Kyocera 6-K 2005
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of July 2005
Commission File Number: 1-07952
6 Takeda Tobadono-cho, Fushimi-ku,
Kyoto 612-8501, Japan
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F X Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b); 82-
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
Date: July 28, 2005
Information furnished on this form:
for the Three Months Ended June 30, 2005
1. The basic items on preparation for consolidated results for the three months ended June 30, 2005 :
(1) The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.
(2) Change in accounting policies : None
(3) Changes in scope of consolidation and application of the equity method :
2. Consolidated financial information for the three months ended June 30, 2005 :
(1) Consolidated results of operations :
(2) Consolidated financial condition :
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3. Consolidated financial forecast for the year ending March 31, 2006 :
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Consolidated Financial Highlights (Unaudited)
Results for the Three Months Ended June 30, 2005
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Business Results, Financial Condition and Prospects
1. Business Results for the Three Months Ended June 30, 2005
(1) Economic Situation and Business Environment
The Japanese economy only showed a slight recovery during the three months ended June 30, 2005 (the first quarter) despite increasing personal consumption and expanding capital investment in the private sector. The U.S. and Asian economies continued to grow steadily while the European economy stagnated.
In the electronics industry, as a result of moderate rebound of production activities, which had slowed since last summer, demand on components used in this industry has also recovered in the first quarter. Nonetheless, demand on components for digital consumer equipment in the first quarter has not caught up with the buoyant levels of the three months ended June 30, 2004 (the previous first quarter). In addition, prices of components in the first quarter have fallen significantly compared with the previous first quarter.
(2) Consolidated Financial Results
Due to the above business environment, consolidated net sales and profits in the first quarter decreased compared with the previous first quarter.
The yen appreciated 2 yen against the U.S. dollar and depreciated 4 yen against the Euro compared with the average exchange rates in the previous first quarter. The effects of the rising yen against the dollar outweighed the positive impact of the weak yen against the Euro. Accordingly, net sales after translation into yen were pushed down by approximately ¥400 million compared with the previous first quarter. Conversely, the positive effects of the weak yen against the Euro compensated for the strong yen against the dollar, and as a result, income before income taxes after translation into yen had a positive impact of approximately ¥500 million.
(3) Determined management initiatives during the first quarter
1) On May 5, 2005 (Japan Time), Kyocera decided to outsource the manufacture of mobile phone handsets of Kyocera Wireless Corp. (KWC), a U.S. subsidiary, and to sell KWCs manufacturing equipment and inventories to Flextronics International Ltd. (Flextronics), a leading provider of electronics manufacturing services. KWC intends to reduce its manufacturing costs significantly and to improve its profitability rapidly by taking cost-down activities upon its procurements of parts and materials through a strong promotion of the outsourcing to Flextronics, and by making fixed costs related to the manufacturing of mobile phone handsets into variable costs. KWC will also enhance its business operation through specializing in research, development, sales and marketing of mobile phone handsets.
2) Since June 1, 2005, Kyocera implemented a new executive officer system to enhance Kyocera Groups management organization under a global consolidation system, and accordingly, appointed a Chief Executive Officer (CEO), a Chief Financial Officer (CFO) and a Chief Operating Officer (COO). The CEO will take responsibility for mid and long-term Group management policy and strategy formulation and execution, while the CFO will be responsible for constructing and executing a financial strategy for the Group that ensures the effective implementation of these management strategies. The COO will be in charge of daily management issues and business execution to achieve yearly management plans. At the same time, Kyocera also introduced a new corporate business group system, headed by newly appointed executive officers. These business group leaders will be responsible for each product line on a global basis.
(4) Consolidated Results by Reporting Segments
Kyocera had previously classified its operations into four reporting segments: Fine Ceramics Group, Electronic Device Group, Equipment Group and Others. Kyocera changed its segmentation to make clarify the nature of each operations and to make its management structure more efficiently. Kyocera currently has the following eight reporting segments: Fine Ceramic Parts Group, Semiconductor Parts Group, Applied Ceramic Products Group, Electronic Device Group, Telecommunications Equipment Group, Information Equipment Group, Optical Equipment Group and Others. Consolidated results for the three months ended June 30, 2004 have been reclassified accordingly. Current Applied Ceramic Products Group was previously known as Consumer-Related Products. Current Optical Equipment Group was previously known as Optical Instruments.
With regard to the components business in the first quarter, Applied Ceramic Products Group, which includes solar energy products and cutting tools, posted an increase in sales and profits compared with the previous first quarter. However, sales in Semiconductor Parts Group and Electronic Device Group decreased due to declines in demand on components for digital consumer products such as mobile phone handsets coupled with the negative effect of decline in prices of such components. As a result, overall sales and operating profit of the components business decreased compared with the previous first quarter.
In the equipment business, although Information Equipment Group posted higher sales compared with the previous first quarter, Telecommunications Equipment Group and Optical Equipment Group registered declines in sales. Operating profit in the equipment business also declined due to lower performances from Telecommunications Equipment Group and Information Equipment Group.
Kyoceras consolidated results by reporting segment are as follows.
1) Fine Ceramic Parts Group
Despite the semiconductor fabrication equipment market had shown a strong growth in the previous first quarter, it entered a downturn since last summer, and as a result, demand of ceramic parts for semiconductor fabrication equipment continued to be slow in the first quarter. Sapphire products for LCD projectors were negatively impacted by a decline in unit prices caused by intensifying market competition. Sales and operating profit in this segment decreased compared with the previous first quarter.
2) Semiconductor Parts Group
A slowdown in the digital consumer products market, notably mobile phone handsets, coupled with declining revenues in the ceramic package business, led to lower sales and operating profit in this segment compared with the previous first quarter. Nonetheless, in the organic package business, demand of packages and substrates for servers and portable music players grew steadily.
3) Applied Ceramic Products Group
Rising awareness towards the environment has driven increased demand for solar energy products, particularly in Europe, while robust production activities in the automotive industry has spurred increased sales of cutting tools. As a result, both sales and operating profit in this segment increased compared with the previous first quarter.
4) Electronic Device Group
Despite growth in sales of thin-film products such as thermal printheads, sales of capacitors and timing devices for digital consumer products as well as connectors slumped. A Decline in sales volume together with decline in prices of components led to lower operating profit in this segment compared with the previous first quarter.
5) Telecommunications Equipment Group
Sales and operating profit in this segment dipped below levels recorded in the previous first quarter. In the mobile phone business, KWC is now under a promotion of structural reforms and its sales of existing products declined, however, sales in the Japanese market increased reflecting contributions from new products. In the PHS-related business, Kyocera posted increased sales of PHS handsets to WILLCOM, Inc., which has already introduced new services such as fixed voice charges in Japan. Despite this, sales of PHS handsets and base stations for the Chinese market decreased materially.
6) Information Equipment Group
Sales in this segment increased compared with the previous first quarter as Kyocera enjoyed steady growth in sales of page printers and digital multifunctional products in Europe. Operating profit declined, however, due to the impact of a decline in price of units and increasing development costs for the new products, notably for color models scheduled for release in the second half of the year ended March 31, 2006.
7) Optical Equipment Group
Sales in this segment decreased while operating loss reduced compared with the previous first quarter owing to the downsizing of the camera business.
Kyocera Communication Systems Co., Ltd. (KCCS) posted solid growth from its telecommunications engineering business, and sales of a subsidiary, which was newly consolidated Kyocera Group during the previous fiscal year, were included from the start of this fiscal year. Consequently, sales in this segment increased. Operating profit in this segment decreased compared with the previous first quarter due to a decline in sales at Kyocera Chemical Corporation.
(5) Consolidated Orders and Production by Reporting Segment
(6) Geographic Segments (Sales by region)
Sales of the components business decreased due to declining demand for digital consumer equipment together with decline in the components price. New mobile phone handsets and PHS handsets, however, contributed to increased sales steadily as well as an increase in sales at KCCS. As a result, net sales in Japan increased compared with the previous first quarter.
2) United States of America
Net sales decreased compared with the previous first quarter due to decreased sales of mobile phone handsets, while sales of information equipment grew.
3) Asia (excluding Japan)
Net sales decreased compared with the previous first quarter due to decreased sales of components for digital consumer equipment as well as decreased sales of PHS handsets and base stations.
Although sales of camera products decreased due to structural reform, sales growth for solar energy products outweighed significantly. As a result, net sales increased compared with the previous first quarter.
Net sales decreased compared with the previous first quarter due mainly to decreased sales of mobile phone handsets in Canada and South and Central America.
2. Cash Flows
Cash and cash equivalents at June 30, 2005 decreased by ¥16,913 million to ¥293,679 million compared with those at March 31, 2005.
1) Cash Flows from Operating Activities
Net cash provided by operating activities in the first quarter increased by ¥17,695 million to ¥44,507 million from the previous first quarter of ¥26,812 million. Although net income decreased and a payment of income taxes increased, collections of receivables and reductions of inventories contributed to an increase in net cash.
2) Cash Flows from Investing Activities
Net cash used by investing activities in the first quarter decreased by ¥62,317 million to ¥51,894 million from the previous first quarter of ¥114,211 million. This was due mainly to decreases in purchases of the government bonds and negotiable certificate of deposits.
3) Cash Flows from Financing Activities
Net cash used in financing activities in the first quarter increased by ¥3,449 million to ¥11,025 million from the previous first quarter of ¥7,576 million. This reflected an increase in cash dividend due to a change in period-end divided per share for the year ended March 31, 2005 from ¥30 to ¥50.
3. Consolidated Business Forecast for the Year Ending March 31, 2006
(1) Consolidated Financial Forecast for the Year Ending March 31, 2006
Although Kyocera changed its forecast of average exchange rates for the year ending March 31, 2006 (fiscal 2006), it has not changed its forecast of sales and profits for fiscal 2006 because an impact of change in the forecast of average exchange rates is not considered to be material.
Kyoceras consolidated forecasts for fiscal 2006 are as follows.
Note: The forecast of earnings per share announced on July 28, 2005 is computed based on the diluted average number of shares outstanding during the three months ended June 30, 2005.
There are no changes in the forecast by each reporting segment for the fiscal 2006 from the original forecast as of April 27, 2005. Forecast by each reporting segment are as follows.
(2) Management Challenges for the Second Quarter Onward
In the electronics equipment market, production activities for digital consumer products such as mobile phone handsets, computer equipment and digital home appliances are expected to expand from the second quarter and increase markedly in the second half of fiscal 2006. It is anticipated that this will drive a full-scale recovery in component demand in the second half.
Amid such a market outlook, Kyocera will continue to promote its group-wide strategy of high-value-added diversification as a means to boosting profitability.
In the components business, Kyocera will make significant investments to create a new ultra-streamlined production system in Japan and expand production capacity, as well as launch new businesses. Specifically, Kyocera will further expand the solar energy business to cater for growing worldwide demand through a quadripartite production framework in Japan, China, Mexico and the Czech Republic. Other efforts will be focused on boosting sales of ceramic packages and organic packages for mobile phone handsets, digital cameras and flat-screen TVs. Kyocera will also make the most of its new factory in Ayabe City, Kyoto, with the mass-production of organic packages for next-generation MPUs that will be installed in digital consumer products.
In the equipment business, Kyocera will look to exploit the positive effects of structural reforms, and in particular, work to swiftly raise profitability in the mobile phone handsets business. Kyocera will also strive to further expand Telecommunications Equipment Group by expanding sales of PHS-related products in Japan and by cultivating new markets overseas.
Note: Forward-Looking Statements
Certain of the statements made in this document are forward-looking statements (within the meaning of Section 21E of the U.S. Securities and Exchange Act of 1934), which are based on our current assumptions and beliefs in light of the information currently available to us. These forward-looking statements involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors include, but are not limited to: general economic conditions in our markets, which are primarily Japan, North America, Europe, and Asia, including in particular China; changes in exchange rates, particularly between the yen and the U.S. dollar and euro, respectively, in which we make significant sales; our ability to launch innovative products and otherwise meet the advancing technical requirements of our customers, particularly in the highly competitive markets for ceramics, semiconductor parts and electronic components; and the extent and pace of future growth or contraction in information technology-related markets around the world, including those for communications and personal computers; events that may impact negatively on our markets or supply chain, including terrorist acts and outbreaks of diseases; and the occurrence of natural disasters, such as earthquakes, in locations where our manufacturing and other key business facilities are located. Such risks, uncertainties and other factors may cause our actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements included in this document.
CONSOLIDATED BALANCE SHEETS
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CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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SEGMENT INFORMATION (Unaudited)
1. Operating segments :
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2. Geographic segments (Sales and operating profit by geographic area) :
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3. Geographic segments (Sales by region) :
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