject to Japanese
income tax. Under the Income Tax Convention between the U.S. and Japan (the
"Convention"), the maximum rate of Japanese withholding tax that may be imposed
on dividends paid to a U.S. resident or corporation not having a "permanent
establishment" (as defined therein) in Japan is generally 15%.
For purposes of the Convention and the U.S. Internal Revenue Code of 1986,
as amended (the "Code"), U.S. holders of ADRs will be treated as the owners of
the Common Stock underlying the American Depositary Shares evidenced by the
ADRs.
In the absence of an applicable tax treaty, convention or agreement
reducing the maximum rate of withholding tax, the rate of Japanese withholding
tax on dividends paid by Japanese corporation to non-residents of Japan or
non-Japanese corporation is 20%.
Gains derived by a non-resident of Japan or a non-Japanese corporation from
the sale of Common Stock or ADRs outside Japan, or from the sale of Common Stock
within Japan by a non-resident of Japan or by a non-Japanese corporation not
having a permanent establishment in Japan, are in general not subject to
Japanese income or corporation tax. Japanese inheritance or gift tax at
progressive rates may be payable by an individual who has acquired Common Stock
or ADRs as a legatee, heir or donee.
U.S. TAXATION
This summary describes the material U.S. federal income tax consequences
for a U.S. holder (as defined below) of owning and disposing of shares of Common
Stock or American Depositary Shares. This summary applies to you only if you
hold shares of Common Stock or American Depositary Shares as capital assets for
tax purposes. This summary does not apply to you if you are a member of a class
of holders subject to special rules, such as:
- a dealer in securities or currencies;
47
- a trader in securities that elects to use a mark-to-market method of
accounting for securities holdings;
- a bank;
- a life insurance company;
- a tax-exempt organization;
- a person that holds shares of Common Stock or American Depositary
Shares that are a hedge or that are hedged against interest rate or
currency risks;
- a person that holds shares of Common Stock or American Depositary
Shares as part of a straddle or conversion transaction for tax
purposes;
- a person whose functional currency for tax purposes is not the U.S.
dollar; or
- a person that owns or is deemed to own 10% or more of any class of our
stock.
This summary is based on laws, treaties, and regulatory interpretations in
effect on the date hereof, all of which are subject to change, possibly on a
retroactive basis.
Please consult your own tax advisers concerning the U.S. federal, state,
local, and other national tax consequences of purchasing, owning, and disposing
of shares of Common Stock or American Depositary Shares in your particular
circumstances.
For purposes of this summary, you are a "U.S. holder" if you are a
beneficial owner of a share of Common Stock or an American Depositary Share that
is:
a citizen or resident of the United States;
a U.S. domestic corporation; or
otherwise subject to U.S. federal income tax on a net income basis with
respect to income from the share of Common Stock or American Depositary
Share.
In general, if you hold American Depositary Shares, you will be treated as
the holder of the shares of Common Stock represented by those American
Depositary Shares for U.S. federal income tax purposes, and no gain or loss will
be recognized if you exchange an American Depositary Share for the shares of
Common Stock represented by that American Depositary Share.
Dividends
The gross amount of cash dividends that you receive (prior to deduction of
Japanese taxes) generally will be subject to U.S. federal income taxation as
foreign source dividend income. Dividends paid in Japanese yen will be included
in your income in a U.S. dollar amount calculated by reference to the exchange
rate in effect on the date of your (or, in the case of American Depositary
Shares, the depositary's) receipt of the dividend, regardless of whether the
payment is in fact converted into U.S. dollars. If such a dividend is converted
into U.S. dollars on the date of receipt, you generally should not be required
to recognize foreign currency gain or loss in respect of the dividend income.
You should consult your own tax advisers to determine whether you are
subject to any special rules that limit your ability to make effective use of
foreign tax credits, including the possible adverse impact of failing to take
advantage of benefits under the income tax treaty between the United States and
Japan. If no such rules apply, you may claim a credit against your U.S. federal
income tax liability for Japanese taxes withheld from dividends on shares of
Common Stock or American Depositary Shares, so long as you have owned the shares
of Common Stock or American Depositary Shares (and not entered into specified
kinds of hedging transactions) for at least a 16-day period that includes the
ex-dividend date. Instead of claiming a credit, you may, at your election,
deduct such Japanese taxes in computing your taxable income, subject to
generally applicable limitations under U.S. tax law. The calculation of foreign
tax credits and, in the case of a U.S. holder that elects to deduct foreign
taxes, the availability of deductions involve the application of complex rules
that depend on a U.S. holder's particular circumstances. You should
48
consult your own tax advisers regarding the creditability or deductibility of
such taxes.
Sales and Other Dispositions
For U.S. federal income tax purposes, gain or loss you realize on a sale or
other disposition of shares of Common Stock or American Depositary Shares will
be capital gain or loss, and will be long-term capital gain or loss if the
shares of Common Stock or American Depositary Shares were held for more than one
year. Your ability to offset capital losses against ordinary income is limited.
Long-term capital gain recognized by an individual U.S. holder generally is
subject to taxation at a maximum rate of 20%.
U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING RULES
Payments in respect of the shares of Common Stock or American Depositary
Shares that are made within the United States or through certain U.S.-related
financial intermediaries are subject to information reporting and may be subject
to backup withholding unless the holder (i) is a corporation or other exempt
recipient or (ii) provides a taxpayer identification number and certifies that
no loss of exemption from backup withholding has occurred. Holders that are not
U.S. persons generally are not subject to information reporting or backup
withholding. However, such a holder may be required to provide a certification
of its non-U.S. status in connection with payments received within the United
States or through a U.S.-related financial intermediary.
(f) Dividends and paying agents
Not applicable.
(g) Statement by experts
Not applicable.
(h) Documents on display
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended. In accordance with these requirements, the
Company files reports and other information with the Securities and Exchange
Commission. These materials, including this annual report and exhibits thereto,
may be inspected and copied at the Commission's Public Reference Room at 450
Fifth Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, New
York, New York 10048. Copies of the materials may be obtained from the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington D.C.
20549 at prescribed rates. The public may obtain information on the operation of
the Commission's Public Reference Room by calling the Commission in the U.S. at
1-800-SEC-0330.
(i) Subsidiary information
See "Item 4. (c) Organization structure".
49
Item 11. Quantitative and Quantitative Disclosures About Market Risk
MARKET RISK EXPOSURE
Ricoh is exposed to market risks primarily from changes in foreign currency
exchange rates and interest rates, which affect outstanding debt and certain
assets and liabilities denominated in foreign currencies. In order to manage
these risks that arise in the normal course of business, Ricoh enters into
hedging transactions pursuant to its policies and procedures covering such areas
as counterparty exposure and hedging practices. Ricoh does not hold or issue
derivative financial instruments for trading purposes or to generate income.
Ricoh regularly assesses these market risks based on the policies and procedures
established to protect against adverse effects of these risks and other
potential exposures, primarily by reference to the market value of the financial
instruments. As a result of the latest assessment, Ricoh does not anticipate any
material losses in these areas.
FOREIGN CURRENCY RISK
In the ordinary course of business, Ricoh uses foreign exchange forward
contracts to manage the effects of foreign currency exchange risk on monetary
assets and liabilities denominated in foreign currencies. The contracts with
respect to the operating activities generally have maturities less than six
months, while the contracts with respect to the financing activities have the
same maturities as underlying assets and liabilities.
The table below provides information about Ricoh's major derivative
financial instruments that are sensitive to foreign currency exchange rates,
except for the contracts with respect to the financial activities. For foreign
exchange forward contracts, the table presents the notional amounts and weighted
average exchange rates. These notional amounts generally are used to calculate
the contractual payments to be exchanged under the contracts.
FOREIGN EXCHANGE FORWARD CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------
Year Ended March 31, 2001 Year Ended March 31, 2002
-------------------------------------------------------------------------------------------------------
Average contractual Contract amounts Average contractual Contract amounts
rates Millions of yen rates Millions of yen
- ---------------------------------------------------------------------------------------------------------------------
US$/Yen 118.77 20,666 125.43 38,482
EUR/Yen 105.25 10,210 111.71 19,885
- ---------------------------------------------------------------------------------------------------------------------
INTEREST RATE RISK
In the ordinary course of business, Ricoh enters into interest rate swap
agreements to reduce interest rate risk and to modify the interest rate
characteristics of its outstanding debt. These agreements primarily involve the
exchange of fixed and floating rate interest payments over the life of the
agreement without the exchange of the underlying principal amounts.
The table on page 51 provides information about Ricoh's major derivative
and other financial instruments that are sensitive to changes in interest rates,
including interest rate swaps and debt obligations. For debt obligations, the
table presents principal cash flows by expected maturity date and related
weighted average interest rates. For interest rate swaps, the table presents
notional amounts by expected maturity date and weighted average interest rates.
Notional amounts are generally used to calculate the contractual payments to be
exchanged under the contract.
50
LONG-TERM INDEBTEDNESS
(Excluding Capital Lease Obligations and SFAS No. 133 adjustment)
- --------------------------------------------------------------------------------------------------------------
Millions of yen
---------------------------------------------------------------------
Expected maturity date
-----------------------------------------------------------
Average 2008
pay rate Total 2003 2004 2005 2006 2007 and
thereafter
- --------------------------------------------------------------------------------------------------------------
Convertible Bonds 0.36% 34,049 34,049 - - - - -
Bonds 1.40 145,000 - 15,000 10,000 40,000 45,000 35,000
Medium-Term Notes 0.40 39,162 16,162 9,000 11,000 3,000 - -
Loans 2.41 175,336 15,695 31,280 50,054 49,924 10,140 18,243
- --------------------------------------------------------------------------------------------------------------
Total 393,547 65,906 55,280 71,054 92,924 55,140 53,243
- --------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAPS
- --------------------------------------------------------------------------------------------------------------------------
Millions of yen
---------------------------------------------------------------------
Expected maturity date
----------------------------------------------------------
Notional Average Average 2008
amounts Type of swap receive pay Total 2003 2004 2005 2006 2007 and
(Millions) rate rate thereafter
- -------------------------------------------------------------------------------------------------------------------------
Receive
floating
Yen 30,188 /Pay fixed 0.10% 0.55% 30,188 725 513 4,950 22,000 2,000 -
Receive
fixed/Pay
80,000 floating 1.99 0.13 80,000 1,000 18,000 17,000 19,000 1,000 24,000
- --------------------------------------------------------------------------------------------------------------------------
Receive
floating
US$ 30 /Pay floating 7.18% 2.99% 3,998 1,333 - 2,665 - - -
- --------------------------------------------------------------------------------------------------------------------------
CREDIT RISK
Credit risk arising from the nonperformance of counterparties to meet the
terms of financial instrument contracts is generally limited to the amounts by
which the counterparties' obligations exceed the obligations of Ricoh. It is
Ricoh's policy to only enter into financial instrument contracts with a
diversity of high credit rated financial institutions to minimize the
concentration of credit risk. Therefore, Ricoh does not expect to incur material
credit losses on its financial instruments.
Item 12. Description of Securities Other Than Equity Securities
Not applicable.
51
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds
None.
PART III
Item 17. Financial Statements
Not applicable.
Item 18. Financial Statements
See Consolidated Financial Statements and Schedule.
Item 19. Exhibits
Documents filed as exhibits to this annual report:
(1) Articles of Incorporation, as amended (English translation)
(2) Certificate of English Translations
(3) Assurances letter concerning the audit by Arthur Andersen
52
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RICOH COMPANY, LTD.
---------------------
(Registrant)
By /s/ Zenji Miura
----------------------
Zenji Miura
Senior Vice President
June 27, 2002
53
RICOH COMPANY, LTD.
Financial Statements and Schedules
For the years ended March 31, 2000, 2001 and 2002
Together with Report of Independent Public Accountants
Ricoh Company, Ltd. and Consolidated Subsidiaries
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
-----------
Report of Independent Public Accountants F-3
Consolidated Balance Sheets as of March 31, 2001 and 2002 F-4 to F-5
Consolidated Statements of Income for the years ended March 31, 2000, 2001 and 2002 F-6
Consolidated Statements of Shareholders' Investment for the years ended March 31, 2000, 2001 and 2002 F-7
Consolidated Statements of Cash Flows for the years ended March 31, 2000, 2001 and 2002 F-8
Notes to Consolidated Financial Statements F-9 to F-36
Schedule:
II. Valuation and Qualifying Accounts and Reserves F-37
F-1
The consolidated financial statements listed are presented in Japanese yen,
and the amounts pertaining to the most recent year are also expressed in U.S.
dollars, for convenience only, as described in Note 3.
All schedules not listed have been omitted because they are not applicable,
or the required information has been otherwise supplied in the consolidated
financial statements or the notes thereto.
F-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors
of Ricoh Company, Ltd.:
We have audited the accompanying consolidated balance sheets of Ricoh
Company, Ltd. (a Japanese corporation) and consolidated subsidiaries as of March
31, 2001 and 2002, and the related consolidated statements of income,
shareholders' investment and cash flows for each of the three years in the
period ended March 31, 2002, expressed in yen. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ricoh
Company, Ltd. and its consolidated subsidiaries as of March 31, 2001 and 2002,
and the results of their operations and their cash flows for each of the three
years in the period ended March 31, 2002, in conformity with accounting
principles generally accepted in the United States of America (see Note 2).
As discussed in Note 2 to the consolidated financial statements, the
Company and its subsidiaries changed its method of accounting for derivative
instruments and hedging activities effective April 1, 2001.
In our opinion, the amounts translated into U.S. dollars and presented in
the accompanying consolidated financial statements have been computed on the
basis set forth in Note 3.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen
- ---------------
(Signature)
Tokyo, Japan
May 31, 2002
F-3
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31, 2001 and 2002
Thousands of
Millions of Yen U.S. Dollars
---------------------- ------------
2001 2002 2002
ASSETS --------- --------- ------------
- ------
Current Assets:
Cash and cash equivalents 64,457 142,508 $ 1,071,489
Time deposits 11,187 12,478 93,820
Marketable securities 62,213 50,599 380,444
Trade receivables-
Notes 96,329 85,269 641,120
Accounts 331,575 376,073 2,827,616
Less- Allowance for doubtful receivables (17,043) (18,943) (142,429)
Inventories-
Finished goods 126,189 116,435 875,451
Work in process and raw materials 50,194 45,741 343,917
Deferred income taxes 54,306 53,508 402,316
--------- --------- ------------
Total current assets 779,407 863,668 6,493,744
--------- --------- ------------
Property, Plant and Equipment, at cost:
Land 43,518 44,542 334,902
Buildings 195,103 202,581 1,523,166
Machinery and equipment 631,015 663,723 4,990,398
Construction in progress 1,862 2,969 22,323
--------- --------- ------------
871,498 913,815 6,870,789
Less- Accumulated depreciation (604,249) (654,435) (4,920,563)
--------- --------- ------------
267,249 259,380 1,950,226
--------- --------- ------------
Investments and Other Assets:
Finance receivables 428,790 447,829 3,367,135
Investment securities 49,076 28,886 217,188
Investments in and advances to affiliates 43,014 47,434 356,647
Lease deposits and other 137,255 185,731 1,396,474
--------- --------- ------------
658,135 709,880 5,337,444
--------- --------- ------------
1,704,791 1,832,928 $13,781,414
========= ========= ============
F-4
Thousands of
Millions of Yen U.S. Dollars
--------------------------- ------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT 2001 2002 2002
- ---------------------------------------- --------- --------- ------------
Current Liabilities:
Short-term borrowings 195,770 161,094 $ 1,211,233
Current maturities of long-term indebtedness 125,415 67,314 506,120
Trade payables-
Notes 42,474 35,481 266,775
Accounts 249,317 242,272 1,821,594
Accrued income taxes 34,396 33,356 250,797
Accrued expenses and other 132,064 126,184 948,752
--------- --------- ------------
Total current liabilities 779,436 665,701 5,005,271
--------- --------- ------------
Long-term Liabilities:
Long-term indebtedness 217,743 332,995 2,503,722
Accrued pension and severance costs 82,828 119,572 899,037
Deferred income taxes 20,625 30,592 230,015
--------- --------- ------------
321,196 483,159 3,632,774
--------- --------- ------------
Minority Interests 47,431 51,048 383,820
--------- --------- ------------
Commitments and Contingent Liabilities (Note 16)
Shareholders' Investment:
Common stock;
Authorized - 1,000,000,000 shares
Issued and outstanding - 692,755,584 shares in 2001 and
727,278,256 shares in 2002 103,434 120,461 905,722
Additional paid-in capital 154,635 171,628 1,290,436
Legal reserve 16,223 16,815 126,428
Retained earnings 316,224 368,926 2,773,880
Accumulated other comprehensive income (loss) (33,788) (44,376) (333,654)
Treasury stock at cost; 191,518 shares in 2002 - (434) (3,263)
--------- --------- ------------
Total shareholders' investment 556,728 633,020 4,759,549
--------- --------- ------------
1,704,791 1,832,928 $13,781,414
========= ========= ============
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
F-5
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended March 31, 2000, 2001 and 2002
Thousands of
Millions of Yen U.S. Dollars
-------------------------------- -------------
2000 2001 2002 2002
- --------------------------------------------------------------------------------------------
Net Sales 1,447,157 1,538,262 1,672,340 $12,573,985
Cost of Sales 867,148 924,893 972,394 7,311,233
- --------------------------------------------------------------------------------------------
Gross profit 580,009 613,369 699,946 5,262,752
Selling, General and Administrative
Expenses 491,088 508,264 570,251 4,287,602
- --------------------------------------------------------------------------------------------
Operating income 88,921 105,105 129,695 975,150
- --------------------------------------------------------------------------------------------
Other (Income) Expenses:
Interest and dividend income (5,997) (8,045) (4,753) (35,737)
Interest expense 10,181 7,787 8,233 61,902
Foreign currency exchange (gain) loss,
net 6,004 (3,490) 5,732 43,098
Other, net 8,340 11,088 6,533 49,120
- --------------------------------------------------------------------------------------------
Total 18,528 7,340 15,745 118,383
- --------------------------------------------------------------------------------------------
Income before Income Taxes, Minority
Interests and Equity in Earnings of
Affiliates 70,393 97,765 113,950 856,767
Provision for Income Taxes:
Current 46,416 53,506 52,365 393,722
Deferred (18,053) (9,994) (1,218) (9,158)
- --------------------------------------------------------------------------------------------
Total 28,363 43,512 51,147 384,564
- --------------------------------------------------------------------------------------------
Income before Minority Interests and
Equity in Earnings of Affiliates 42,030 54,253 62,803 472,203
Minority Interests 2,599 3,123 3,080 23,158
Equity in Earnings of Affiliates 2,497 2,098 1,891 14,218
- --------------------------------------------------------------------------------------------
Net Income 41,928 53,228 61,614 $ 463,263
============================================================================================
Yen U.S. Dollars
------------------------------- ------------
Per Share of Common Stock
- --------------------------------------------------------------------------------------------
Net income:
Basic 60.61 76.85 88.27 $0.66
Diluted 56.06 71.02 82.46 0.62
============================================================================================
Cash dividends, applicable to the year 11.00 12.00 13.00 $0.10
============================================================================================
Per American Depositary Share, each representing 5 shares of common stock:
- --------------------------------------------------------------------------------------------
Net income:
Basic 303.05 384.25 441.35 $3.32
Diluted 280.30 355.10 412.30 3.10
============================================================================================
Cash dividends, applicable to the year 55.00 60.00 65.00 $0.49
============================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Years Ended March 31, 2000, 2001 and 2002
Thousands of
Millions of Yen U.S. Dollars
----------------------------- ------------
2000 2001 2002 2002
- --------------------------------------------------------------------------------------------
Common Stock:
Beginning balance 102,849 103,112 103,434 $777,699
Conversion of convertible bonds; 484,328
shares in 2000, 672,625 shares in 2001
and 34,522,672 shares in 2002 263 322 17,027 128,023
- --------------------------------------------------------------------------------------------
Ending balance 103,112 103,434 120,461 $905,722
============================================================================================
Additional Paid-in Capital:
Beginning balance 154,055 154,314 154,635 $1,162,669
Conversion of convertible bonds 259 321 16,993 127,767
- --------------------------------------------------------------------------------------------
Ending balance 154,314 154,635 171,628 $1,290,436
============================================================================================
Legal Reserve:
Beginning balance 14,271 15,178 16,223 $121,977
Transfer from retained earnings 907 1,045 592 4,451
- --------------------------------------------------------------------------------------------
Ending balance 15,178 16,223 16,815 $126,428
============================================================================================
Retained Earnings:
Beginning balance 238,592 272,004 316,224 $2,377,624
Net income for the year 41,928 53,228 61,614 463,263
Dividends declared (7,609) (7,963) (8,320) (62,556)
Transfer to legal reserve (907 (1,045) (592) (4,451)
- --------------------------------------------------------------------------------------------
Ending balance 272,004 316,224 368,926 $2,773,880
============================================================================================
Accumulated other comprehensive income (loss):
Beginning balance (22,308) (3,102) (33,788) $ (254,045)
Foreign currency translation adjustments (7,394) (1,740) 6,516 48,992
Unrealized gains (losses) on securities,
net of reclassification adjustment 9,355 (6,967) (766) (5,759)
Unrealized losses on derivatives , net of
reclassification adjustment - - (207) (1,556)
Minimum pension liability adjustments 17,245 (21,979) (16,131) (121,286)
- --------------------------------------------------------------------------------------------
Ending balance (3,102) (33,788) (44,376) $ (333,654)
============================================================================================
Treasury stock:
Beginning balance - - - -
Purchase of treasury stock - - (1,083) $ (8,143)
Sales of treasury stock - - 649 4,880
- --------------------------------------------------------------------------------------------
Ending balance - - (434) $ (3,263)
============================================================================================
Comprehensive income:
Net income for the year 41,928 53,228 61,614 $ 463,263
Other comprehensive income (loss) for the
year, net of tax 19,206 (30,686) (10,588) (79,609)
- --------------------------------------------------------------------------------------------
Total comprehensive income for the year 61,134 22,542 51,026 $ 383,654
============================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-7
Ricoh Company, Ltd. and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended March 31, 2000, 2001 and 2002
Thousands of
Millions of Yen U.S. Dollars
------------------------------ ------------
2000 2001 2002 2002
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 41,928 53,228 61,614 $463,263
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 61,946 62,142 73,782 554,752
Equity in earnings of affiliates, net of
dividends received (846) (1,056) (1,260) (9,474)
Deferred income taxes (18,053) (9,994) (1,218) (9,158)
Losses on disposals and sales of property,
plant and equipment 207 2,223 1,665 12,519
Changes in assets and liabilities, net of
effects from acquisition-
Increase in trade receivables (7,794) (32,476) (20,006) (150,421)
Decrease (increase) in inventories 8,502 (7,167) 21,194 159,353
Increase in finance receivables (22,914) (15,127) (13,620) (102,406)
(Decrease) increase in trade payables 23,852 16,235 (19,535) (146,880)
(Decrease) increase in accrued income taxes
and accrued expenses and other 27,620 27,310 (13,592) (102,195)
Increase in accrued pension and severance
costs 8,618 1,667 8,374 62,962
Other, net 12,574 5,743 7,740 58,196
- ---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 135,640 102,728 105,138 790,511
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and
equipment 2,989 1,120 756 5,684
Expenditures for property, plant and equipment (56,930) (73,040) (75,231) (565,647)
Payments for purchases of available-for-sale
securities (54,194) (52,853) (38,564) (289,955)
Proceeds from sales of available-for-sale
securities 24,534 93,705 68,736 516,812
Decrease in investments in and advances to
affiliates 4,254 51 5 38
(Increase) decrease in time deposits (1,571) 6,797 (477) (3,586)
Decrease in cash deposits for assignment of debt
securities 50,000 - - -
Payments for acquisition of Lanier Worldwide,
Inc., net of cash acquired - (28,103) - -
Other, net 2,428 (10,405) (21,017) (158,023)
- ---------------------------------------------------------------------------------------------------
Net cash used in investing activities (28,490) (62,728) (65,792) (494,677)
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term loans 8,362 33,183 71,075 534,399
Repayment of long-term loans (36,699) (114,701) (79,640) (598,797)
(Decrease) increase in short-term borrowings, net (56,529) 5,565 (39,414) (296,346)
Proceeds from issuance of long-term debt
securities 35,000 - 103,500 778,195
Repayment of long-term debt securities (66,620) (2,990) (10,000) (75,188)
Cash dividends paid (7,595) (7,964) (8,322) (62,571)
Other, net 2,832 (1,475) (964) (7,248)
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (121,249) (88,382) 36,235 272,444
- ---------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS (4,718) 1,001 2,470 18,572
- ---------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,817) (47,381) 78,051 586,850
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 130,655 111,838 64,457 484,639
- ---------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR 111,838 64,457 142,508 $1,071,489
===================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR-
Interest 17,305 13,749 9,418 $ 70,812
Income taxes 26,546 57,192 53,129 399,466
===================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-8
Ricoh Company, Ltd. and Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Ricoh Company, Ltd. (the "Company") was established in 1936 and is
headquartered in Tokyo, Japan. The Company and its consolidated subsidiaries
("Ricoh" as a consolidated group) is a world-wide supplier of office automation
equipment, including copiers, facsimile machines, data processing systems,
printers and related supplies. Ricoh is also well known for its state-of-the-art
electronic devices, digital photographic equipment and others.
Ricoh distributes its products primarily through domestic (Japan) and
foreign sales subsidiaries. Overseas, Ricoh owns and distributes not only Ricoh
brand products but also other brands, such as Gestetner, Lanier and Savin.
Ricoh manufactures its products primarily in 15 plants in Japan and 7
plants overseas, which are located in the United States, United Kingdom, France,
and China.
2. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The accompanying consolidated financial statements of Ricoh have been
prepared in conformity with accounting principles generally accepted in the
United States of America, modified for the accounting for stock splits (see Note
2.(o) below). Significant accounting and reporting policies are summarized
below:
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ricoh.
Investments in 20% to 50% owned companies are accounted for on the equity basis.
All significant intercompany balances and transactions have been eliminated in
consolidation.
The accounts of certain consolidated subsidiaries have been included on the
basis of fiscal periods ended three months or less prior to March 31, and
significant transactions after then are appropriately adjusted in consolidation.
(B) REVENUE RECOGNITION
Ricoh recognizes revenue when it has persuasive evidence of an arrangement,
the product has been shipped to and received by the customer or the services
have been provided to the customer, the sales price is fixed or determinable and
collectibility is reasonably assured.
(C) TRANSLATION OF FOREIGN CURRENCY ACCOUNTS
Under the provisions of Statement of Financial Accounting Standards
("SFAS") No. 52, "Foreign Currency Translation", assets and liabilities are
translated at the exchange rates in effect at each fiscal year-end, and income
and expenses are translated at the average rates of exchange prevailing during
each fiscal year. The resulting translation adjustments are accumulated as a
part of other comprehensive income (loss) included in shareholders' investment.
F-9
(D) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Ricoh currently manages its exposure to certain market risks, including
foreign exchange and interest rate risks, through the use of derivative
instruments, and beginning April 1, 2001, accounts for them in accordance with
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities",
and No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities".
Ricoh enters into a derivative contract and designates the derivative as;
(1) a hedge of the fair value of a recognized asset or liability (fair value
hedge), (2) a hedge of the variability of cash flows that are to be paid in
connection with a recognized liability (cash flow hedge), or (3) a derivative
instrument that is not designated for hedge accounting treatment. For derivative
contracts that are designated and qualify as fair value hedges, the derivative
instrument is marked-to-market with gains and losses recognized in current
period earnings to offset the respective losses and gains recognized on the
underlying exposure. For derivative contracts that are designated and qualify as
cash flow hedges, the effective portion of gains and losses on these contracts
is reported as a component of accumulated other comprehensive income (loss) and
reclassified into earnings in the same period the hedged transaction affects
earnings. Any hedge ineffectiveness on cash flow hedges is immediately
recognized in earnings. Ricoh also enters into derivative contracts that are not
designated as hedging instruments. These derivative contracts are recorded at
fair value with the gain or loss recognized in current period earnings. Ricoh
does not hold any derivative instruments for trading purposes. See Note 15 for
further description of Ricoh's specific programs to manage risk using derivative
financial instruments.
On April 1, 2001, Ricoh adopted SFAS No. 133 and SFAS No. 138. The
cumulative effect adjustment upon the adoption of SFAS No. 133 and SFAS No. 138,
net of the related income tax effect, resulted in a decrease in net income of
approximately 66 million yen ($496 thousand) and a decrease in other
comprehensive income (loss) of approximately 1,864 million yen ($14,015
thousand).
Prior to April 1, 2001, gains and losses on hedges of existing assets or
liabilities were included in the carrying amounts of those assets or liabilities
and were ultimately recognized in income as part of those carrying amounts.
Gains and losses related to qualifying hedges of firm commitments and
anticipated transactions were deferred and recognized in income, or as
adjustments of carrying amounts, when the hedged transaction occurred.
(E) SECURITIES
Ricoh conforms with SFAS No.115, "Accounting for Certain Investments in
Debt and Equity Securities" which requires investments in debt and certain
equity securities to be classified as either held-to-maturity, trading, or
available-for-sale securities. As of March 31, 2001 and 2002, a substantial part
of Ricoh's investments in debt and equity securities are classified as
available-for-sale securities. Those classified as available-for-sale are
reported at fair value with unrealized gains and losses, net of related taxes,
excluded from earnings and reported in other comprehensive income (loss).
Individual securities classified as available-for-sale are reduced to net
realizable value for any other than temporary declines in market value.
Available-for-sale securities which are expected to be sold in one year are
classified as current assets.
The cost of the securities sold was computed based on the average cost of
each security held at the time of sale.
The non-marketable equity securities primarily relate to less than 20%
owned companies and are stated at cost.
F-10
(F) INVENTORIES
Inventories are mainly stated at the lower of average cost or market.
Inventory costs include raw materials, labor and manufacturing overheads.
(G) PLANT AND EQUIPMENT
Depreciation of plant and equipment is computed principally by using the
declining-balance method over the estimated useful lives. Most of the foreign
subsidiaries have adopted the straight-line method for computing depreciation,
which currently accounts for approximately 40% of the consolidated depreciation
expense.
Effective rates of depreciation for the years ended March 31, 2000, 2001
and 2002 are summarized below:
2000 2001 2002
- ------------------------------------------------------------------------------
Buildings 7.9% 8.0% 8.3%
Machinery and equipment 37.6 36.6 40.6
- ------------------------------------------------------------------------------
Certain leased buildings, machinery and equipment are accounted for as
capital leases in conformity with SFAS No. 13, "Accounting for Leases." The
aggregate cost included in plant and equipment and related accumulated
depreciation as of March 31, 2001 and 2002 were as follows:
Thousands of
Millions of Yen U.S. Dollars
------------------ ------------
2001 2002 2002
- -------------------------------------------------------------------------------
Aggregate cost 6,413 6,578 $49,459
Accumulated depreciation 3,448 3,965 29,812
- -------------------------------------------------------------------------------
The related future minimum lease payments and the present value of the net
minimum lease payments as of March 31, 2002 were 3,286 million yen ($24,707
thousand) and 3,113 million yen ($23,406 thousand), respectively.
Ordinary maintenance and repairs are charged to income as incurred. Major
replacements and improvements are capitalized. When properties are retired or
otherwise disposed of, the property and related accumulated depreciation
accounts are relieved of the applicable amounts, and any differences are
included in other income or expenses.
(H) GOODWILL
Ricoh has classified the cost in excess of fair value of the net assets of
major companies acquired in purchase transactions as goodwill. Goodwill is being
amortized on a straight-line method over the estimated periods benefited, not to
exceed 20 years.
(I) PENSION AND RETIREMENT ALLOWANCES PLANS
Ricoh conforms with SFAS No. 87, "Employers' Accounting for Pensions" in
accounting for pension and retirement allowances plans.
F-11
(J) INCOME TAXES
Ricoh conforms with SFAS No. 109, "Accounting for Income Taxes" which
requires an asset and liability approach for financial accounting and reporting
for income taxes.
Income taxes are currently provided for undistributed earnings of foreign
subsidiaries and affiliates except for those that are deemed to be permanent
investments.
(K) ADVERTISING
The costs of advertising are expensed as incurred.
(L) SHIPPING AND HANDLING COSTS
Shipping and handling costs, which mainly include transportation to
customers, are included in Selling, General and Administrative Expenses on the
consolidated statements of income. Shipping and handling costs were 11,123
million yen and 13,332 million yen ($100,241 thousand) for the years ended
March 31, 2001 and 2002, respectively.
(M) IMPAIRMENT LOSS ON LONG-LIVED ASSETS
Ricoh conforms with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", in accounting
for impairment losses on long-lived assets and certain identifiable intangibles.
In performing the review for recoverability of long-lived assets and certain
identifiable intangibles, Ricoh estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. An impairment
loss is recognized if the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the asset. For
purposes of such comparison, portions of unallocated excess of cost over net
assets acquired were attributed to related long-lived assets and identifiable
intangible assets, based upon the relative fair values of such assets at
acquisition. Measurement of an impairment loss for long-lived assets and
identifiable intangibles is based on the fair value of the asset.
(N) EARNINGS PER SHARE
Basic net income per common share is calculated by dividing net income by
the weighted-average number of shares outstanding during the reported period.
The calculation of diluted net income per common share is similar to the
calculation of basic net income per share, except that the weighted-average
number of shares outstanding includes the additional dilution from potential
common stock equivalents such as convertible bonds.
(O) ACCOUNTING FOR STOCK SPLITS
Before September 30, 2001, the stock splits of common stock made at various
times had been accounted for by transferring an amount equivalent to the par
value of such stocks from additional paid-in capital to common stock in the case
of capitalization by resolution of the Board of Directors. However, no
accounting recognition was made for stock splits when common stock already
included a portion of the proceeds from shares issued at a price in excess of
par value. The Japanese Commercial Code, amended effective on October 1, 2001,
no longer requires a transfer from additional paid-in capital to common stock in
such cases (see Note 12).
F-12
In the United States, distributions of shares in comparable circumstances
are required to be accounted for by transferring amounts equal to the fair
market value of the shares issued from retained earnings to common stock and
additional paid-in capital.
(P) CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash and cash equivalents include highly liquid investments with a maturity
of three months or less at the date of purchase.
The following noncash transactions have been excluded from the consolidated
statements of cash flows:
Thousands of
Millions of Yen U.S. Dollars
---------------------------------- ------------
2000 2001 2002 2002
- ----------------------------------------------------------------------------------------------------------------
Conversion of convertible bonds 4,676 1,088 35,620 $267,820
Capital lease obligations incurred 1,426 289 445 3,346
Transfer of securities to pension fund 20,760 - - -
Assets and liabilities of Lanier Worldwide, Inc.
in 2001:
Fair value of assets acquired - 134,586 - -
Liabilities assumed - 104,623 - -
- ----------------------------------------------------------------------------------------------------------------
(Q) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses,
including impairment losses of long-lived assets and the disclosures of fair
value of financial instruments and contingent assets and liabilities, to prepare
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
The Company has identified four areas where it believes assumptions and
estimates are particularly critical to the financial statements. These are the
determination of the allowance for doubtful receivables, impairment on
long-lived assets and goodwill, realizability of deferred income tax assets and
pension accounting.
(R) NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 141 requires the use of only the purchase method of
accounting for business combinations and prohibits the use of the pooling of
interests method. SFAS No. 141 also refines the definition of intangible assets
acquired in a purchase business combination. As a result, the purchase price
allocation of future business combinations may be different from the allocation
that would have resulted under the old rules. Business combinations must be
accounted for using SFAS No. 141 beginning on July 1, 2001.
SFAS No. 142 eliminates the amortization of goodwill, requires annual
impairment testing of goodwill and introduces the concept of indefinite life
intangible assets. It will be adopted on April 1, 2002.
F-13
These new requirements will impact future period net income by an amount
equal to the discontinued goodwill amortization offset by goodwill impairment
charges, if any, and adjusted for any differences between the old and new rules
for defining intangible assets on future business combinations. A transitional
impairment test of goodwill is required as of April 1, 2002, the date of
adoption. Ricoh is currently assessing the impact of the new impairment testing
requirements that may have on its consolidated financial position and result of
operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The new standard will be
adopted on April 1, 2003, and is not expected to have a material effect on
Ricoh's consolidated financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses significant
issues relating to the implementation of SFAS No. 121, and develops a single
accounting model, based on the framework established in SFAS No. 121 for
long-lived assets to be disposed of by sale, whether such assets are or are not
deemed to be a business. SFAS No. 144 also modifies the accounting and
disclosure rules for discontinued operations. The new standard will be adopted
on April 1, 2002, and does not expected to have a material effect on Ricoh's
consolidated financial position or results of operations.
3. BASIS OF PRESENTING FINANCIAL STATEMENTS
The accounts of the Company and its domestic subsidiaries are maintained in
yen. The accompanying consolidated financial statements as of March 31, 2001 and
2002 and for the years ended March 31, 2000, 2001 and 2002 have been presented
in yen, and for the convenience of the reader the consolidated financial
statements as of March 31, 2002 and for the year then ended have also been
presented in U.S. dollars by arithmetically translating all yen amounts by using
the exchange rate of 133 yen to US $1 in effect at March 31, 2002.
The books of the Company and its domestic subsidiaries are maintained in
conformity with Japanese accounting principles and accounting practices. Foreign
subsidiaries maintain their books in conformity with those of the countries of
their domicile.
The accompanying financial statements are presented on a consolidated basis
and reflect certain adjustments, not recorded in the Ricoh's books, to present
them in conformity with accounting principles generally accepted in the United
States of America, modified for the accounting for stock splits (see Note 2(o)).
The principal accounting adjustments relate to bonds with detachable stock
purchase warrants, impairment of long-lived assets and for long-lived assets to
be disposed of, accrued pension and severance costs and certain other accrued
expenses, sales-type leases, derivatives and providing for the income tax effect
of such adjustments.
4. ACQUISITION
In January 2001, Ricoh completed a take-over bid ("TOB") for Lanier
Worldwide, Inc. ("Lanier"). As a result of this acquisition, Lanier became a
wholly-owned subsidiary that distributes Lanier brand name office equipment
products in the global marketplace.
F-14
The acquisition was accounted for as a purchase transaction. The excess of
purchase price over the estimated fair value of the net assets acquired is being
amortized over 20 years. As of April 1, 2002, Ricoh adopted new authoritative
accounting guidance relating to both the initial recording and subsequent
impairment testing of goodwill and other intangible assets, and remaining
goodwill is no longer amortized (see Note 2(r)).
The post-acquisition period for the two months ended March 31, 2001, was
consolidated in the accompanying financial statements. The following unaudited
pro forma information presents the consolidated results of operations for the
years ended March 31, 2000 and 2001, as if the acquisition had occurred as of
the beginning of each year presented:
Millions of Yen
-----------------------
2000 2001
- ----------------------------------------------------------------------------
Net sales 1,574,465 1,624,036
Net income 43,861 49,474
Yen
-----------------------
Net income per share of common stock-
Basic 63.41 71.43
Diluted 58.63 66.03
- ----------------------------------------------------------------------------
The pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition been
made at the beginning of the respective years or of results which may occur in
the future.
5. FINANCE RECEIVABLES
Finance receivables as of March 31, 2001 and 2002 are comprised of lease
receivables and installment loans.
Ricoh's products are leased to domestic customers primarily through Ricoh
Leasing Company, Ltd., a majority-owned subsidiary and to overseas customers
primarily through certain overseas subsidiaries. These leases are accounted for
as sales-type leases in conformity with SFAS No.13. Revenues from sales-type
leases are recognized at the inception of the leases.
Information pertaining to Ricoh's lease receivables as of March 31, 2001
and 2002 is as follows:
Thousands of
Millions of Yen U.S. Dollars
--------------------- ------------
2001 2002 2002
- ---------------------------------------------------------------------------------------
Minimum lease payments receivable 442,886 462,356 $3,476,361
Unearned income (49,995) (50,576) (380,271)
Allowance for doubtful receivables (11,992) (12,926) (97,188)
- ---------------------------------------------------------------------------------------
Net lease receivables 380,899 398,854 $2,998,902
=======================================================================================
F-15
As of March 31, 2002, the minimum lease payments receivable due in each of
the next five years and thereafter are as follows:
Thousands of
Years ending March 31 Millions of Yen U.S. Dollars
- ---------------------------------------------------------------------------------------
2003 146,290 $1,099,925
2004 126,030 947,593
2005 96,941 728,880
2006 60,067 451,632
2007 25,994 195,444
2008 and thereafter 7,034 52,887
- ---------------------------------------------------------------------------------------
Total 462,356 $3,476,361
=======================================================================================
Installment loans, net of allowance for doubtful receivables, as of March
31, 2001 and 2002 are primarily comprised of housing loans and term loans
aggregating 47,891 million yen and 48,975 million yen ($368,233 thousand),
respectively.
Ricoh sold finance lease receivables with a pretax gain of 175 million yen
and 225 million yen ($1,692 thousand) for the years ended March 31, 2001 and
2002, respectively, through securitization transactions. Servicing assets or
liabilities related to securitization transactions initiated were not recorded,
because the servicing fees adequately compensate Ricoh. Ricoh's retained
interests are subordinate to the investor's interests. Their value is subject to
credit and interest rate risk on the sold financial assets. The investors and
Special Purpose Entities have no recourse to our other assets for failure of
debtors to pay.
Key economic assumptions used in measuring the fair value of retained
interests related to securitization transactions completed during the year ended
March 31, 2001 and 2002 were as follows:
2001 2002
- -------------------------------------------------------------------------
Expected credit losses 0.75% - 1.35% 0.75% - 1.35%
Discount rate 0.89% - 3.00% 0.89% - 3.00%
- -------------------------------------------------------------------------
The impacts of 10% and 20% adverse changes to the key economic assumptions
on the fair value of retained interests as of March 31, 2002 are presented
below.
Thousands of
Millions of Yen U.S. Dollars
--------------- ------------
2002 2002
- ------------------------------------------------------------------------------------------------
Carrying value of retained interests (included in lease
deposits and other in the consolidated balance sheet) 20,154 $151,534
Expected credit losses:
+10% 144 1,083
+20% 287 2,158
Discount rate:
+10% 88 662
+20% 175 1,316
- ------------------------------------------------------------------------------------------------
F-16
The hypothetical scenario does not reflect expected market conditions and
should not be used as a prediction of future performance. As the figures
indicate, changes in fair value may not be linear. Also, in the above table, the
effect of a variation in a particular assumption on the fair value of the
retained interest is calculated without changing any other assumption; in
reality, changes in one factor may result in changes in another, which might
magnify or counteract the sensitivities.
The following table summarizes certain cash flows received from and paid to
the Special Purpose Entities for all securitization activity for the years ended
March 31, 2001 and 2002:
Thousands of
Millions of Yen U.S. Dollars
----------------- ------------
2001 2002 2002
- --------------------------------------------------------------------------------------------
Proceeds from new securitization 29,869 25,000 $188,970
Servicing fees received 32 39 293
Repurchases of delinquent or ineligible assets 3,277 5,138 38,632
- --------------------------------------------------------------------------------------------
Amounts of delinquencies, net credit losses, and components of all
receivables managed and securitized as of March 31, 2001 and 2002, and for the
years then ended, are as follows:
Millions of Yen
-------------------------------------------------------------------------------------
2001 2002
------------------------------------------- ---------------------------------------
Principal Principal
amount of amount of
Total receivables Total receivables
principal 4 months principal 4 months
amount of or more Net credit amount of or more Net credit
receivables past due losses receivables past due losses
- ----------------------------------------------------------------------------------------------------------------------------
Principal amount outstanding 466,017 871 3,395 491,791 977 3,937
Less: receivables securitized (73,126) (80,011)
------- -------
Receivables held in portfolio 392,891 411,780
============================================================================================================================
Thousands of U.S. dollars
--------------------------------------------
2002
--------------------------------------------
Principal
Total amount of
Principal receivables
amount of 4 months or Net credit
receivables more past due losses
- ---------------------------------------------------------------------------------------------------
Principal amount outstanding $3,697,677 $7,346 $29,602
Less: receivables securitized (601,587)
----------
Receivables held in portfolio $3,096,090
===================================================================================================
F-17
6. SECURITIES
Marketable securities and investment securities as of March 31, 2001 and
2002 consist of the following:
Thousands of
Millions of Yen U.S. Dollars
----------------- ------------
2001 2002 2002
- ----------------------------------------------------------------------------------------
Marketable securities:
Available-for-sale securities 62,213 50,599 $380,444
- ----------------------------------------------------------------------------------------
Investment securities:
Available-for-sale securities 46,231 23,337 $175,466
Non-marketable equity securities 2,845 5,549 41,722
- ----------------------------------------------------------------------------------------
49,076 28,886 $217,188
========================================================================================
The current and noncurrent security types of available-for-sale securities,
and the respective cost, gross unrealized holding gains, gross unrealized
holding losses and fair value as of March 31, 2001 and 2002 are as follows:
Millions of Yen
---------------------------------------------------------------------------------------------
2001 2002
---------------------------------------------------------------------------------------------
Gross Gross Gross Gross
unrealized unrealized unrealized unrealized
holding holding Fair holding holding Fair
Cost gains losses value Cost gains gains value
- -------------------------------------------------------------------------------------------------------------------
Current:
Japanese and
foreign
governmental
bond securities 997 10 - 1,007 - - - -
Corporate debt
securities 7,062 2 12 7,052 21,338 1,205 12 22,531
Other 54,168 5 19 54,154 28,068 - - 28,068
- -------------------------------------------------------------------------------------------------------------------
62,227 17 31 62,213 49,406 1,205 12 50,599
===================================================================================================================
Non-current:
Equity securities 7,686 8,805 453 16,038 7,457 6,025 469 13,013
Corporate debt
securities 21,587 2,656 53 24,190 20 6 - 26
Other 7,639 6 1,642 6,003 10,612 205 519 10,298
- -------------------------------------------------------------------------------------------------------------------
36,912 11,467 2,148 46,231 18,089 6,236 988 23,337
===================================================================================================================
Thousands of U.S. Dollars
-----------------------------------------------
2002
-----------------------------------------------
Gross Gross
unrealized unrealized
holding holding Fair
Cost gains losses value
- ----------------------------------------------------------------------
Current:
Japanese and
foreign
governmental
bond securities $ - $ - $ - $ -
Corporate debt
securities 160,436 9,060 90 169,406
Other 211,038 - - 211,038
- ----------------------------------------------------------------------
$371,474 $ 9,060 $ 90 $380,444
======================================================================
Non-current:
Equity securities $ 56,068 $45,301 $3,527 $ 97,842
Corporate debt
securities 150 45 - 195
Other 79,790 1,541 3,902 77,429
- ----------------------------------------------------------------------
$136,008 $46,887 $7,429 $175,466
======================================================================
Other current securities include short term Money Management Funds of
38,665 million yen and 27,025 million yen ($203,195 thousand) as of March 31,
2001 and 2002, respectively. Other non-current securities mainly include
investment trusts consisting of investment in marketable debt and equity
securities.
The contractual maturities of debt securities classified as
available-for-sale as of March 31, 2002, regardless of their balance sheet
classification, are as follows:
Millions of Yen Thousands of U.S. Dollars
---------------------- -------------------------
Cost Fair value Cost Fair value
- --------------------------------------------------------------------------------------------------
Due within one year 60,026 60,905 $451,324 $457,933
Due after one year through five years 12 18 90 135
- --------------------------------------------------------------------------------------------------
60,038 60,923 $451,414 $458,068
==================================================================================================
F-18
Proceeds from the sales of available-for-sale securities were 24,534
million yen, 93,705 million yen and 68,736 million yen ($516,812 thousand) for
the years ended March 31, 2000, 2001 and 2002, respectively.
The gross realized gains on sales of available-for-sale securities were
1,601 million yen and 2,898 million yen for the years ended March 31, 2000 and
2001, respectively, and there were no significant realized gains on sales of
available-for-sale securities for the year ended March 31, 2002. There were no
significant realized losses on sales of available-for-sale securities for the
three years ended March 31, 2002. The loss on securities of 2,739 million yen
($20,594 thousand) for the years ended March 31, 2002 was charged to income for
declines in market value of available-for-sale securities where the decline was
classified as other than temporary.
In March 2000, the Company contributed certain marketable equity
securities, not including those of its subsidiaries and affiliated companies, to
an employee retirement benefit trust fully administered and controlled by an
independent bank trustee, with no cash proceeds thereon. The transfer of the
available-for-sale securities was accounted for as a sale in accordance with
SFAS No. 125 and accordingly the recorded pension liability was reduced by the
fair market value amount of the transferred securities. The fair value of these
securities at the time of contribution was 20,760 million yen. The net
unrealized gains on these available-for-sale securities amounting to 13,095
million yen continues to be included in "Accumulated other comprehensive income
(loss)" on the consolidated balance sheets and will only be reflected in
realized gains in the statements of income upon the future sale of the
transferred securities by the trustee.
7. INVESTMENTS IN AND ADVANCES TO AFFILIATES
The investments in and advances to affiliates primarily relate to 20% to
50% owned companies. Included in these companies is COCA-COLA WEST JAPAN
COMPANY, LIMITED, a 20.8% owned affiliate. The common stock of this company is
publicly traded. The carrying value of the investment in this company was equal
to its underlying book value and amounted to 37,196 million yen ($279,669
thousand) as of March 31, 2002. The quoted market value of this company was
37,299 million yen ($280,444 thousand) as of March 31, 2002.
The underlying book value of the other 20% to 50% owned companies is
approximately the same as their carrying value.
Summarized financial information for all affiliates as of March 31, 2001
and 2002 and for the years ended March 31, 2000, 2001 and 2002 is as follows:
Thousands of
Millions of Yen U.S. Dollars
------------------- ------------
FINANCIAL POSITION 2001 2002 2002
- -------------------------------------------------------------------------------------------
Assets-
Current assets 124,244 122,974 $ 924,617
Other assets 103,347 141,148 1,061,263
- -------------------------------------------------------------------------------------------
227,591 264,122 $1,985,880
===========================================================================================
Liabilities and shareholders' investment-
Current liabilities 34,389 41,852 $ 314,677
Other liabilities 8,043 13,972 105,053
Shareholders' investment 185,159 208,298 1,566,150
- -------------------------------------------------------------------------------------------
227,591 264,122 $1,985,880
===========================================================================================
F-19
Thousands of
Millions of Yen U.S. Dollars
------------------------------ ------------
OPERATIONS 2000 2001 2002 2002
- --------------------------------------------------------------------------------
Sales 229,825 263,804 288,992 $2,172,872
Costs and expenses 217,316 254,137 277,950 2,089,850
- --------------------------------------------------------------------------------
Net income 12,509 9,667 11,042 $ 83,022
================================================================================
The significant transactions of Ricoh with these affiliates for the years
ended March 31, 2000, 2001 and 2002, and the related account balances at March
31, 2001 and 2002 are summarized as follows:
Thousands of
Millions of Yen U.S. Dollars
--------------------------- ------------
2000 2001 2002 2002
- ------------------------------------------------------------------------------------
Transactions-
Sales 23,231 20,952 25,413 $191,075
Purchases 13,412 13,673 15,584 117,173
Dividend income 1,651 1,008 1,133 8,519
- ------------------------------------------------------------------------------------
The unrealized gains regarding above transactions were eliminated in the
consolidated financial statements.
Thousands of
Millions of Yen U.S. Dollars
-------------------- ------------
2001 2002 2002
- ------------------------------------------------------------------------------
Account balances-
Receivables 6,398 8,513 $64,008
Payables 1,979 2,858 21,489
- ------------------------------------------------------------------------------
As of March 31, 2002, consolidated retained earnings included undistributed
earnings of 20% to 50% owned companies accounted for by the equity method in the
amount of 37,819 million yen ($284,353 thousand).
F-20
8. INCOME TAXES
Income before income taxes, minority interests and equity in earnings of
affiliates and provision for income taxes for the years ended March 31, 2000,
2001 and 2002 are as follows:
Thousands of
Millions of Yen U.S. Dollars
---------------------------- ------------
2000 2001 2002 2002
- -------------------------------------------------------------------------------------------------------
Income before income taxes, minority interests and
equity in earnings of affiliates-
Domestic 49,135 77,820 95,723 $719,722
Foreign 21,258 19,945 18,227 137,045
- -------------------------------------------------------------------------------------------------------
70,393 97,765 113,950 $856,767
=======================================================================================================
Provision for income taxes-
Current:
Domestic 38,105 45,684 43,564 $327,549
Foreign 8,311 7,822 8,801 66,173
- -------------------------------------------------------------------------------------------------------
46,416 53,506 52,365 393,722
=======================================================================================================
Deferred:
Domestic (19,110) (10,380) (3,524) (26,496)
Foreign 1,057 386 2,306 17,338
- -------------------------------------------------------------------------------------------------------
(18,053) (9,994) (1,218) (9,158)
=======================================================================================================
Consolidated provision for income taxes 28,363 43,512 51,147 $384,564
=======================================================================================================
Total income taxes are allocated as follows:
Thousands of
Millions of Yen U.S. Dollars
---------------------------- ------------
2000 2001 2002 2002
- ----------------------------------------------------------------------------------------------------------
Provision for income taxes 28,363 43,512 51,147 $384,564
Shareholders' investment:
Foreign currency translation adjustments (3,723) (1,252) 2,062 15,504
Unrealized gains (losses) on securities 2,072 629 (582) (4,376)
Unrealized losses on derivatives - - (146) (1,098)
Minimum pension liability adjustment 15,572 (15,818) (11,760) (88,421)
- ----------------------------------------------------------------------------------------------------------
42,284 27,071 40,721 $306,173
==========================================================================================================
Reconciliations of the normal tax rates in Japan with the effective tax
rates for the years ended March 31, 2000, 2001 and 2002, are as follows:
2000 2001 2002
- ------------------------------------------------------------------------------------------------------------
Normal tax rate 42% 42% 42%
Permanently nondeductible expenses, net of nontaxable income 3 2 1
Tax benefits not recognized on operating losses of certain consolidated
subsidiaries 0 0 3
Decrease in the beginning-of-the-year balance of the valuation allowance
for deferred tax assets (2) (2) (0)
Other, net (3) 3 (1)
- ------------------------------------------------------------------------------------------------------------
Effective tax rate 40% 45% 45%
============================================================================================================
F-21
Permanently nondeductible expenses include directors' bonuses and
entertainment expenses. Permanently nontaxable income includes dividends
received and exported technology fees.
The tax effects of temporary differences giving rise to the consolidated
deferred income tax assets and liabilities as of March 31, 2001 and 2002 are as
follows:
Thousands of
Millions of Yen U.S. Dollars
--------------------- ------------
2001 2002 2002
- ------------------------------------------------------------------------------------------------------------------
Assets:
Intercompany profits and inventory write-downs 25,247 24,755 $186,128
Accrued expenses 19,993 17,866 134,331
Depreciation 3,570 4,640 34,887
Accrued pension and severance costs 31,230 41,523 312,203
Net operating losses carryforward 14,439 19,080 143,459
Other 11,826 21,467 161,406
- ------------------------------------------------------------------------------------------------------------------
106,305 129,331 972,414
Less- Valuation allowance (8,403) (11,300) (84,963)
- ------------------------------------------------------------------------------------------------------------------
97,902 118,031 $887,451
==================================================================================================================
Liabilities:
Sales-type leases (5,577) (4,964) $(37,323)
Undistributed earnings of foreign subsidiaries and affiliates (9,626) (12,291) (92,414)
Net unrealized holding gains on available-for-sale securities (9,397) (8,932) (67,158)
Other (2,676) (9,757) (73,361)
- ------------------------------------------------------------------------------------------------------------------
(27,276) (35,944) (270,256)
==================================================================================================================
Net deferred tax assets 70,626 82,087 $617,195
==================================================================================================================
Net deferred tax assets as of March 31, 2001 and 2002 are included in the
consolidated balance sheets as follows:
Thousands of
Millions of Yen U.S. Dollars
------------------ ------------
2001 2002 2002
- ------------------------------------------------------------------------------------------------------------
Deferred income taxes (Current Assets) 54,306 53,508 $402,316
Lease deposits and other 37,361 59,732 449,112
Accrued expenses and other (416) (561) (4,218)
Deferred income taxes (Long-Term Liabilities) (20,625) (30,592) (230,015)
- ------------------------------------------------------------------------------------------------------------
70,626 82,087 $617,195
============================================================================================================
The net changes in the total valuation allowance for the years ended March
31, 2000, 2001 and 2002 were a decrease of 114 million yen and increases of
246 million yen and 2,897 million yen ($21,782 thousand), respectively.
The valuation allowance was established to reduce the deferred tax assets
to the amount that is expected to be realized. The valuation allowance
principally relates to the tax effects of net operating losses recorded by
certain subsidiaries.
F-22
As of March 31, 2002, certain subsidiaries had net operating losses carried
forward for income tax purposes of approximately 53,146 million yen ($399,594
thousand) which were available to reduce future income taxes, if any.
Approximately 25,019 million yen ($188,113 thousand) of the operating losses
expire within a five-year period while the remainder principally have an
indefinite carryforward period.
8. SHORT-TERM BORROWINGS AND TRADE NOTES RECEIVABLE DISCOUNTED WITH BANKS
Short-term borrowings as of March 31, 2001 and 2002 consist of the
following:
Weighted average Thousands of
interest rate Millions of Yen U.S. Dollars
---------------- ------------------ ------------
2001 2002 2001 2002 2002
- -----------------------------------------------------------------------------------------------------------
Borrowings, principally from banks 3.3% 1.3% 131,902 103,784 $ 780,331
Commercial paper 2.2 1.5 63,868 57,310 430,902
- -----------------------------------------------------------------------------------------------------------
195,770 161,094 $1,211,233
===========================================================================================================
The Company and certain of its subsidiaries regularly discount trade notes
receivable on a full recourse basis with banks. These trade notes receivable
discounted are contingent liabilities. The weighted average interest rates on
these trade notes receivable discounted were 4.8% as of March 31, 2001 and 2.8%
as of March 31, 2002, respectively.
The Company and certain of its subsidiaries enter into the contracts with
financial institutions regarding line of credit and overdrawing, and hold the
issuing programs of commercial paper and medium-term notes. The unused lines of
credit were amounting to 527,925 million yen and 580,785 million yen ($4,366,805
thousand) as of March 31, 2001 and 2002, respectively, of which 323,101 million
yen and 342,045 million yen ($2,571,767 thousand) related to commercial paper
and medium-term notes programs at prevailing interest rates.
10. LONG-TERM INDEBTEDNESS
Long-term indebtedness as of March 31, 2001 and 2002 consists of the
followings:
Conversion Thousands of
price Millions of Yen U.S. Dollars
----------- ------------------- ------------
(Per share) 2001 2002 2002
- ----------------------------------------------------------------------------------------------------------------
Convertible bonds-
1.8%, payable in yen, due March 2002 824.70 1,298 - $ -
1.5%, payable in yen, due March 2002 993.00 32,764 - -
0.35%, payable in yen, due March 2003 1,210.00 29,889 29,886 224,707
0.4%, payable in yen, due September 2002 issued
by a consolidated subsidiary 1,594.40 5,764 4,163 31,301
- ----------------------------------------------------------------------------------------------------------------
Total convertible bonds 69,715 34,049 256,008
================================================================================================================
Bonds-
2.075%, straight bonds, payable in yen, due
April 2005 40,000 40,000 300,752
F-23
Conversion Thousands of
price Millions of Yen U.S. Dollars
----------- --------------------- ------------
(Per share) 2001 2002 2002
- ----------------------------------------------------------------------------------------------------------------
0.87%, straight bonds, payable in yen, due March
2007 - 35,000 263,158
1.34%, straight bonds, payable in yen, due March
2009 - 25,000 187,970
2.9%, straight bonds, payable in yen, due August
2001 issued by a consolidated subsidiary 10,000 - -
0.9%, straight bonds, payable in yen, due June
2003 issued by a consolidated subsidiary 5,000 5,000 37,594
1.17%, straight bonds, payable in yen, due June
2004 issued by a consolidated subsidiary 10,000 10,000 75,188
1.1%, straight bonds, payable in yen, due
February 2004 issued by a consolidated
subsidiary 10,000 10,000 75,188
0.73%, straight bonds, payable in yen, due June
2006 issued by a consolidated subsidiary - 10,000 75,188
2.1%, straight bonds, payable in yen, due
October 2009 issued by a consolidated
subsidiary 10,000 10,000 75,188
Medium-term notes, 0.06% ~ 3.89%,
due through 2005 issued by a consolidated
subsidiary 1,239 39,162 294,451
- ----------------------------------------------------------------------------------------------------------------
Total bonds 86,239 184,162 1,384,677
================================================================================================================
Unsecured loans-
Banks and insurance companies,
0.22% ~ 11.60%, due through 2011 174,365 170,537 1,282,233
- ----------------------------------------------------------------------------------------------------------------
Secured loans-
Banks, insurance companies and other financial institution,
0% ~ 3.50%, due through 2020 9,522 4,799 36,082
- ----------------------------------------------------------------------------------------------------------------
Capital lease obligations (see Note 2(g)) 3,317 3,113 23,406
================================================================================================================
Total 343,158 396,660 2,982,406
SFAS No.133 fair value adjustment - 3,649 27,436
Less- Current maturities included in current liabilities (125,415) (67,314) (506,120)
- ----------------------------------------------------------------------------------------------------------------
217,743 332,995 $2,503,722
================================================================================================================
Secured loans are collateralized by land, buildings and lease receivables
with a book value of 8,728 million yen ($65,624 thousand) as of March 31, 2002.
F-24
The convertible bonds are convertible into common stock at the option of
the holders, currently at applicable conversion prices per share as listed in
the above table. These conversion prices are subject to adjustment in certain
events including subsequent stock splits and shares subsequently issued at less
than market value.
The convertible bonds and some straight bonds outstanding as of March 31,
2002 are redeemable at the option of Ricoh at 100% of the principal amounts
under certain conditions as provided in the applicable agreements.
If all convertible bonds of the Company were converted as of March 31,
2002, 24,699 thousand shares of common stock would be issuable.
Convertible bonds and the other bonds are subject to certain covenants such
as restrictions on earnings and certain additional secured indebtedness, as
defined in the agreements. Ricoh presently estimates that none of such covenants
would be applicable to the outstanding bonds.
Certain loan agreements provide, among other things, that the lender may
request the Company to submit proposals for appropriations of earnings
(including payment of dividends) to the lender for its review and approval prior
to presentation to the shareholders. The Company has never been requested to
submit such proposals for approval. In addition, as is customary in Japan,
substantially all of the bank borrowings are subject to general agreements with
each bank which provide, among other things, that the banks may request
additional security for these loans if there is reasonable and probable cause
and may treat any security furnished to the banks as well as cash deposited as
security for all present and future indebtedness. The Company has never been
requested to submit such additional security.
The aggregate annual maturities of long-term indebtedness subsequent to
March 31, 2002 are as follows:
Thousands of
Years ending March 31 Millions of Yen U.S. Dollars
- ---------------------------------------------------------------------------------------
2003 67,062 $ 504,226
2004 56,263 423,030
2005 71,604 538,376
2006 93,344 701,835
2007 55,144 414,616
2008 and thereafter 53,243 400,323
- ---------------------------------------------------------------------------------------
Total 396,660 $2,982,406
=======================================================================================
11. PENSION AND RETIREMENT ALLOWANCES PLANS
The Company and certain of its subsidiaries have various trusted
contributory and noncontributory employees pension fund ("EPF") plans covering
substantially all of their employees. Under the plans, employees are entitled to
lump-sum payments at the time of termination or retirement, or to pension
payments. Under the terms of the domestic EPF plan, the Government welfare
pension insurance benefit is substituted and commingled with the primary benefit
provided by the plan.
The amounts of lump-sum or pension payments under the plans are generally
determined on the basis of length of service and remuneration at the time of
termination.
F-25
It is Ricoh's policy to fund amounts required to maintain sufficient plan
assets to provide for accrued benefits based on a certain percentage of wage and
salary costs. The plan assets consist principally of interest-bearing bonds and
listed equity securities.
The changes in the benefit obligation and plan assets of the defined
benefit plans for the years ended March 31, 2001 and 2002 are as follows:
Thousands of
Millions of Yen U.S. Dollars
---------------------- ------------
2001 2002 2002
- --------------------------------------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year 368,026 424,176 $ 3,189,293
Service cost 15,449 15,636 117,564
Interest cost 11,706 13,693 102,955
Plan participants' contributions 1,513 1,585 11,917
Actuarial loss (gain) 18,024 8,309 62,474
Acquisition 16,712 - -
Settlement - (3,005) (22,594)
Benefits paid (10,586) (12,558) (94,421)
Foreign exchange impact 3,332 4,726 35,534
- --------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 424,176 452,562 $ 3,402,722
==============================================================================================================
Change in plan assets:
Fair value of plan assets at beginning of year 285,830 274,323 $ 2,062,579
Actual return on plan assets (31,986) (11,715) (88,083)
Acquisition 12,402 - -
Employer contribution 11,879 12,680 95,338
Plan participants' contributions 1,513 1,585 11,917
Settlement - (2,858) (21,488)
Benefits paid (7,959) (9,767) (73,436)
Foreign exchange impact 2,644 4,129 31,045
- --------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year 274,323 268,377 $ 2,017,872
==============================================================================================================
Funded status (149,853) (184,185) $(1,384,850)
Unrecognized net actuarial loss 113,056 143,448 1,078,557
Unrecognized net asset at transition, net of amortization (3,492) (2,953) (22,203)
- --------------------------------------------------------------------------------------------------------------
Net amount recognized (40,289) (43,690) $ (328,496)
==============================================================================================================
Amounts recognized in the balance sheets consist of:
Prepaid benefit cost 1,575 1,262 $ 9,489
Accrued benefit liability (82,706) (113,685) (854,774)
Accumulated other comprehensive income, gross of tax 40,842 68,733 516,789
- --------------------------------------------------------------------------------------------------------------
Net amount recognized (40,289) (43,690) $ (328,496)
==============================================================================================================
2001 2002
- ----------------------------------------------------------------------------------------------------------
Discount rate 3.0% ~ 7.75% 2.8% ~ 7.25%
Rate of increase in compensation levels 3.7% ~ 5.5% 2.5% ~ 4.75%
Expected long-term rate of return on plan assets 4.5% ~ 9.0% 1.5% ~ 9.5%
- ----------------------------------------------------------------------------------------------------------
F-26
The discount rate, rate of increase in compensation and expected long-term
rate of return on plan assets of the domestic pension plans were 3.0%, 3.7% and
4.5%, respectively, for the year ended March 31, 2001 and 2.8%~3.0%, 3.3% and
1.5%~4.5%, respectively, for the year ended March 31, 2002. The other data shown
above are those of foreign pension plans.
The net periodic benefit costs of the defined benefit plans for the three
years ended March 31, 2002 consisted of the following components:
Thousands of
Millions of Yen U.S. Dollars
---------------------------------- ------------
2000 2001 2002 2002
- ----------------------------------------------------------------------------------------------------------------
Service costs 16,872 15,449 15,636 $117,564
Interest costs 13,282 11,706 13,693 102,955
Expected return on plan assets (8,611) (13,410) (13,031) (97,978)
Net amortization 3,812 1,123 4,707 35,391
Settlement loss - - 183 1,376
- ----------------------------------------------------------------------------------------------------------------
Net periodic benefit cost 25,355 14,868 21,188 $159,308
================================================================================================================
The projected benefit obligations, accumulated benefit obligations, and
fair value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were 303,113 million yen, 247,897 million
yen and 213,929 million yen, respectively, as of March 31, 2001 and 335,517
million yen ($2,522,684 thousand), 280,930 million yen ($2,112,256 thousand) and
208,712 million yen ($1,569,263 thousand), respectively, as of March 31, 2002.
In accordance with the provisions of SFAS No. 87, Ricoh was required to
record an adjustment for minimum pension liability at March 31, 2001 and 2002.
This liability represents the excess of the accumulated benefit obligations over
the fair value of plan assets. This excess is primarily attributable to a
substantial reduction in the discount rate used in pension calculation and loss
on plan assets, and represents a net loss not yet recognized as net periodic
benefit cost. Since there is no unrecognized prior service cost, this excess is
reported in an accumulated other comprehensive income (loss), at net of tax
benefits. The net changes in pension liability adjustment were an increase of
21,979 million yen for the year ended March 31, 2001 and an increase of
16,131 million yen ($121,286 thousand) for the year ended March 31, 2002,
respectively.
Employees of certain subsidiaries not covered by the EPF plan and directors
of Ricoh are primarily covered by unfunded retirement allowances plans. The
payments to directors are subject to shareholders' approval.
12. SHAREHOLDERS' INVESTMENT
The Japanese Commercial Code provided that an amount equivalent to at least
10% of cash dividends paid and other cash outlays resulting from appropriation
of retained earnings with respect to each fiscal or interim six-month period be
appropriated as a legal reserve until such reserve equals 25% of the stated
capital. This legal reserve and additional paid-in capital were not available
for dividends but may be used to reduce a deficit by resolution of the
shareholders or may be capitalized by resolution of the Board of Directors. The
Japanese Commercial Code, amended effective on October 1, 2001, provides that an
amount equal to at least 10% of appropriations paid in cash be appropriated as a
legal reserve until an aggregated amount of additional paid-in capital and the
legal reserve equals 25% of common stock, and this legal reserve and additional
paid-in capital excess 25% of common stock may be reduced by resolution of the
shareholders.
F-27
Semiannual cash dividends are approved by the shareholders after the end of
each fiscal period or are declared by the Board of Directors after the end of
each interim six-month period. Such dividends are payable to shareholders of
record at the end of each such fiscal or interim six-month period. At the
general meeting to be held on June 27, 2002, the shareholders will approve the
declaration of a cash dividend on the common stock totaling 5,090 million yen
($38,271 thousand), which will be paid to shareholders of record as of March 31,
2002. In accordance with the Japanese Commercial Code, the declaration of this
dividend has not been reflected in the consolidated financial statements as of
March 31, 2002.
The Japanese Commercial Code provides that at least one-half of the
proceeds from shares issued at a price need to be included in common stock. In
conformity therewith, the Company has divided the principal amount of bonds
converted into common stock between common stock and additional paid-in capital.
The amount of retained earnings legally available for distribution is that
recorded in the Company's books and amounted to 253,867 million yen ($1,908,774
thousand) as of March 31, 2002.
13. OTHER COMPREHENSIVE INCOME (LOSS)
Tax effects allocated to each component of other comprehensive income
(loss) are as follows:
Millions of Yen
---------------------------------------
Before-tax Tax Net-of-tax
amount expense amount
- -------------------------------------------------------------------------------------------------------------
2000:
Foreign currency translation adjustments (11,117) 3,723 (7,394)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the year 13,028 (2,742) 10,286
Less- Reclassification adjustment for (gains) losses
realized in net income (1,601) 670 (931)
Net unrealized gains (losses) 11,427 (2,072) 9,355
Minimum pension liability adjustment 32,817 (15,572) 17,245
- -------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) 33,127 (13,921) 19,206
=============================================================================================================
2001:
Foreign currency translation adjustments (2,992) 1,252 (1,740)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the year (3,440) (1,842) (5,282)
Less- Reclassification adjustment for (gains) losses
realized in net income (2,898) 1,213 (1,685)
Net unrealized gains (losses) (6,338) (629) (6,967)
Minimum pension liability adjustment (37,797) 15,818 (21,979)
- -------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) (47,127) 16,441 (30,686)
=============================================================================================================
2002:
Foreign currency translation adjustments 8,578 (2,062) 6,516
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the year (4,212) 1,781 (2,431)
Less- Reclassification adjustment for (gains) losses
realized in net income 2,864 (1,199) 1,665
Net unrealized gains (losses) (1,348) 582 (766)
Unrealized losses on derivatives:
Cumulative effect of accounting change (3,206) 1,342 (1,864)
Unrealized holding gains (losses) arising during the year 2,061 (871) 1,190
Less- Reclassification adjustment for (gains) losses
realized in net income 792 (325) 467
Net unrealized gains (losses) (353) 146 (207)
Minimum pension liability adjustment (27,891) 11,760 (16,131)
- -------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) (21,014) 10,426 (10,588)
=============================================================================================================
F-28
Thousands of U.S. Dollars
----------------------------------
Before-tax Tax Net-of-tax
amount expense amount
- --------------------------------------------------------------------------------------------
2002:
Foreign currency translation adjustments $ 64,496 $(15,504) $ 48,992
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
the year (31,669) 13,391 (18,278)
Less- Reclassification adjustment for (gains)
losses realized in net income 21,534 (9,015) 12,519
Net unrealized gains (losses) (10,135) 4,376 (5,759)
Unrealized losses on derivatives:
Cumulative effect of accounting change (24,105) 10,090 (14,015)
Unrealized holding gains (losses) arising during
the year 15,496 (6,548) 8,948
Less- Reclassification adjustment for (gains)
losses realized in net income 5,955 (2,444) 3,511
Net unrealized gains (losses) (2,654) 1,098 (1,556)
Minimum pension liability adjustment (209,707) 88,421 (121,286)
- --------------------------------------------------------------------------------------------
Other comprehensive income (loss) $(158,000) $ 78,391 $ (79,609)
============================================================================================
Changes in accumulated other comprehensive income (loss) are as follows:
Millions of Yen
------------------------------------------------------------------
Foreign Minimum Accumulated
currency Unrealized Unrealized pension other
translation gains on losses on liability comprehensive
adjustments securities derivatives adjustment income (loss)
- --------------------------------------------------------------------------------------------
2000:
Beginning balance (12,407) 8,944 - (18,845) (22,308)
Change during the
year (7,394) 9,355 - 17,245 19,206
- --------------------------------------------------------------------------------------------
Ending balance (19,801) 18,299 - (1,600) (3,102)
============================================================================================
2001:
Beginning balance (19,801) 18,299 - (1,600) (3,102)
Change during the
year (1,740) (6,967) - (21,979) (30,686)
- --------------------------------------------------------------------------------------------
Ending balance (21,541) 11,332 - (23,579) (33,788)
============================================================================================
2002:
Beginning balance (21,541) 11,332 - (23,579) (33,788)
Cumulative effect of
accounting change - - (1,864) - (1,864)
Change during the year 6,516 (766) 1,657 (16,131) (8,724)
- --------------------------------------------------------------------------------------------
Ending balance (15,025) 10,566 (207) (39,710) (44,376)
============================================================================================
Thousands of U.S. Dollars
-------------------------------------------------------------
2002:
Beginning balance $(161,962) $85,203 $ - $(177,286) $(254,045)
Cumulative effect of
accounting change - - (14,015) - (14,015)
Change during the year 48,992 (5,759) 12,459 (121,286) (65,594)
- --------------------------------------------------------------------------------------------
Ending balance $(112,970) $79,444 $ (1,556) $(298,572) $(333,654)
============================================================================================
F-29
14. PER SHARE DATA
Dividends per share shown in the consolidated statements of income have
been presented on an accrual basis and include, in each fiscal year ended March
31, dividends approved or to be approved after such March 31, but applicable to
the year then ended.
The following table sets forth the computation of basic and diluted
earnings per share showing the reconciliation of the numerators and denominators
used for the computation.
Thousands of shares
-----------------------------
2000 2001 2002
- ---------------------------------------------------------------------------
Average common shares outstanding, less
treasury stocks 691,745 692,617 698,025
Effect of Dilutive Securities:
Convertible bonds-
1.8%, payable in yen, due March 2002 1,743 1,636 997
1.5%, payable in yen, due March 2002 33,604 33,070 28,195
0.35%, payable in yen, due March 2003 24,934 24,703 24,699
- ---------------------------------------------------------------------------
Diluted common shares outstanding 752,026 752,026 751,916
===========================================================================
Thousands of
Millions of Yen U.S. Dollars
---------------------------- ------------
2000 2001 2002 2002
- ---------------------------------------------------------------------------------------------
Net income applicable to common shareholders 41,928 53,228 61,614 $463,263
Effect of Dilutive Securities:
Convertible bonds-
1.8%, payable in yen, due March 2002 15 14 10 75
1.5%, payable in yen, due March 2002 300 295 258 1,940
0.35%, payable in yen, due March 2003 120 119 119 895
Other (204) (249) - -
- ---------------------------------------------------------------------------------------------
Diluted net income 42,159 53,407 62,001 $466,173
=============================================================================================
Yen U.S. Dollars
--------------------------- ------------
Earnings per Share:
Basic 60.61 76.85 88.27 $0.66
Diluted 56.06 71.02 82.46 0.62
=========================================================================================
F-30
15. DERIVATIVE FINANCIAL INSTRUMENTS
Ricoh enters into various derivative financial instrument contracts in the
normal course of business and in connection with the management of its assets
and liabilities.
Ricoh conducts business on a global basis and holds assets and liabilities
denominated in foreign currencies. Ricoh enters into foreign exchange contracts
and foreign currency options to hedge against the potentially adverse impacts of
foreign currency fluctuations on these assets and liabilities denominated in
foreign currencies.
Ricoh enters into interest rate swap agreements to hedge against the
potential adverse impacts of fair value or cash flow fluctuations on interest of
its outstanding debt.
Ricoh uses derivative instruments to reduce risk and protect market value
of assets and liabilities in conformity with the Ricoh's policy. Ricoh does not
use derivative financial instruments for trading or speculative purposes, nor is
it a party to leveraged derivatives.
Changes in the fair value of derivative instruments and the related hedged
item designated as fair value hedges are included in other (income) expenses on
the consolidated statements of income. There is no hedging ineffectiveness nor
are net gains or losses excluded from the assessment of hedge effectiveness for
the year ended March 31, 2002 as the critical terms of the interest rate swap
match the terms of the hedged debt obligations.
Changes in the fair value of derivative instruments and the related
liabilities hedged designated as cash flow hedges are included in accumulated
other comprehensive income (loss) on the consolidated balance sheets. These
amounts are reclassified into earnings as interest on the hedged loans is paid.
There is no hedging ineffectiveness nor are net gains or losses excluded from
the assessment of hedge effectiveness for the year ended March 31, 2002 as the
critical terms of the interest rate swap match the terms of the hedged debt
obligations. Ricoh expects that it will reclassify into earnings through other
(income) expenses during the next 12 months approximately 18 million yen
($135 thousand) of the balance of accumulated other comprehensive loss as of
March 31, 2002.
Derivative instruments not designated as hedging instruments are held to
reduce the risk relating to the variability in exchange rates on assets and
liabilities denominated in foreign currencies. Changes in the fair value of
these instruments are included in other (income) expenses on the consolidated
statement of income.
All derivative instruments are exposed to credit risk arising from the
inability of counterparties to meet the terms of the derivative contracts.
However, Ricoh do not expect any counterparties to fail to meet their
obligations because these counterparties are financial institutions with high
credit ratings. Ricoh utilizes numerous counterparties to minimize the
concentration of credit risk.
16. COMMITMENTS AND CONTINGENT LIABILITIES
As of March 31, 2002, Ricoh had outstanding contractual commitments for
acquisition or construction of plant, equipment and other assets aggregating
706 million yen ($5,308 thousand).
Ricoh was contingently liable for discounted trade notes receivable on a
full recourse basis with banks of 98 million yen ($737 thousand) as of March 31,
2002. As of March 31, 2002, Ricoh was also contingently liable as guarantor for
employees' housing loans of 640 million yen ($4,812 thousand).
F-31
Ricoh made rental payments totaling 43,797 million yen, 39,956 million yen
and 46,426 million yen ($349,068 thousand) for the years ended March 31, 2000,
2001 and 2002, respectively, under operating lease agreements for office space
and machinery and equipment, which are primarily cancelable and renewable.
As of March 31, 2002, the Company and certain of its subsidiaries were
parties to litigation involving routine matters, such as patent rights. In the
opinion of management, the ultimate liability, if any, resulting from such
litigations will not materially affect the consolidated financial position or
the results of operations of Ricoh.
17. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
(A) CASH AND CASH EQUIVALENTS, TIME DEPOSITS, TRADE RECEIVABLES, SHORT-TERM
BORROWINGS, CURRENT MATURITIES OF LONG-TERM INDEBTEDNESS, TRADE PAYABLES
AND ACCRUED EXPENSES
The carrying amounts approximate fair values because of the short
maturities of these instruments.
(B) MARKETABLE SECURITIES AND INVESTMENT SECURITIES
The fair value of the marketable securities and investment securities is
principally based on quoted market price.
(C) LONG-TERM INDEBTEDNESS
The fair value of each of the long-term indebtedness instruments is based
on the quoted price in the most active market or the present value of future
cash flows associated with each instrument discounted using the current
borrowing rate for similar instruments of comparable maturity.
(D) INTEREST RATE SWAP AGREEMENTS
The fair value of interest rate swap agreements is estimated by obtaining
quotes from brokers.
(E) FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY OPTIONS
The fair value of foreign currency contracts and foreign currency options
used for hedging purposes is estimated by obtaining quotes from brokers.
The estimated fair value of the financial instruments as of March 31, 2001
and 2002 is summarized as follows:
Millions of Yen Thousands of U.S. Dollars
------------------------------------------- --------------------------
2001 2002 2002
--------------------- --------------------- --------------------------
Carrying Estimated Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Amount Fair Value
- -----------------------------------------------------------------------------------------------------
Marketable securities and
Investment securities 111,289 111,289 79,485 79,485 $ 597,632 $ 597,632
Long-term indebtedness (217,743) (252,964) (332,995) (337,670) (2,503,722) (2,538,872)
Interest rate swap
agreements, net 189 4,480 4,081 4,081 30,684 30,684
Foreign currency contracts,
net (386) (3,068) (8,304) (8,304) (62,436) (62,436)
Foreign currency options, net - (292) (314) (314) (2,361) (2,361)
=====================================================================================================
F-32
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
18. SEGMENT INFORMATION
The operating segments presented below are the segments of Ricoh for which
separate financial information is available and for which income before income
taxes is evaluated regularly by Ricoh's management in deciding how to allocate
resources and in assessing performance. The accounting policies of the segments
are substantially the same as those described in the summary of significant
accounting policies, as discussed in Note 2.
Ricoh's operating segments are comprised of office equipment, including
copiers and related supplies, communications and information systems, and
others, including optical equipment and electronic devices.
The following tables present certain information regarding Ricoh's
operating segments and operations by geographic areas as of March 31, 2000, 2001
and 2002 and for the periods then ended.
(A) OPERATING SEGMENT INFORMATION
Thousands of
Millions of Yen U.S. Dollars
---------------------------------- ------------
2000 2001 2002 2002
- ----------------------------------------------------------------------------------------
Sales-
Office equipment 1,253,070 1,338,374 1,485,389 $11,168,339
Other 197,490 205,095 190,815 1,434,699
Intersegment transaction (3,403) (5,207) (3,864) (29,053)
- ----------------------------------------------------------------------------------------
Consolidated 1,447,157 1,538,262 1,672,340 $12,573,985
========================================================================================
Operating Expenses-
Office equipment 1,124,675 1,195,834 1,304,079 $ 9,805,106
Other 191,447 191,909 187,424 1,409,203
Intersegment transaction (3,410) (5,218) (3,893) (29,271)
Unallocated expense 45,524 50,632 55,035 413,797
- ----------------------------------------------------------------------------------------
Consolidated 1,358,236 1,433,157 1,542,645 $11,598,835
========================================================================================
Operating Income-
Office equipment 128,395 142,540 181,310 $ 1,363,233
Other 6,043 13,186 3,391 25,496
Elimination (45,517) (50,621) (55,006) (413,579)
- ----------------------------------------------------------------------------------------
Consolidated 88,921 105,105 129,695 $ 975,150
========================================================================================
Other Expenses (18,528) (7,340) (15,745) $ (118,383)
- ----------------------------------------------------------------------------------------
Income before Income Taxes, Minority
Interests and Equity in Earnings
of Affiliates 70,393 97,765 113,950 $ 856,767
========================================================================================
F-33
Thousands of
Millions of Yen U.S. Dollars
---------------------------------- ------------
2000 2001 2002 2002
- ----------------------------------------------------------------------------------------
Total Assets-
Office equipment 965,316 1,179,499 1,219,723 $ 9,170,850
Other 161,017 180,164 185,158 1,392,166
Elimination (7,509) (9,116) (6,991) (52,564)
Corporate assets 424,496 354,244 435,038 3,270,962
- ----------------------------------------------------------------------------------------
Consolidated 1,543,320 1,704,791 1,832,928 $13,781,414
========================================================================================
Expenditure for segment assets-
Office equipment 51,817 61,836 68,513 $ 515,135
Other 5,561 10,235 5,633 42,353
Corporate assets 978 1,258 1,530 11,504
- ----------------------------------------------------------------------------------------
Consolidated 58,356 73,329 75,676 $ 568,992
========================================================================================
Depreciation-
Office equipment 54,046 52,908 64,426 $ 484,406
Other 6,838 7,598 7,448 56,000
Corporate assets 1,062 1,636 1,908 14,346
- ----------------------------------------------------------------------------------------
Consolidated 61,946 62,142 73,782 $ 554,752
========================================================================================
Intersegment sales are not separated by operating segment because they are
immaterial.
(B) GEOGRAPHIC INFORMATION
Sales which are attributed to countries based on location of customers and
long-lived assets for the years ended March 31, 2000, 2001 and 2002 are as
follows:
Thousands of
Millions of Yen U.S. Dollars
--------------------------------- ------------
2000 2001 2002 2002
- ----------------------------------------------------------------------------------------
Sales-
Japan 873,170 930,433 902,655 $ 6,786,880
The Americas 231,181 252,698 341,747 2,569,526
Europe 258,515 247,449 311,312 2,340,692
Other 84,291 107,682 116,626 876,887
- ----------------------------------------------------------------------------------------
Consolidated 1,447,157 1,538,262 1,672,340 $12,573,985
========================================================================================
Long-Lived Assets-
Japan 227,980 244,506 257,752 $ 1,937,985
The Americas 27,490 70,809 77,269 580,970
Europe 22,459 37,557 38,320 288,120
Other 11,181 12,694 12,897 96,970
- ----------------------------------------------------------------------------------------
Consolidated 289,110 365,566 386,238 $ 2,904,045
========================================================================================
(C) ADDITIONAL INFORMATION
The following information shows net sales and operating income recognized
by geographic origin for the years ended March 31, 2000, 2001 and 2002. In
addition to the disclosure requirements under SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information", Ricoh discloses this
information as supplemental information in light of the disclosure requirements
of the Japanese Securities and Exchange Law, which a Japanese public company is
subject to.
F-34
Thousands of
Millions of yen U.S. Dollars
---------------------------------- --------------
2000 2001 2002 2002
- ----------------------------------------------------------------------------------------
Sales-
Japan
External customers 885,998 954,125 938,946 $ 7,059,744
Intersegment 259,792 279,802 309,745 2,328,910
- ----------------------------------------------------------------------------------------
Total 1,145,790 1,233,927 1,248,691 9,388,654
========================================================================================
The Americas
External customers 230,496 252,029 338,016 2,541,474
Intersegment 5,988 4,470 8,937 67,195
- ----------------------------------------------------------------------------------------
Total 236,484 256,499 346,953 2,608,669
========================================================================================
Europe
External customers 265,621 254,548 309,086 2,323,955
Intersegment 3,355 3,246 4,265 32,068
- ----------------------------------------------------------------------------------------
Total 268,976 257,794 313,351 2,356,023
========================================================================================
Other
External customers 65,042 77,560 86,292 648,812
Intersegment 36,026 39,571 60,655 456,053
- ----------------------------------------------------------------------------------------
Total 101,068 117,131 146,947 1,104,865
========================================================================================
Elimination of intersegment sales (305,161) (327,089) (383,602) (2,884,226)
- ----------------------------------------------------------------------------------------
Consolidated 1,447,157 1,538,262 1,672,340 $12,573,985
========================================================================================
Operating Expenses-
Japan 1,083,227 1,150,353 1,142,522 $ 8,590,391
The Americas 226,210 247,521 335,521 2,522,714
Europe 255,698 246,498 301,152 2,264,301
Other 95,802 110,937 139,874 1,051,684
- ----------------------------------------------------------------------------------------
Elimination of intersegment sales (302,701) (322,152) (376,424) (2,830,255)
- ----------------------------------------------------------------------------------------
Consolidated 1,358,236 1,433,157 1,542,645 $11,598,835
========================================================================================
Operating Income-
Japan 62,563 83,574 106,169 $ 798,263
The Americas 10,274 8,978 11,432 85,955
Europe 13,278 11,296 12,199 91,722
Other 5,266 6,194 7,073 53,180
- ----------------------------------------------------------------------------------------
Elimination of intersegment profit (2,460) (4,937) (7,178) (53,970)
- ----------------------------------------------------------------------------------------
Consolidated 88,921 105,105 129,695 $ 975,150
========================================================================================
Other Expenses (18,528) (7,340) (15,745) $ (118,383)
========================================================================================
Income before Income Taxes, Minority
Interests and Equity in Earnings
of Affiliates 70,393 97,765 113,950 $ 856,767
========================================================================================
Total Assets-
Japan 956,670 1,042,557 1,084,387 $ 8,153,286
The Americas 93,191 209,638 228,743 1,719,872
Europe 120,587 163,542 172,408 1,296,301
Other 52,791 63,438 61,549 462,775
Elimination (104,415) (128,628) (149,197) (1,121,782)
Corporate assets 424,496 354,244 435,038 3,270,962
- ----------------------------------------------------------------------------------------
Consolidated 1,543,320 1,704,791 1,832,928 $13,781,414
========================================================================================
F-35
Corporate assets consist primarily of cash and cash equivalents and
marketable securities maintained for general corporate purposes.
Intersegment sales between geographic areas are made at cost plus profit.
Operating income by geographic area is sales less expense related to the area's
operating revenue.
No single customer accounted for 10% or more of the total revenues for the
periods ended as of March 31, 2000, 2001 and 2002.
19. RESEARCH AND DEVELOPMENT EXPENSES AND ADVERTISING COSTS
The following amounts were charged to costs and expenses for the years
ended March 31, 2000, 2001 and 2002:
Thousands of
Millions of Yen U.S. Dollars
------------------------------- --------------
2000 2001 2002 2002
========================================================================================
Research and development costs 66,524 78,239 80,799 $607,511
Advertising costs 16,081 18,592 16,868 126,827
========================================================================================
F-36
Ricoh Company, Ltd. and Consolidated Subsidiaries
SCHEDULE II. - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Three Years Ended March 31, 2002
(Millions of Yen)
Additions
-----------------------
Balance at Charged to Charged to Deduction Balance at
beginning costs and other from Translation end of
Description of period expenses accounts reserves(2) adjustment period
- -------------------------------------------------------------------------------------------------------------
For the year ended March 31,
2000:
Allowance for doubtful
receivables-
Trade receivables 13,887 1,384 580 2,902 (1,232) 11,717
Finance receivables 12,588 2,759 150 2,959 (20) 12,518
Deferred tax asset valuation
allowance(1) 8,271 943 - 764 (293) 8,157
For the year ended March 31,
2001:
Allowance for doubtful
receivables-
Trade receivables 11,717 5,259 2,381 3,411 1,097 17,043
Finance receivables 12,518 3,969 (912) 3,039 68 12,604
Deferred tax asset valuation
allowance(1) 8,157 533 2,139 3,071 645 8,403
For the year ended March 31,
2002:
Allowance for doubtful
receivables-
Trade receivables 17,043 2,706 28 1,793 959 18,943
Finance receivables 12,604 4,223 - 3,325 69 13,571
Deferred tax asset valuation
allowance(1) 8,403 2,369 1,154 1,444 818 11,300
=============================================================================================================
Notes:
(1) See Note 2 to Consolidated Financial Statements.
(2) Write-offs or payments.
Amounts recorded in separate accounts to recognize obsolete and slow-moving
inventory are not considered reserves for the purpose of this schedule since
such amounts in substance represent normal adjustments of inventory to net
realizable value rather than true reserves.
F-37