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Kyocera 6-K 2005
Form 6-K
Table of Contents

FORM 6-K

 

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 April 2005

 

Commission File Number: 1-07952

 

KYOCERA CORPORATION

 

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-


Table of Contents

SIGNATURE

 

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.

 

KYOCERA CORPORATION

/s/ AKIHIKO TOYOTANI


Akihiko Toyotani
General Manager of

Finance Division

Kyocera Corporation

 

Date: April 27, 2005


Table of Contents

Information furnished on this form:

 

EXHIBITS

 

Exhibit
Number


   
1.   Consolidated and Non-consolidated Financial Results for the Year Ended March 31, 2005
2.   Changes in Directors, Corporate Auditors and Executive Officers
3.   Notice relating to Stock Options (Stock Acquisition Rights)


Table of Contents
LOGO  

April 27, 2005

KYOCERA CORPORATION

 

Consolidated Financial Highlights

Result for the Year Ended March 31, 2005

 

     (Yen in millions, except per share
amounts and exchange rates)


 
     Years Ended March 31,

   Increase or
Decrease
(%)


 
     2005

   2004

  

Net sales

   1,180,655    1,140,814    3.5  

Profit from operations

   100,968    108,962    (7.3 )

Income before income taxes

   107,530    115,040    (6.5 )

Net income

   45,908    68,086    (32.6 )

Average exchange rates :

                

US$

   108    113     

Euro

   135    133     

Earnings per share :

                

Basic

   244.86    364.79     

Diluted

   244.81    364.78     

Capital expenditures

   63,176    54,937    15.0  

Depreciation

   58,790    60,861    (3.4 )

R&D expenses

   54,398    46,630    16.7  

Sales of products manufactured outside Japan to net sales (%)

   31.8    33.8     

 

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Table of Contents

Kyocera Corporation and its Consolidated Subsidiaries

 

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.

 

Date of the board of directors’ meeting for the consolidated result for the year : April 27, 2005

 

1. Results for the year ended March 31, 2005 :

 

(1) Consolidated results of operations :

 

     Years ended March 31,

     2005

   2004

Net sales

   ¥1,180,655 million    ¥1,140,814 million

% change from the previous year

   3.5%    6.6%

Profit from operations

   100,968 million    108,962 million

% change from the previous year

   (7.3)%    30.7%

Income before income taxes

   107,530 million    115,040 million

% change from the previous year

   (6.5)%    51.3%

Net income

   45,908 million    68,086 million

% change from the previous year

   (32.6)%    65.4%
    
  

Earnings per share :

         

Basic

   ¥244.86    ¥364.79

Diluted

   244.81    364.78
    
  

Return on equity

   3.9%    6.3%

Income before income taxes to total assets

   6.1%    6.7%

Income before income taxes to net sales

   9.1%    10.1%
    
  

 

Notes :

    

1. Equity in (losses) earnings of affiliates and unconsolidated subsidiaries :

    

Year ended March 31, 2005 :

   ¥(1,678) million

Year ended March 31, 2004 :

   ¥2,575 million

2. Weighted average number of shares outstanding during the year :

    

Year ended March 31, 2005 :

   187,488,658 shares

Year ended March 31, 2004 :

   186,642,680 shares

3. Change in accounting policies : None

    

 

(2) Consolidated financial position :

 

     March 31,

     2005

   2004

Total assets

   ¥1,745,519 million    ¥1,794,758 million

Stockholders’ equity

   1,174,851 million    1,150,453 million

Stockholders’ equity to total assets

   67.3%    64.1%

Stockholders’ equity per share

   ¥6,266.50    ¥6,136.26

 

Note : Total number of shares outstanding as of :

 

March 31, 2005    187,481,084 shares
March 31, 2004    187,484,253 shares

 

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Table of Contents

(3) Consolidated cash flows :

 

     Years ended March 31,

     2005

   2004

Cash flows from operating activities

   ¥ 145,523 million    ¥ 62,575 million

Cash flows from investing activities

     (132,494) million      29,581 million

Cash flows from financing activities

     (67,344) million      (20,422) million

Cash and cash equivalents at end of year

     310,592 million      361,132 million

 

(4) Scope of consolidation and application of the equity method :

 

    Number of consolidated subsidiaries : 165

 

    Number of non-consolidated subsidiaries accounted for by the equity method: 2

 

    Number of affiliates accounted for by the equity method : 14

 

(5) Changes in scope of consolidation and application of the equity method :

 

     Consolidation

   Equity
method


Increase

   8    2

Decrease

   2    2

 

2. Forecast for the year ending March 31, 2006 :

 

     Year ending March 31, 2006

Net sales

   ¥1,240,000 million

Income before income taxes

   135,000 million

Net income

   81,000 million

 

Note:

Forecast of earnings per share : ¥431.94

 

Net income per share amounts is computed based on Statement of Financial Accounting Standards No.128.

Forecast of earnings per share is computed based on the diluted average number of shares outstanding during the year ended March 31, 2005.

 

With regard to forecasts set forth above, please refer to the accompanying “Forward Looking Statements” on page 18.

 

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Table of Contents

KYOCERA GROUP

 

Kyocera group consists of Kyocera Corporation, 167 subsidiaries and 14 affiliates.

 

(Chart of the group companies)

 

LOGO

 

Note : Others include affiliates that are accounted for by the equity method.

 

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Table of Contents

Management Policies

 

1. Management Goal and Strategies

 

    Kyocera Corporation and its consolidated subsidiaries (Kyocera) strive to be a “creative company that continues to grow in 21st century.” To achieve this goal, Kyocera promotes “high-value-added” diversification in three high growth potential areas – telecommunications and information processing, environmental protection, and quality of life — in accordance with the following criteria and management system.

 

  ü Criteria

“Value added business” is defined as a business generating pre-tax profit ratio of 15% or more. Whether or not to remain in a field is based on a judgment of the existence of an evident need in the relevant markets and the possibility of serving that market need from the current or future attainable technologies.

 

  ü Management System

Kyocera’s unique management system allows it to make accurate and swift assessments of individual business conditions to facilitate timely decision-making and maximize synergies among businesses.

 

    By promoting the development of business diversification, Kyocera aims to drive stable and continuous corporate growth in a rapidly changing business environment.

 

    The most important management resource for successful business diversification is technological prowess. Based on this conviction, Kyocera strives to expand and diversify applications through advancement and specialization of its technical expertise, thereby promptly responding to the variety of market needs brought about by rapid changes in society. Kyocera also views sales competency and brand awareness as vital management resources for business expansion, and constantly works to strengthen these elements.

 

    Kyocera will maintain a sound financial position to enable to pursue new business development and market creation.

 

2. Specific Policies

 

  1) Efficient Resource Management

    Kyocera will concentrate management resources into “value added” fields and its candidates. With the objective of outstripping the competition and becoming leader in each business area, Kyocera will create new markets and technologies through the integration of Group resources, including technical and sales competencies, while utilizing external management resources when it is necessary.

 

    Authorization of decision-making on planning, execution and control of the business is delegated to each Corporate Business Group to act as an independent company, in order to speed up management decision-making processes.

 

    A prime emphasis is placed on cash flows, in particular, boosting returns on capital investment, improving inventory control and shortening lead-times.

 

  2) Emphasizing Consolidated Group Results

    Kyocera will increase its profitability of each operating segment on a consolidated basis by strengthening ties between Kyocera Group companies and each Corporate Business Group of Kyocera Corporation, and by maximizing synergies.

 

    Kyocera will employ a global strategy in each business and optimize R&D, production and sales structures.

 

    Kyocera will appoint a Chief Executive Officer, a Chief Financial Officer and a Chief Operating Officer to enhance Kyocera Group’s management organization under its global consolidation system that will become effective as from June 1, 2005.

 

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Table of Contents

  3) Focusing on Stockholder Value

    In order to increase stockholder value (market capitalization), Kyocera seeks to generate a higher return on investment to maximize future profits and cash flows.

 

    A stock option plan will be extended to senior managers within Kyocera to further increase value by ensuring their interests in agreement with stockholders and investors.

 

3. Basic Profit Distribution Policy

    Since the listing of its shares, Kyocera has endeavored to increase dividends per share in line with improvements in performance. Kyocera has also boosted dividends by actively undertaking free share distributions and stock splits.

 

    Historically, Kyocera has set dividend amounts with the goal of maintaining stable payment of dividends. In the interest of shareholders, however, Kyocera has decided, commencing with the year end dividend relating to the year ended March 31, 2005 (fiscal 2005), to change this policy to establish a greater linkage between dividend amounts and the Group’s performance. In particular, Kyocera will determine dividend amounts based on an overall assessment that will take into consideration capital expenditures necessary for the further development of Kyocera from a medium to long-term perspective, while also aiming for a payout ratio of approximately 20 to 25% on a consolidated basis.

 

    Kyocera’s goal of constantly enhancing profitability will ensure greater returns for stockholders to meet their expectations. In order to be a “creative company that continues to grow in the 21st century”, Kyocera will strive at the same time to be a market leader in the three strategic areas of “telecommunications and information processing”, “environmental protection” and “quality of life”. To realize this goal, Kyocera will aggressively strive to cultivate new businesses and markets and to develop new technologies, acquiring external management resources when necessary. Kyocera will maintain a healthy and stable financial position and therefore, internal reserves shall be utilized for this purpose.

 

4. Policy Encouraging Individual Share Ownership

    In February 1997, to make share transactions easier for individuals, Kyocera Corporation revised the number of shares in a minimum trading unit, reducing it from 1,000 to 100 shares. These efforts have proven highly rewarding as the number of stockholders in Kyocera Corporation continues to rise. At present, Kyocera Corporation has secured sufficient liquidity in its shares and so has no further plans to reduce the size of trading units.

 

5. Challenges

    Kyocera aims to be a “creative company that continues to grow in the 21st century” and promotes “high-value-added diversification” as its core management strategy to achieve this. The management initiatives implemented in past years, coupled with new, structural reforms to be undertaken in fiscal 2006, are expected to lead to improved corporate performance. Kyocera accordingly seeks to attain a consolidated pre-tax profit ratio of 10% or higher in fiscal 2006. By making the components and equipment businesses at Kyocera highly profitable, Kyocera would like to achieve the target of a pre-tax profit ratio of over 15% in the medium to long term. Specific business developments aimed at accomplishing the aforementioned goals are as follows.

 

  1) Enhance Profitability of Equipment Group

Kyocera intends to improve performance in the telecommunications equipment business and optical instruments business that was sluggish in the fiscal year ended March 31, 2005 (fiscal 2005). In the mobile phone handset business, Kyocera will implement additional structural reforms at Kyocera Wireless Corp. (KWC) to improve its profitability. With regard to PHS-related products, Kyocera will strive for business expansion through the introduction of next-generation base stations and handsets in line with the commencement of new high-speed data communication services in Japan. In addition to creating new markets and launching more cost-competitive products overseas, Kyocera will also strive to capture new customers for its high-speed wireless internet systems. Kyocera seeks to boost profitability in the optical instruments business by maximizing the positive effects of structural reforms executed in fiscal 2005. Other initiatives aimed at improving profitability in this business include expanding the business for optical components, especially optical modules for mobile phones, and increasing productivity at production sites in China.

 

  2) Enhance Profitability of Components Business

    Kyocera will aggressively pursue improvements in productivity through production process reforms implemented up until now. In fiscal 2006, Kyocera will promote to strengthen and entrench business basis that will drive future business development. Specifically, investment will be strategically and aggressively channeled into businesses focused on solar energy products, ceramic components for semiconductor and LCD fabrication equipment, organic packages and cutting tools to further improve profitability.

 

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Table of Contents

6. Corporate Governance Guidelines and Policy Implementation

 

  1) Basic Guidelines concerning Corporate Governance
    Kyocera’s corporate governance is designed to ensure extremely sound, transparent and effective management and thereby best protect the interests of stockholders. No discussion of corporate governance at Kyocera would be complete without first looking at the “Kyocera Philosophy,” which provides both the moral and intellectual backbone for Kyocera’s management style.

 

    The “Kyocera Philosophy” was created by Kyocera’s founder, as he codified his views on the subject of business management. He was convinced that one of the most important points for the management of the company was that the “Kyocera Philosophy” should apply to the actions of all who work for the enterprise—directors, managers and employees alike. The “Kyocera Philosophy” embodies many principles, covering subjects ranging from the fundamentals of business management to the specifics of day-to-day operations. Its principles demand impartial, fair and totally transparent management, while emphasizing the importance of maximizing profits by eliminating waste, minimizing expenses and maximizing revenues. The “Kyocera Philosophy” demands particularly high standards of ethical behavior from all leaders within the company. Managers are never allowed to put their personal interests ahead of the company’s interests. From the beginning, Kyocera has been guided by principles that have naturally worked toward achieving the corporate governance goals mentioned above.

 

    Kyocera’s management believes that the standards and criteria applied by all members of the enterprise hold the key to achieving the aims of corporate governance. At its core, the “Kyocera Philosophy” exhorts workers to use the criterion of what they judge “the right thing to do as human being” as the basis for guiding all actions and decisions. Because of their universal nature, the principles of the “Kyocera Philosophy” are as applicable to Kyocera’s worldwide operations as they are to any other business.

 

    During fiscal 2005, Kyocera managers and employees in Japan attended an aggregated total of 49,998 training and education sessions designed to promote deeper understanding of the “Kyocera Philosophy.” The “Kyocera Philosophy” also formed an important part of our orientation efforts for new recruits and on-the-job training programs. A total of 1,011 managers at Kyocera subsidiaries outside Japan received training along these lines in fiscal 2005.

 

    Kyocera emphasizes a so-called “amoeba” management system in which operations are managed at the level of small groups. This system is believed to reflect the “Kyocera Philosophy” best, and is regarded as the source of Kyocera’s strength in creating highly motivated management by getting all employees involved in the daily operation of the company. Explicit delegation of responsibilities to small groups has the added advantage of promoting transparency in all details of management, while creating a system that promotes efficiency. In Kyocera’s experience, these processes maintain sound business management practices, which in turn translate into greater benefits for all stakeholders.

 

    To make these principles work in practice, a system of checks and balances is also crucial. Kyocera has adopted the corporate governance model outlined in the Commercial Code of Japan that is based on the use of corporate auditors. In this system, the board of corporate auditors oversees the management decisions of the board of directors and policy execution by executive officers. In addition, to ensure a systematic and sustained approach to compliance management throughout Kyocera, Kyocera established a Risk Management Department.

 

    By respecting the “Kyocera Philosophy” as a corporate culture and completing internal management control system apart from management aspect, Kyocera aims to achieve solid corporate governance as our stockholders expect.

 

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  2) Corporate Governance Policy Implementation

a) Corporate Governance System

    The Kyocera Management Research Institute was established so that the principles and values contained in the “Kyocera Corporate Philosophy” could be shared and further understood among Kyocera worldwide. The “Philosophy education programs” for managers and executives take place in the training center in the Institute constantly and on a large scale.

 

    Kyocera introduced an executive officer system in June 2003 to increase management efficiency. At the same time, the number of members on the Board of Directors was reduced from 26 to 13 thereby promoting more effective discussions on important issues related to management and speeding up decision-making. Kyocera also employs a corporate auditor system. Of the four corporate auditors, two are appointed externally.

 

    Kyocera makes routine audits to ensure that business operations throughout the Group comply with all pertinent regulations and internal rules. An Internal Audit Department has been set up to report the findings of the audit to all directors and corporate auditors. Furthermore, as a company listed on the New York Stock Exchange (NYSE), Kyocera is promoting the establishment of an internal control system in accordance with Section 404 of Sarbanes-Oxley Act of 2002, which will be applied from fiscal 2007. This system, which will underpin the foundations of corporate governance, will act to strengthen the internal controls of Kyocera.

 

    Kyocera has also created a risk management system based on the following key objectives: to predict potential risks in corporate activities as a preventative measure; to ensure risk contingencies that minimize physical loss (human, material and financial) and a decline in brand image if the need arises; and, to help realize philosophy and policy by making management more stable and maintaining and enhancing societal trust. Kyocera’s risk management system connects a vertical structure of risk managers in each business division, led by the Risk Management Department at Headquarters, and a horizontal structure of risk management departments in each business location. It also enhances compliance management by promoting the appropriate observance of laws and regulations, high moral standards in the workplace and the implementation of audits, including legal audits. As part of the system, an Emergency Management Department has been established as a complement to the crisis management manual to ensure appropriate actions are taken to limit damage in times of crises.

 

    Kyocera conducts corporate auditors’ meetings in order to determine auditing policies, procedures, plans and schedules. Corporate auditors attend monthly Board of Directors’ meetings as well as other important meetings to obtain understanding of the progress of the business. Also, through the periodic interview with the Business Execution Department, they can effectively monitor the extent to which a director’s duties are being fulfilled. Furthermore, corporate auditors periodically receive reports from the Internal Audit Department, while frequently participating in meetings with the external auditor, ChuoAoyama PricewaterhouseCoopers, to exchange opinion. This ensures that all audits are just and fair.

 

    Kyocera has engaged ChuoAoyama PricewaterhouseCoopers as the external auditor under the Commercial Code of Japan and the Securities and Exchange Law of Japan. The audit engagement in fiscal 2005 was conducted:

 

Names of the certified public accountants to audit and terms of auditing until fiscal 2005

    Engagement partners:   Yukihiro Matsunaga   10 years
    Yasushi Kozu   12 years
    Minamoto Nakamura     3 years

 

Members to assist auditing          
    Certified public accountants:    14     
    Junior accountants:    11     
    Others:    6     

 

    Kyocera paid the following compensation to its directors, corporate auditors and the external auditor for fiscal 2005.

 

<Compensation paid to Director and Corporate Auditor>

Compensation paid to directors:

   ¥ 233 million

Compensation paid to auditors:

   ¥ 61 million

Total:

   ¥ 294 million

The amount above includes retirement benefit.

 

<Compensation paid to the external auditor>

Compensation paid for audit service:

   ¥ 137 million

Compensation paid for other services:

   ¥ 59 million

Total:

   ¥ 196 million

 

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Table of Contents

b) Outline of Vested Interest with External Auditors

    Of Kyocera’s two external auditors, one is its corporate lawyer.

 

c) Corporate Governance Policy Implementation during the Year Ended March 31, 2005

    As a general rule, Kyocera holds Board of Directors’ meetings once a month. A total of 14 such meetings were held during fiscal 2005, including special Board of Directors’ meetings.

 

    Kyocera also held nine corporate auditors’ meetings during fiscal 2005. To enhance the effectiveness of audits by corporate auditors, Kyocera set up the Auditors Office in April 2004 and deployed two full-time staff there.

 

    As a company listed on the NYSE, Kyocera is promoting the establishment of an internal control system in accordance with Section 404 of Sarbanes-Oxley Act of 2002, which will be applied from fiscal 2007.

 

LOGO

 

 

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Table of Contents

Business Results and Financial Condition

 

1. Business Results for the Year Ended March 31, 2005

 

(1) Economic Situation and Business Environment

 

    Although production activities increased in the manufacturing sector in the first half of the year ended March 31, 2005 (fiscal 2005), they declined markedly from the start of the second half, especially for electronics equipment. This led to a slump in exports and ensuing deceleration in the Japanese economy. Overseas, despite a slowdown in the European economy, the U.S. economy manifest signs of a steady recovery on the back of solid personal consumption and capital expenditures, while the Asian economy continued to show strong growth, particularly in China.

 

    Declining demand for mobile phone handsets, computer equipment and digital consumer products forced Kyocera customers to conduct production adjustments in the second half, which resulted in a decline in orders. Coupled with this, component prices continued to fall, as did the sales price of telecommunications equipment and information equipment. Consequently, both the components business and the equipment business were faced with a difficult business environment.

 

(2) Consolidated Financial Results

 

    

(Yen in millions, except per share

amounts and exchange rates)


 
     Years Ended March 31,

  

Increase (Decrease)

(%)


 
     2005

   2004

  

Net sales

   1,180,655    1,104,814    3.5  

Profit from operations

   100,968    108,962    (7.3 )

Income before income taxes

   107,530    115,040    (6.5 )

Net income

   45,908    68,086    (32.6 )

Diluted earnings per share

   244.81    364.78     

US$ average exchange rate

   108    113     

Euro average exchange rate

   135    133     

 

1) Sales

    Consolidated net sales for fiscal 2005 increased by 3.5% to ¥1,180,655 million compared with fiscal 2004, as a result of increased sales in Fine Ceramics Group, Electronic Device Group and Others, due to burgeoning component demand in the electronics industry in the first half. Conversely, sales in Equipment Group declined due to sluggish sales of mobile phone handsets in Kyocera’s core markets, the United States and Japan (see page 12, “Operating Segments,” for details).

 

2) Profits

    Kyocera recorded a one-time loss of approximately ¥11.7 billion, including loss related to structural reforms in the telecommunications equipment and the optical instruments businesses aimed at boosting profitability in the future. Further, the absence of a gain of approximately ¥18.9 billion due to return of a substitutional portion of employee benefit obligation at Kyocera Corporation and one of the subsidiaries, and a gain of approximately ¥6.0 billion raised in connection with the withdrawal from employee benefit plans by another subsidiary, which were recorded in the previous fiscal year, caused profit from operations to decrease by 7.3% to ¥100,968 million. As a result, income before income taxes decreased by 6.5% to ¥107,530 million.

 

    Kyocera Corporation received a notice of tax assessment based on taxes on transfer pricing adjustments from the National Tax Bureau stating that, in the Bureau’s judgment, the allocation of profit earned from transfers of products between Kyocera and its overseas affiliates was less than appropriate for the five years from fiscal 1999 through fiscal 2003. The resultant additional tax was ¥12.7 billion. As a result, net income decreased by 32.6% to ¥45,908 million.

 

3) Effect of Exchange Rate Fluctuations

    The yen appreciated 5 yen against the U.S. dollar and depreciated 2 yen against the Euro compared with the average exchange rates in fiscal 2004, respectively. In terms of net sales, 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 ¥21.2 billion compared with fiscal 2004. Also, income before income taxes after translation into yen was pushed down by approximately ¥1.5 billion compared with fiscal 2004.

 

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(3) Operating Highlights

 

1) Kinseki, Ltd., a wholly-owned subsidiary, and Kyocera Corporation re-organized the operations related to crystal components on April 1, 2004. The marketing division of Kinseki Ltd. was merged into the marketing division of the electronic component of Kyocera Corporation and the manufacturing division of crystal related components of Kyocera Corporation was transferred to Kinseki Ltd. At the same time, Kinseki Ltd. changed its name to Kyocera Kinseki Corporation (Kyocera Kinseki).

 

2) On April 1, 2004, Kyocera integrated the organic material components business into Kyocera SLC Technologies Corporation (KST), a wholly owned subsidiary. Management resources relating to the organic material components business were concentrated in KST to enhance the synergistic effects within Kyocera and to expand the business base.

 

3) On June 21, 2004, the Carlyle Group (Carlyle), Kyocera, KDDI Corporation (KDDI) and DDI Pocket, Inc. (DDI Pocket) reached an agreement that a consortium of Kyocera and Carlyle would acquire the business of DDI Pocket, a subsidiary of KDDI. Under the agreement, the company that succeeds DDI Pocket’s business, the name of which was changed to “WILLCOM, Inc.” in February 2005 (the “New Co”), was invested 30% by Kyocera. In cooperation with New Co, Kyocera will endeavor to expand sales in its PHS related business by carving out new markets in Japan as well as overseas.

 

4) Kyocera and Kobe Steel, Ltd. established “Japan Medical Materials Corporation (JMM)” on September 1, 2004 by merging the medical materials businesses of both companies and commenced operation on the same day. JMM will benefit from the integration of the specialized expertise of both companies in material and processing technologies, while maximizing synergies by integrating development, production and marketing divisions. JMM will also seek to expand its business worldwide, as a dedicated manufacturer of medical materials.

 

5) On December 17, 2004, Kyocera announced to transfer its domestic sales division for solar energy products (which handles sales of solar power generation systems for use by domestic public sector industries) by means of a corporate split to Kyocera Solar Corporation, a consolidated subsidiary of Kyocera, in April 2005. The aim of this move is to expand sales of solar-related products to domestic public sector industries.

 

6) Kyocera made a decision during fiscal 2005 to reorganize its optical instruments business. In line with this resolution, Kyocera will downsize the camera business and concentrate management resources into the optical component business with the objective of raising profitability.

 

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Table of Contents

(4) Consolidated Operating Segments

 

     (Yen in millions)

 
     Years Ended March 31,

   

Increase (Decrease)

(%)


 
     2005

    2004

   

Net sales

   1,180,655     1,140,814     3.5  

Fine Ceramics Group

   295,383     255,805     15.5  

Electronic Device Group

   262,997     256,906     2.4  

Equipment Group

   527,379     545,811     (3.4 )

Others

   118,040     100,505     17.4  

Adjustments and eliminations

   (23,144 )   (18,213 )    

Operating profit

   100,522     77,126     30.3  

Fine Ceramics Group

   46,214     31,139     48.4  

Electronic Device Group

   35,406     5,047     601.5  

Equipment Group

   5,883     31,257     (81.2 )

Others

   13,019     9,683     34.5  

Corporate

   8,683     34,871     (75.1 )

Equity in earnings of affiliates and unconsolidated subsidiaries

   (1,678 )   2,575      

Adjustments and eliminations

   3     468     (99.4 )

Income before income taxes

   107,530     115,040     (6.5 )

 

Commencing in the third quarter of fiscal 2004 (October to December 2003), net sales and operating profit of the Precision Machine Division of Kyocera Corporation, previously included within “Others,” have been charged to “Corporate.” Accordingly, previously published net sales and operating profit of this operating segment for the six months ended September 30, 2003 was restated.

 

1) Fine Ceramics Group

    Sales of solar cell modules and solar power generation systems increased significantly, especially in Europe and Japan, while sales of cutting tools, primarily for the automotive industry, were also strong. Demand was brisk for fine ceramic parts, notably for semiconductor and LCD fabrication equipment, and sapphire substrates for LEDs. In semiconductor parts, sales of ceramic packages for mobile phones and digital consumer products and of organic packages grew considerably.

 

    Operating profit in this segment increased dramatically compared with fiscal 2004 due to the positive effects of sales gains and improved productivity in each business division, particularly semiconductor parts, solar power generation systems and cutting tools.

 

2) Electronic Device Group

    Kyocera achieved strong growth of thermal printheads for digital photo printers and LCDs for mobile handsets. Sales of Kyocera Kinseki Corporation, which became a wholly-owned subsidiary of Kyocera in fiscal 2004, were fully added to the total sales in this segment from the start of fiscal 2005.

 

    Operating profit in this segment improved remarkably from fiscal 2004. Besides an increase in sales of key components, Kyocera also enjoyed the positive effects of structural reforms implemented to increase productivity. In addition to these factors, there were no restructuring costs at AVX Corporation, a U.S. subsidiary, as in fiscal 2004.

 

3) Equipment Group

    Sales of information equipment increased, due to expanded sale of mid- and high-speed digital multifunction products and the sales contribution of new models such as low- and mid-speed models. Sales of optical instruments also increased due to contributions from optical camera modules, which outweighed a substantial decline in sales of digital cameras due to the implementation of structural reforms. In contrast, sales of telecommunications equipment were forced down due to intensifying price competition for mobile phone handsets and PHS-related products in Japan and overseas, and to the negative impact of inventory adjustments for PHS-related products in China. As a result, overall sales in this segment decreased compared with fiscal 2004.

 

    Although profit from information equipment grew strongly due to sales of high-value-added products, profit from telecommunications equipment decreased due to lower sales of mobile phone handsets and of PHS-related products for the Chinese market and to intensifying price competition. The optical instruments business was impacted negatively by price erosion in digital cameras, while also recording reorganization charges, which resulted in a considerable decline in profit. Consequently, operating profit in this segment decreased.

 

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Table of Contents

4) Others

    Net sales and operating profit in this segment increased due mainly to strong growth of Kyocera Chemical Corporation, especially in its business related to flexible printed circuit boards and semiconductor epoxy molding compounds, and favorable growth of Kyocera Communication Systems Co., Ltd., especially in its telecommunications engineering and data center businesses.

 

(5) Orders and Production (Consolidated)

 

     (Yen in millions)

 
     Years Ended March 31,

   

Increase (Decrease)

(%)


 
     2005

    2004

   

Orders

   1,154,786     1,183,388     (2.4 )

Fine Ceramics Group

   294,042     264,439     11.2  

Electronic Device Group

   265,628     267,444     (0.7 )

Equipment Group

   497,752     565,929     (12.0 )

Others

   120,005     104,052     15.3  

Adjustments and eliminations

   (22,641 )   (18,476 )    

Production

   1,170,312     1,140,987     2.6  

Fine Ceramics Group

   301,352     256,703     17.4  

Electronic Device group

   268,950     254,932     5.5  

Equipment Group

   522,501     558,941     (6.5 )

Others

   77,509     70,411     10.1  

 

(6) Geographic Segments (Consolidated)

 

     (Yen in millions)

 
     Years Ended March 31,

  

Increase (Decrease)

(%)


 
     2005

   2004

  

Sales

   1,180,655    1,140,814    3.5  

Japan

   472,417    456,807    3.4  

USA

   248,333    251,326    (1.2 )

Asia

   203,848    194,302    4.9  

Europe

   175,850    156,929    12.1  

Others

   80,207    81,450    (1.5 )

 

1) Japan

Sales increased because sales of Kyocera Kinseki Corporation, which became a wholly-owned subsidiary of Kyocera in fiscal 2004, were fully added to the total sales from the start of fiscal 2005, and also due to increased sales of components business such as fine ceramic parts, organic packages, solar systems, cutting tools. In addition, sales of KCCS also increased.

 

2) USA

Sales dropped slightly, due mainly to decreased sales of telecommunications equipment coupled with intensified price competition, though sales of information equipment increased.

 

3) Asia

Sales grew considerably, due mainly to increased sales of information equipment and telecommunications equipment as well as electronic devices.

 

4) Europe

Sales increased, due to increased sales of information equipment and also to increased sales of solar systems.

 

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2. Cash Flow

 

Cash and cash equivalents at the end of fiscal 2005 decreased by ¥50,540 million to ¥310,592 million compared with the end of fiscal 2004.

 

     (Yen in millions)

 
     Years Ended March 31,

 
     2005

    2004

    Change

 

Cash flows from operating activities

   145,523     62,575     82,948  

Cash flows from investing activities

   (132,494 )   29,581     (162,075 )

Cash flows from financing activities

   (67,344 )   (20,422 )   (46,922 )

Effect of exchange rate changes on cash and cash equivalents

   3,775     (8,912 )   12,687  

Net (decrease) increase in cash and cash equivalents

   (50,540 )   62,822     (113,362 )

Cash and cash equivalents at beginning of year

   361,132     298,310     62,822  

Cash and cash equivalents at end of year

   310,592     361,132     (50,540 )

 

<Cash Flows from Operating Activities>

Net cash provided by operating activities in fiscal 2005 increased by ¥82,948 million to ¥145,523 million from fiscal 2004 of ¥62,575 million. This was due to a significant decrease in receivables by collection, including the short-term finance receivables, although net income decreased by ¥22,178 million to ¥45,908 compared with fiscal 2004. In addition, due to settlement regarding LaPine Case of ¥35,454 million in fiscal 2004, net cash provided by operating activities in fiscal 2005 increased compared with fiscal 2004.

 

<Cash Flows from Investing Activities>

Net cash used by investing activities in fiscal 2005 increased by ¥162,075 million to ¥132,494 million from net cash provided in fiscal 2004 of ¥29,581 million. This was due mainly to increases in purchases of the government bonds and negotiable certificate of deposits in consideration of current and future financial position according to our investment policy. In addition, due to withdrawal of restricted cash for settlement regarding LaPine Case in fiscal 2004, net cash used by investing activities in fiscal 2005 increased compared with fiscal 2004.

 

<Cash Flows from Financing Activities>

Net cash used in financing activities in fiscal 2005 increased by ¥46,922 million to ¥67,344 million from fiscal 2004 of ¥20,422 million. This was due mainly to a decrease in proceeds from issuance of long-term debt and an increase in repayments of long-term debt.

 

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<Cash Flows Indexes (Consolidated)>

 

     Years Ended March 31,

 
     2005

    2004

    2003

    2002

    2001

 

Stockholders’ equity to total assets

   67.3 %   64.3 %   61.4 %   63.2 %   59.2 %

Market capitalization to total assets

   82.2 %   91.3 %   66.5 %   101.2 %   124.6 %

Interest bearing debts per operating cash flows (years)

   1.0     3.2     1.2     1.5     1.5  

Operating cash flows per interest paid (ratio)

   62.4     20.6     49.8     26.6     37.3  

All indexes are computed on a consolidated basis.

Interest bearing debts represent all debts with interest expense included in consolidated balance sheets.

 

3. Capital Expenditures and Depreciation (Consolidated)

 

     Years Ended March 31,

    Increase (Decrease)
(%)


 
     2005

    2004

   

Capital expenditures

   63,176     54,937     15.0  

(% to net sales)

   5.4 %   4.8 %    

Depreciation expenses

   58,790     60,861     (3.4 )

(% to net sales)

   5.0 %   5.3 %    

 

  Capital expenditures increased due mainly to investment in Fine Ceramics Group, including solar systems and semiconductor parts.

 

4. Non-Consolidated Results for the Year Ended March 31, 2005

 

     (Yen in millions)

 
     Years Ended March 31,

   Increase (Decrease)
(%)


 
     2005

   2004

  

Net sales

   493,271    494,035    (0.2 )

Profit from operations

   33,822    41,222    (18.0 )

Recurring profit

   66,434    61,788    7.5  

Net income

   34,327    60,663    (43.4 )

 

5. Cash Dividends for the Year

 

With regard to year-end dividends, it will be decided at the 51st General Meeting of Shareholders, scheduled for June 28, 2005, that a cash distribution shall be made at the rate of 50 yen per share. Accordingly, total dividends for the year, including the interim dividend of 30 yen per share already paid, shall amount to 80 yen per share, up 20 yen per share from fiscal 2004.

 

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Basic Outlook and Future Management and Business Strategies

 

1. Economic Situation and Business Environment for the Year Ending March 31, 2006

 

  There are fears that the sharp rise in oil prices will have a profoundly negative effect on the world economy in fiscal 2006. Overseas, despite concerns over a slowdown in the European economy, both the Asian and U.S. economies are expected to continue expanding steadily. Although exchange rate trends against the Euro and U.S. dollar remain uncertain, moderate expansion is predicted for the Japanese economy.

 

  Kyocera expects a gradual recovery in production activities in the electronics industry in the first half, and a full-scale recovery from the second half of fiscal 2006.

 

  In the telecommunications and information processing market, shipment volume of mobile phones is forecast to increase steadily due to the rising popularity of high-performance handsets and the proliferation of low-priced handsets. Meanwhile, stable growth is expected to continue in the markets for PCs and digital cameras. Shipment volume of DVD recorders and digital TVs is predicted to increase significantly.

 

  Kyocera also expects continued global expansion of the alternative energy market, which includes solar energy.

 

  Kyocera aims to improve profitability in such business environment by promoting its group-wide management policy of “high-value-added diversification”. In order to strengthen each business and make it into a highly profitable “value-added business,” Kyocera will boost productivity, primarily by expanding production in China, and invest aggressively in areas with high growth potential.

 

2. Consolidated Forecasts for the Year Ending March 31, 2006

 

(Yen in millions, except per share amounts and exchange rate)
     March 31, 2006
(Forecast)


   March 31, 2005
(Result)


   Increase
(Decrease)
(%)


Net sales

   1,240,000    1,180,655    5.0

Profit from operations

   124,000    100,968    22.8

Income before income taxes

   135,000    107,530    25.5

Net income

   81,000    45,908    76.4

Diluted earnings per share

   431.94    244.81   

Average US$ exchange rate

   102    108   

Average Euro exchange rate

   134    135   

 

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Table of Contents

3. Outlook and Future Business Strategies by Operating Segment (Consolidated)

 

     (Yen in millions)

 
     March 31, 2006
(Forecast)


   

March 31, 2005

(Result)


    Increase
(Decrease)
(%)


 

Net sales

   1,240,000     1,180,655     5.0  

•      Fine Ceramics Group

   338,000     295,383     14.4  

•      Electronic Device Group

   258,000     262,997     (1.9 )

•      Equipment Group

   535,000     527,379     1.4  

•      Others

   131,000     118,040     11.0  

•      Adjustments and eliminations

   (22,000 )   (23,144 )    

Profit from operations

   130,000     100,522     29.3  

•      Fine Ceramics Group

   50,000     46,214     8.2  

•      Electronic Device Group

   31,000     35,406     (12.4 )

•      Equipment Group

   35,000     5,883     494.9  

•      Others

   14,000     13,019     7.5  

        Corporate

   5,000     7,008     (28.7 )

Income before income taxes

   135,000     107,530     25.5  

 

<Fine Ceramics Group>

  In the solar system business, Kyocera will promote enhanced production capability for solar cells and a global production system for modules and also strive for business expansion to meet escalating worldwide demand.

 

  Kyocera intends to expand sales in the high-growth-potential areas of single crystal sapphire products for LEDs. Kyocera will also strive to boost market share of fine ceramic parts for LCD fabrication equipment through the creation of a production system that can handle demand for components for larger LCDs.

 

  Kyocera seeks to expand sales of both ceramic and organic packages for mobile phone handsets, digital cameras and flat-screen TVs. In addition, plans are in place to commence the mass-production of organic packages for next-generation MPUs used inside digital consumer equipment.

 

<Electronic Device Group>

  With the objective of increasing sales of passive components, crystal related products and circuit modules, Kyocera will strengthen design-in activities through integration of the total resources of Kyocera Group, from the equipment design stage to component development and through cooperation with customers in domestic and overseas markets.

 

  Kyocera also intends to increase sales of thin-film products by promoting thermal printheads that enable high-speed color printing capability, making them ideal for the digital photo printing market. By strengthening production capacity of color LCDs for application in industrial equipment, Kyocera aims to enhance its responsiveness to customer needs and expand this business sector.

 

<Equipment Group>

  To improve profitability in the mobile phone handset business, Kyocera will implement additional structural reforms. In PHS-related products, Kyocera will work to expand domestic sales by launching new next-generation base stations and handsets and also to cultivate overseas markets. Through these endeavors, Kyocera aims to swiftly improve the profitability its entire telecommunications equipment business.

 

  In the optical instruments business, Kyocera will release new products and expand its customer base for optical modules for mobile phone handsets, and fully utilize production in China.

 

  Kyocera aims to expand sales in the information equipment business by further strengthening products with higher speed and color printers to promote its business model by developing products under the “Ecosys Concept.”

 

<Others>

  Kyocera Chemical Corporation will strive aggressively to increase sales of new eco-friendly materials, beginning with lead-free materials, in line with rising demand. It will also devote energies to the development of materials that enhance product competitiveness by maximizing synergies with Kyocera Group companies.

 

  In accord with projected growth in security-related industries due to the enactment of the Personal Information Protection Act in Japan, Kyocera Communication Systems Co., Ltd. (KCCS) will expend resources in this business by launching new products. KCCS also aims to expand its business directed at securing safe mobile communication with intranets.

 

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Table of Contents

4. Non-Consolidated Forecasts for the Year Ending March 31, 2006

 

     (Yen in millions)

 
     March 31, 2006
(Forecast)


   March 31, 2005
(Result)


   Increase
(Decrease)
(%)


 

Net sales

   513,000    493,271    4.0  

Profit from operations

   37,000    33,822    9.4  

Recurring profit

   64,000    66,434    (3.7 )

Net income

   45,000    34,327    31.1  

 

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; the extent and pace of future growth or contraction in information technology-related markets around the world, including those for communications and personal computers; and events that may impact negatively on our markets or supply chain, including terrorist acts and outbreaks of diseases such as SARS. 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.

 

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Table of Contents

CONSOLIDATED BALANCE SHEETS

 

 

     Yen in millions

 
     March 31,

   Increase
(Decrease)


 
     2005

   2004

  
     Amount

    %

   Amount

    %

  

Current assets :

                                  

Cash and cash equivalents

   ¥ 310,592          ¥ 361,132          ¥ (50,540 )

Short-term investments

     34,938            3,855            31,083  

Trade notes receivable

     29,552            33,801            (4,249 )

Trade accounts receivable

     201,374            207,583            (6,209 )

Short-term finance receivables

     40,801            70,553            (29,752 )

Less allowances for doubtful accounts and sales returns

     (7,981 )          (8,468 )          487  

Inventories

     213,411            197,194            16,217  

Deferred income taxes

     38,659            34,957            3,702  

Other current assets

     34,229            33,089            1,140  
    


 
  


 
  


Total current assets

     895,575     51.3      933,696     52.0      (38,121 )
    


 
  


 
  


Non-current assets :

                                  

Investments in and advances to affiliates and unconsolidated subsidiaries

     30,623            24,054            6,569  

Securities and other investments

     430,437            430,096            341  
    


 
  


 
  


Total investments and advances

     461,060     26.4      454,150     25.3      6,910  

Long-term finance receivables

     66,427     3.8      88,512     5.0      (22,085 )

Property, plant and equipment, at cost :

                                  

Land

     55,210            54,867            343  

Buildings

     225,964            217,216            8,748  

Machinery and equipment

     656,780            622,721            34,059  

Construction in progress

     14,384            10,384            4,000  

Less accumulated depreciation

     (693,341 )          (650,668 )          (42,673 )
    


 
  


 
  


       258,997     14.9      254,520     14.2      4,477  

Goodwill

     28,110     1.6      25,254     1.4      2,856  

Intangible assets

     15,847     0.9      16,645     0.9      (798 )

Other assets

     19,503     1.1      21,981     1.2      (2,478 )
    


 
  


 
  


Total non-current assets

     849,944     48.7      861,062     48.0      (11,118 )
    


 
  


 
  


Total assets

   ¥ 1,745,519     100.0    ¥ 1,794,758     100.0    ¥ (49,239 )
    


 
  


 
  


 

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Table of Contents
     Yen in millions

 
     March 31,

   Increase
(Decrease)


 
     2005

   2004

  
     Amount

    %

   Amount

    %

  

Current liabilities :

                                  

Short-term borrowings

   ¥ 66,556          ¥ 84,815          ¥ (18,259 )

Current portion of long-term debt

     44,051            44,522            (471 )

Trade notes and accounts payable

     86,872            110,759            (23,887 )

Other notes and accounts payable

     34,690            38,115            (3,425 )

Accrued payroll and bonus

     34,821            34,161            660  

Accrued income taxes

     31,180            19,054            12,126  

Other accrued expenses

     28,849            28,665            184  

Other current liabilities

     17,338            16,548            790  
    


 
  


 
  


Total current liabilities

     344,357     19.7      376,639     21.0      (32,282 )

Non-current liabilities :

                                  

Long-term debt

     33,557            70,608            (37,051 )

Accrued pension and severance costs

     31,166            38,620            (7,454 )

Deferred income taxes

     96,345            98,791            (2,446 )

Other non-current liabilities

     4,761            6,409            (1,648 )
    


 
  


 
  


Total non-current liabilities

     165,829     9.5      214,428     11.9      (48,599 )
    


 
  


 
  


Total liabilities

     510,186     29.2      591,067     32.9      (80,881 )
    


 
  


 
  


Minority interests in subsidiaries

     60,482     3.5      53,238     3.0      7,244  

Stockholders’ equity :

                                  

Common stock

     115,703            115,703             

Additional paid-in capital

     162,061            162,091            (30 )

Retained earnings

     916,628            881,969            34,659  

Accumulated other comprehensive income

     11,839            22,046            (10,207 )

Treasury stock, at cost

     (31,380 )          (31,356 )          (24 )
    


 
  


 
  


Total stockholders’ equity

     1,174,851     67.3      1,150,453     64.1      24,398  
    


 
  


 
  


Total liabilities, minority interests and stockholders’ equity

   ¥ 1,745,519     100.0    ¥ 1,794,758     100.0    ¥ (49,239 )
    


 
  


 
  


 

Note  1:  Accumulated other comprehensive income is as follows:

 

     Yen in millions

 
     March 31,

 
     2005

    2004

 

Net unrealized gains on securities

   ¥ 42,461     ¥ 59,241  

Net unrealized losses on derivative financial instruments

   ¥ (27 )   ¥ (48 )

Minimum pension liability adjustments

   ¥ (1,629 )   ¥ (1,477 )

Foreign currency translation adjustments

   ¥ (28,966 )   ¥ (35,670 )

 

Note 2:   As a result of increase in an affiliated company accounted for by the equity method, the previous years’ consolidated financial statements have been restated as if the equity method had been applied at inception in accordance with Accounting Principles Board Opinion No.18, “The Equity Method of Accounting for Investments in Common Stock”

 

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Table of Contents

CONSOLIDATED STATEMENTS OF INCOME

 

     Yen in millions and shares in thousands, except per share amounts

 
     Years ended March 31,

    Increase
(Decrease)


 
     2005

    2004

   
     Amount

    %

    Amount

    %

    Amount

    %

 

Net sales

   ¥ 1,180,655     100.0     ¥ 1,140,814     100.0     ¥ 39,841     3.5  

Cost of sales

     855,067     72.4       860,224     75.4       (5,157 )   (0.6 )
    


 

 


 

 


 

Gross profit

     325,588     27.6       280,590     24.6       44,998     16.0  

Selling, general and administrative expenses

     224,620     19.0       171,628     15.0       52,992     30.9  
    


 

 


 

 


 

Profit from operations

     100,968     8.6       108,962     9.6       (7,994 )   (7.3 )

Other income (expenses) :

                                          

Interest and dividend income

     6,396     0.5       4,883     0.4       1,513     31.0  

Interest expense

     (1,275 )   (0.1 )     (1,286 )   (0.1 )     11      

Foreign currency transaction gains and losses, net

     2,618     0.2       (1,546 )   (0.1 )     4,164      

Equity in (losses) earnings of affiliates and unconsolidated subsidiaries

     (1,678 )   (0.1 )     2,575     0.2       (4,253 )    

Other, net

     501     0.0       1,452     0.1       (951 )   (65.5 )
    


 

 


 

 


 

Total other income (expenses)

     6,562     0.5       6,078     0.5       484     8.0  
    


 

 


 

 


 

Income before income taxes, minority interests

     107,530     9.1       115,040     10.1       (7,510 )   (6.5 )

Income taxes

     58,480     4.9       50,310     4.4       8,170     16.2  
    


 

 


 

 


 

Income before minority interests

     49,050     4.2       64,730     5.7       (15,680 )   (24.2 )

Minority interests

     (3,142 )   (0.3 )     3,356     0.3       (6,498 )    
    


 

 


 

 


 

Net income

   ¥ 45,908     3.9     ¥ 68,086     6.0     ¥ (22,178 )   (32.6 )
    


 

 


 

 


 

Earnings per share:

                                          

Net income:

                                          

Basic

   ¥ 244.86           ¥ 364.79                      

Diluted

   ¥ 244.81           ¥ 364.78                      

Weighted average number of shares of common stock outstanding :

                                          

Basic

     187,489             186,643                      

Diluted

     187,528             186,649                      

 

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Table of Contents

Notes:

1. Kyocera applies Statement of Financial Accounting Standards No. 130, “Financial Reporting of Comprehensive Income.” Based on this standard, comprehensive income for years ended March 31, 2005 and 2004 was an increase of ¥35,701 million and ¥146,326 million, respectively.
2. Earnings per share amounts were computed based on Statement of Financial Accounting Standards No. 128, “Earnings per Share.” Under Statement of Financial Accounting Standards No. 128, basic earnings per share was computed based on the average number of shares of common stock outstanding during each period and diluted earnings per share assumed the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock.
3. Profit from operation for the year ended March 31, 2004 included ¥18,917 million of net settlement gain for the substitutional portion of Employee Pension Funds, which was recorded at Kyocera Corporation and Kyocera Mita Corporation. Kyocera Corporation and Kyocera Mita Corporation adopted Emerging issues Task Force issue No. 03-02 “Accounting for the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities” for the settlement process of the substitutional portion of Employee Pension.
4. On March 28, 2005, Kyocera Corporation received a notice of tax assessment based on tax on transfer pricing adjustments from the Osaka Regional Tax Bureau stating that, in the Bureau’s judgment, allocation of profit earned from transfers of products between Kyocera Corporation and its overseas subsidiaries was less than appropriate for the five years from the year ended March 31, 1999 through the year ended March 31, 2003. Based on this notice of tax assessment, Kyocera Corporation recorded ¥12,748 million in income taxes as tax expenses of previous years.

 

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Table of Contents

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

( Yen in millions and shares in thousands)

(Number of shares of common stock)        


   Common
stock


   Additional
paid-in
capital


    Retained
earnings


    Accumulated
other
comprehensive
income


    Treasury
stock, at
cost


    Comprehensive
income


 

Balance, March 31, 2003 (184,964)

   ¥ 115,703    ¥ 167,675     ¥ 825,057     ¥ (56,194 )   ¥ (52,034 )        

Net income for the year

                    68,086                     ¥ 68,086  

Other comprehensive income

                            78,240               78,240  
                                           


Total comprehensive income for the year

                                          ¥ 146,326  
                                           


Cash dividends

                    (11,174 )                        

Purchase of treasury stock (14)

                                    (105 )        

Reissuance of treasury stock (5)

            4                       44          

Exchange of stock for acquisition of an affiliate (2,529)

            (5,607 )                     20,739          

Stock option plan of a subsidiary

            19                                  
    

  


 


 


 


       

Balance, March 31, 2004 (187,484)

     115,703      162,091       881,969       22,046       (31,356 )        

Net income for the year

                    45,908                     ¥ 45,908  

Other comprehensive income

                            (10,207 )             (10,207 )
                                           


Total comprehensive income for the year

                                          ¥ 35,701  
                                           


Cash dividends

                    (11,249 )                        

Purchase of treasury stock (21)

                                    (170 )        

Reissuance of treasury stock (18)

            (5 )                     146          

Stock option plan of a subsidiary

            (25 )                                
    

  


 


 


 


       

Balance, March 31, 2005 (187,481)

   ¥ 115,703    ¥ 162,061     ¥ 916,628     ¥ 11,839     ¥ (31,380 )        
    

  


 


 


 


       

 

Note:   As a result of increase in an affiliated company accounted for by the equity method, the previous years’ consolidated financial statements have been restated as if the equity method had been applied at inception in accordance with Accounting Principles Board Opinion No.18, “The Equity Method of Accounting for Investments in Common Stock”

 

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Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Yen in millions

 
     Years ended March 31,

 
     2005

    2004

 

Cash flows from operating activities:

                

Net income

   ¥ 45,908     ¥ 68,086  

Adjustments to reconcile net income to net cash provided by operating activities :

                

Depreciation and amortization

     65,909       70,260  

Losses on devaluation of inventories

     13,458       14,013  

Minority interests

     3,142       (3,356 )

Decrease (increase) in receivables

     68,558       (34,704 )

Increase in inventories

     (28,651 )     (35,751 )

(Decrease) increase in notes and accounts payable

     (31,914 )     20,701  

Settlement regarding LaPine Case

           (35,454 )

Other, net

     9,113       (1,220 )
    


 


Net cash provided by operating activities

     145,523       62,575  
    


 


Cash flows from investing activities :

                

Payments for purchases of securities

     (92,087 )     (37,981 )

Payments for purchases of investments and advances

     (11,858 )     (7,917 )

Sales and maturities of securities

     49,674       77,487  

Proceeds from sales of investment in an affiliate

           5,004  

Payments for purchases of property, plant and equipment, and intangible assets

     (64,201 )     (58,869 )

Proceeds from sales of property, plant and equipment, and intangible assets

     2,920       2,720  

Acquisitions of businesses, net of cash acquired

     (2,794 )     (2,271 )

Deposit of negotiable certificate of deposits and time deposits

     (112,903 )     (674 )

Withdrawal of negotiable certificate of deposits and time deposits

     95,220       79  

Deposit of restricted cash

           (1,994 )

Withdrawal of restricted cash

           52,983  

Other, net

     3,535       1,014  
    


 


Net cash (used in) provided by investing activities

     (132,494 )     29,581  
    


 


Cash flows from financing activities :

                

Decrease in short-term debt

     (18,490 )     (23,823 )

Proceeds from issuance of long-term debt

     21,077       48,975  

Payments of long-term debt

     (58,720 )     (33,152 )

Dividends paid

     (12,614 )     (12,372 )

Net purchases of treasury stock

     (28 )     (33 )

Other, net

     1,431       (17 )
    


 


Net cash used in financing activities

     (67,344 )     (20,422 )
    


 


Effect of exchange rate changes on cash and cash equivalents

     3,775       (8,912 )
    


 


Net (decrease) increase in cash and cash equivalents

     (50,540 )     62,822  

Cash and cash equivalents at beginning of year

     361,132       298,310  
    


 


Cash and cash equivalents at end of year

   ¥ 310,592     ¥ 361,132  
    


 


 

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Table of Contents

SUPPLEMENTAL CASH FLOW INFORMATION

 

     Yen in millions

 
     Years ended March 31,

 
     2005

    2004

 

Cash paid during the year for :

                

Interest

   ¥ 2,331     ¥ 3,043  

Income taxes

     40,055       38,774  

Acquisitions of businesses :

                

Fair value of assets acquired

   ¥ 8,478     ¥ 56,506  

Fair value of liabilities assumed

     (2,683 )     (19,804 )

Minority interests

     (2,440 )      

Investments accounted for by the equity method

           (4,600 )

Stock issuance for acquisition

           (15,132 )

Cash acquired

     (561 )     (14,699 )
    


 


     ¥ 2,794     ¥ 2,271  
    


 


 

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Table of Contents

SEGMENT INFORMATION

 

1. Operating segments :

 

     Yen in millions

 
     Years ended March 31,

    Increase (Decrease)

 
     2005

    2004

   
     Amount

    Amount

    Amount

    %

 

Net sales :

                              

Fine Ceramics Group

   ¥ 295,383     ¥ 255,805     ¥ 39,578     15.5  

Electronic Device Group

     262,997       256,906       6,091     2.4  

Equipment Group

     527,379       545,811       (18,432 )   (3.4 )

Others

     118,040       100,505       17,535     17.4  

Adjustments and eliminations

     (23,144 )     (18,213 )     (4,931 )    
    


 


 


 

     ¥ 1,180,655     ¥ 1,140,814     ¥ 39,841     3.5  
    


 


 


 

Operating profit :

                              

Fine Ceramics Group

   ¥ 46,214     ¥ 31,139     ¥ 15,075     48.4  

Electronic Device Group

     35,406       5,047       30,359     601.5  

Equipment Group

     5,883       31,257       (25,374 )   (81.2 )

Others

     13,019       9,683       3,336     34.5  
    


 


 


 

       100,522       77,126       23,396     30.3  

Corporate

     8,683       34,871       (26,188 )   (75.1 )

Equity in earnings of affiliates and unconsolidated subsidiaries

     (1,678 )     2,575       (4,253 )    

Adjustments and eliminations

     3       468       (465 )   (99.4 )
    


 


 


 

Income before income taxes

   ¥ 107,530     ¥ 115,040     ¥ (7,510 )   (6.5 )
    


 


 


 

Segment assets :

                              

Fine Ceramics Group

   ¥ 208,720     ¥ 194,073     ¥ 14,647     7.5  

Electronic Device Group

     357,797       349,755       8,042     2.3  

Equipment Group

     308,811       315,851       (7,040 )   (2.2 )

Others

     216,178       260,818       (44,640 )   (17.1 )
    


 


 


 

       1,091,506       1,120,497       (28,991 )   (2.6 )

Corporate

     684,970       696,298       (11,328 )   (1.6 )

Investments in and advances to affiliates and unconsolidated subsidiaries

     30,623       24,054       6,569     27.3  

Adjustments and eliminations

     (61,580 )     (46,091 )     (15,489 )    
    


 


 


 

Total assets

   ¥ 1,745,519     ¥ 1,794,758     ¥ (49,239 )   (2.7 )
    


 


 


 

Depreciation and amortization :

                              

Fine Ceramics Group

   ¥ 17,887     ¥ 16,729     ¥ 1,158     6.9  

Electronic Device Group

     21,723       23,323       (1,600 )   (6.9 )

Equipment Group

     19,963       22,814       (2,851 )   (12.5 )

Others

     4,070       4,838       (768 )   (15.9 )

Corporate

     2,266       2,556       (290 )   (11.3 )
    


 


 


 

Total

   ¥ 65,909     ¥ 70,260     ¥ (4,351 )   (6.2 )
    


 


 


 

Capital expenditures :

                              

Fine Ceramics Group

   ¥ 19,089     ¥ 13,307     ¥ 5,782     43.5  

Electronic Device Group

     19,453       18,612       841     4.5  

Equipment Group

     19,169       18,303       866     4.7  

Others

     2,279       1,099       1,180     107.4  

Corporate

     3,186       3,616       (430 )   (11.9 )
    


 


 


 

Total

   ¥ 63,176     ¥ 54,937     ¥ 8,239     15.0  
    


 


 


 

 

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Table of Contents

2. Geographic segments (Sales and operating profit by geographic area) :

 

     Yen in millions

 
     Years ended March 31,

    Increase
(Decrease)


 
     2005

    2004

   
     Amount

    Amount

    Amount

    %

 

Net sales:

                              

Japan

     ¥ 525,432     ¥ 519,532     ¥ 5,900     1.1  

Intra-group sales and transfer between geographic areas

     314,149       284,346       29,803     10.5  
    


 


 


 

       839,581       803,878       35,703     4.4  
    


 


 


 

United States of America

     307,490       313,007       (5,517 )   (1.8 )

Intra-group sales and transfer between geographic areas

     25,299       20,815       4,484     21.5  
    


 


 


 

       332,789       333,822       (1,033 )   (0.3 )
    


 


 


 

Asia

     147,654       128,629       19,025     14.8  

Intra-group sales and transfer between geographic areas

     118,877       100,527       18,350     18.3  
    


 


 


 

       266,531       229,156       37,375     16.3  
    


 


 


 

Europe

     180,604       161,364       19,240     11.9  

Intra-group sales and transfer between geographic areas

     30,475       32,918       (2,443 )   (7.4 )
    


 


 


 

       211,079       194,282       16,797     8.6  
    


 


 


 

Others

     19,475       18,282       1,193     6.5  

Intra-group sales and transfer between geographic areas

     7,559       7,686       (127 )   (1.7 )
    


 


 


 

       27,034       25,968       1,066     4.1  
    


 


 


 

Adjustments and eliminations

     (496,359 )     (446,292 )     (50,067 )    
    


 


 


 

     ¥ 1,180,655     ¥ 1,140,814     ¥ 39,841     3.5  
    


 


 


 

Operating profit:

                              

Japan

   ¥ 91,760     ¥ 89,193     ¥ 2,567     2.9  

United States of America

     2,091       2,560       (469 )   (18.3 )

Asia

     13,055       9,829       3,226     32.8  

Europe

     (1,482 )     (17,601 )     16,119      

Others

     1,245       1,042       203     19.5  
    


 


 


 

       106,669       85,023       21,646     25.5  

Adjustments and eliminations

     (6,144 )     (7,429 )     1,285      
    


 


 


 

       100,525       77,594       22,931     29.6  

Corporate

     8,683       34,871       (26,188 )   (75.1 )

Equity in earnings of affiliates and unconsolidated subsidiaries

     (1,678 )     2,575       (4,253 )    
    


 


 


 

Income before income taxes

   ¥ 107,530     ¥ 115,040     ¥ (7,510 )   (6.5 )
    


 


 


 

 

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Table of Contents

3. Geographic segments (Sales by region) :

 

     Yen in millions

 
     Years ended March 31,

   Increase
(Decrease)


 
     2005

   2004

  
     Amount

    %

   Amount

    %

   Amount

    %

 

Japan

   ¥ 472,417     40.0    ¥ 456,807     40.0    ¥ 15,610     3.4  

United States of America

     248,333     21.0      251,326     22.0      (2,993 )   (1.2 )

Asia

     203,848     17.3      194,302     17.0      9,546     4.9  

Europe

     175,850     14.9      156,929     13.8      18,921     12.1  

Others

     80,207     6.8      81,450     7.2      (1,243 )   (1.5 )
    


 
  


 
  


 

Net sales

   ¥ 1,180,655     100.0    ¥ 1,140,814     100.0    ¥ 39,841     3.5  
    


 
  


 
  


 

Sales outside Japan

   ¥ 708,238          ¥ 684,007          ¥ 24,231     3.5  

Sales outside Japan ratio to net sales

     60.0 %          60.0 %                   

 

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Table of Contents

INVESTMENTS IN DEBT AND EQUITY SECURITIES

 

Investments in debt and equity securities at March 31, 2005 and 2004, included in short-term investments (current assets) and securities and other investments (non-current assets) are summarized as follows :

 

     Yen in millions

     March 31,

     2005

   2004

     Cost

   Aggregate
fair values


   Gross
unrealized
gains


   Gross
unrealized
losses


   Cost

   Aggregate
fair values


   Gross
unrealized
gains


   Gross
unrealized
losses


Available-for-sale securities :

                                                       

Corporate debt securities

   ¥ 2,024    ¥ 2,029    ¥ 12    ¥ 7    ¥ 14,961    ¥ 14,891    ¥ 26    ¥ 96

Other debt securities

     72,174      72,060      199      313      12,994      12,839      1      156

Equity securities

     272,764      344,085      71,692      371      281,143      380,502      102,579      3,220
    

  

  

  

  

  

  

  

Total available-for-sale securities

     346,962      418,174      71,903      691      309,098      408,232      102,606      3,472
    

  

  

  

  

  

  

  

Held-to-maturity securities :

                                                       

Other debt securities

     24,718      24,357           361      21,093      21,165      72     
    

  

  

  

  

  

  

  

Total held-to-maturity securities

     24,718      24,357      2,004      361      21,093      21,165      72     
    

  

  

  

  

  

  

  

Total investments in debt and equity securities

   ¥ 371,680    ¥ 442,531    ¥ 71,903    ¥ 1,052    ¥ 330,191    ¥ 429,397    ¥ 102,678    ¥ 3,472
    

  

  

  

  

  

  

  

 

Note:   Cost represents amortized cost for held-to-maturity securities and acquisition cost for available-for-sale securities. The cost basis of the individual securities is written down to fair value as a new cost basis when other-than-temporary impairment is recognized.

 

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Table of Contents

BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

 

1. Scope of consolidation and application of the equity method :

 

Major consolidated subsidiaries :

 

AVX CORPORATION

KYOCERA WIRELESS CORPORATION

KYOCERA MITA CORPORATION

KYOCERA ELCO CORPORATION

 

Major affiliates accounted for by the equity method :

 

TAITO CORPORATION

WILLCOM, INC.

 

2. Changes in scope of consolidation and application of the equity method :

    Consolidation

 

    (Increase)    8    JAPAN MEDICAL MATERIALS CORPORATION and others
    (Decrease)    2    KYOCERA CHEMICAL REINFORCED PLASTIC CO., LTD. and another
Equity method          
    (Increase)    2    WILLCOM, INC. and another
    (Decrease)    2    MILLENNIUM BUSINESS SYSTEMS, L.L.C. and another

 

3. Summary of significant accounting policies

Kyocera’s consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.

 

( 1 ) Valuation of inventories

Finished goods and work in process are mainly stated at the lower of cost or market, the cost being determined by the average method. All other inventories are mainly stated at the lower of cost or market, the cost being determined by the first-in, first-out method.

 

( 2 ) Valuation of securities

Kyocera adopts Statement of Financial Accounting Standards No.115, “Accounting for Certain Investments in Debt and Equity Securities.”

Held-to-maturity securities are recorded at amortized cost.

Available-for-sales securities are recorded at fair value, with unrealized gains and losses excluded from income and recorded in other comprehensive income, net of tax.

 

( 3 ) Depreciation method of Property, Plant and Equipment

Depreciation is computed at rates based on the estimated useful lives of assets mainly using the declining balance method.

 

( 4 ) Goodwill and other intangible assets

Kyocera adopts Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” Goodwill and intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually.

Intangible assets with definite useful lives are amortized over their respective estimate useful life.

 

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Table of Contents

( 5 ) Accounting for allowance and accruals

Allowance for doubtful accounts :

Kyocera provided based on the past actual ratio of losses on bad debt in addition to estimation of uncollectible amount based on the analysis of certain individual receivables.

 

Accrued pension and severance cost:

Kyocera adopts Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions”, pension and severance cost is accrued based on the projected benefit obligations and the fair value of plan assets at the balance sheet date. If the accumulated benefit obligation (i.e., obligations deducting an effect of future compensation levels from projected benefit obligations) exceeds the fair value of plan assets, a minimum pension liability equal to this difference is reflected in the consolidated balance sheets by recognizing an additional minimum pension liability. Unrecognized prior service cost is amortized by the straight-line method over the average remaining service period of employees. Unrecognized actuarial loss is recognized by amortizing a portion in excess of a corridor (i.e., 10% of the greater of the projected benefit obligations or the fair value of plan assets) by the straight-line method over the average remaining service period of employees.

 

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Table of Contents

Kyocera Corporation

 

The non-consolidated financial statements are prepared in conformity with accounting principles generally accepted in Japan.

 

Date of the board of directors’ meeting for the result for the year : April 27, 2005

Date of the general meeting of shareholders : June 28, 2005

 

1. Results for the year ended March 31, 2005 :

(1) Results of operations :

 

     Years ended March 31,

 
     2005

    2004

 

Net sales

   ¥ 493,271 million           ¥494,035 million        

% change from the previous year

           (0.2) %         2.3 %

Profit from operations

     33,822 million           41,222 million        

% change from the previous year

           (18.0) %         (2.8) %

Recurring profit

     66,434 million           61,788 million        

% change from the previous year

           7.5 %         13.0 %

Net income

     34,327 million           60,663 million        

% change from the previous year

           (43.4) %         117.2 %
    
   
 

Earnings per share :

                          

Basic

     ¥182.77           ¥324.70        

Diluted

     ¥182.73           ¥324.69        
    
   
 

Return on equity

     3.3   %         6.4   %      

Recurring profit to total assets

     5.4   %         5.3   %      

Recurring profit to net sales

     13.5   %         12.5   %      

 

Notes :

 

1. Average number of common stock outstanding during the year

 

Year ended March 31, 2005 :

  187,488,658    shares

Year ended March 31, 2004 :

  186,644,145    shares

 

2. Change in accounting policies : None

 

(2) Dividend information :

 

     Years ended March 31,

     2005

  2004

Year-end dividends per share

   ¥50.00   ¥30.00

Interim dividends per share

     30.00     30.00

Annual dividends per share

     80.00     60.00

Annual aggregate amount of dividends paid

   14,999 million   11,249 million

Dividends to net income

        43.8%        18.5%

Dividends to stockholders’ equity

        1.4 %        1.1 %

 

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Table of Contents

(3) Financial Condition :

 

     March 31,

     2005

   2004

Total assets

   ¥ 1,232,069 million    1,241,012 million

Stockholders’ equity

     1,036,744 million    1,029,738 million
    

  

Stockholders’ equity to total assets

     84.1%    83.0 %
    

  

Stockholders’ equity per share

     ¥5,529.54                  ¥5,492.08            

 

Notes : Total number of shares outstanding as of :

 

March 31, 2005

  187,481,084 shares

March 31, 2004

  187,484,253 shares

 

Total number of treasury stock as of :

 

March 31, 2005

  3,828,206 shares

March 31, 2004

  3,825,037 shares

 

2. Forecast for the year ending March 31, 2006 :

 

     Year ending March 31, 2006

Net sales

   ¥513,000 million

Recurring profit

   64,000 million

Net income

   45,000 million

Annual dividends per share

   ¥100.00              

 

Note:  Forecast of earnings per share:                                                                                                                         ¥239.70

 

With regard to the forecasts set forth above, please refer to the accompanying “Forward Looking Statements” on page 18.

 

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Table of Contents

BALANCE SHEETS

 

     Yen in millions

 
     March 31,

  

Increase
(Decrease)


 
     2005

   2004

  
     Amount

    %

   Amount

    %

  

Current assets :

                                  

Cash and bank deposits

   ¥ 154,347          ¥ 192,928          ¥ (38,581 )

Trade notes receivable

     40,249            50,414            (10,165 )

Trade accounts receivable

     90,666            85,441            5,225  

Marketable securities

     12,606            —              12,606  

Finished goods and merchandise

     15,483            20,010            (4,527 )

Raw materials

     21,663            20,058            1,605  

Work in process

     20,217            21,904            (1,687 )

Supplies

     625            742            (117 )

Advanced payment

     676            173            503  

Deferred income taxes

     12,525            10,806            1,719  

Short-term loans to affiliates

     3,766            3,178            588  

Other accounts receivable

     5,413            5,772            (359 )

Refundable income taxes

     —              2,645            (2,645 )

Other current assets

     328            1,176            (848 )

Allowances for doubtful accounts

     (139 )          (144 )          5  
    


 
  


 
  


Total current assets

     378,425     30.7      415,103     33.4      (36,678 )
    


 
  


 
  


Fixed assets :

                                  

Tangible fixed assets :

                                  

Buildings

     33,378            36,499            (3,121 )

Structures

     2,131            2,275            (144 )

Machinery and equipment

     36,706            37,163            (457 )

Vehicles

     27            30            (3 )

Tools, furniture and fixtures

     7,652            9,232            (1,580 )

Land

     32,277            31,972            305  

Construction in progress

     1,958            1,634            324  
    


 
  


 
  


Total tangible fixed assets

     114,129     9.3      118,805     9.6      (4,676 )
    


 
  


 
  


Intangible assets :

                                  

Patent rights and others

     2,192            3,178            (986 )
    


 
  


 
  


Total intangible assets

     2,192     0.2      3,178     0.3      (986 )
    


 
  


 
  


Investments and other assets :

                                  

Investments in securities

     407,221            413,960            (6,739 )

Investments in subsidiaries and affiliates

     284,996            249,591            35,405  

Investments in subsidiaries and affiliates other than equity securities

     23,254            25,664            (2,410 )

Long-term loan to employees

     —              1            (1 )

Long-term loans to affiliates

     19,744            10,540            9,204  

Long-term loans under rehabilitation plans

     5,336            155            5,181  

Long-term prepaid expenses

     5,035            6,791            (1,756 )

Security deposits

     2,173            2,279            (106 )

Other investments

     364            1,136            (772 )

Allowances for doubtful accounts

     (4,850 )          (241 )          (4,609 )

Allowances for impairment loss on securities

     (5,950 )          (5,950 )           
    


 
  


 
  


Total investments and other assets

     737,323     59.8      703,926     56.7      33,397  
    


 
  


 
  


Total fixed assets

     853,644     69.3      825,909     66.6      27,735  
    


 
  


 
  


Total assets

   ¥ 1,232,069     100.0    ¥ 1,241,012     100.0    ¥ (8,943 )
    


 
  


 
  


 

- 34 -


Table of Contents
     Yen in millions

 
     March 31,

   

Increase

(Decrease)


 
     2005

    2004

   
     Amount

    %

    Amount

    %

   

Current liabilities :

                                    

Trade accounts payable

   ¥ 42,602           ¥ 51,684           ¥ (9,082 )

Current portion of long-term debt

                 0             (0 )

Other payables

     13,737             14,012             (275 )

Accrued expenses

     6,165             6,355             (190 )

Income taxes payables

     13,800             45             13,755  

Advance received

     109             48             61  

Deposits received

     2,845             2,176             669  

Unearned income

     3             4             (1 )

Accrued bonuses

     9,215             10,658             (1,443 )

Provision for warranties

     493             650             (157 )

Provision for sales returns

     232             184             48  

Other current liabilities

     568                         568  
    


 

 


 

 


Total current liabilities

     89,769     7.3       85,816     6.9       3,953  
    


 

 


 

 


Non-current liabilities :

                                    

Long-term debt

                 1             (1 )

Deferred income taxes

     83,376             90,977             (7,601 )

Accrued pension and severance costs

     20,789             33,148             (12,359 )

Directors’ retirement allowance

     1,078             985             93  

Other non-current liabilities

     313             347             (34 )
    


 

 


 

 


Total non-current liabilities

     105,556     8.6       125,458     10.1       (19,902 )
    


 

 


 

 


Total liabilities

     195,325     15.9       211,274     17.0       (15,949 )
    


 

 


 

 


Stockholder’s equity

                                    

Common stock

     115,703     9.4       115,703     9.3        

Additional paid-in capital

     192,555     15.6       192,555     15.5        

Retained earnings:

                                    

Legal reserves

     17,207             17,207              

Reserve for special depreciation

     2,003             2,393             (390 )

Reserve for research and development

     1,000             1,000              

Reserve for dividends

     1,000             1,000              

Reserve for retirement benefits

     300             300              

Reserve for overseas investments

     1,000             1,000              

General reserve

     535,836             487,828             48,008  

Unappropriated retained earnings

     36,990             61,588             (24,598 )
    


 

 


 

 


Total retained earnings

     595,336     48.3       572,316     46.2       23,020  
    


 

 


 

 


Net unrealized gains on other securities

     164,530     13.3       180,520     14.5       (15,990 )

Treasury stock, at cost

     (31,380 )   (2.5 )     (31,356 )   (2.5 )     (24 )
    


 

 


 

 


Total stockholders’ equity

     1,036,744     84.1       1,029,738     83.0       7,006  
    


 

 


 

 


Total liabilities and stockholders’ equity

   ¥ 1,232,069     100.0     ¥ 1,241,012     100.0     ¥ (8,943 )
    


 

 


 

 


 

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Table of Contents

STATEMENTS OF INCOME

 

     Yen in millions

 
     Years ended March 31,

      
     2005

    2004

   Increase (Decrease)

 
     Amount

    %

    Amount

   %

   Amount

    %

 

Net sales

   ¥ 493,271     100.0     ¥ 494,035    100.0    ¥ (764 )   (0.2 )

Cost of sales

     390,348     79.1       385,752    78.1      4,596     1.2  

Gross profit

     102,923     20.9       108,283    21.9      (5,360 )   (5.0 )

Selling, general and administrative expenses

     69,101     14.0       67,061    13.6      2,040     3.0  
    


 

 

  
  


 

Profit from operations

     33,822     6.9       41,222    8.3      (7,400 )   (18.0 )
    


 

 

  
  


 

Non-operating income :

                                        

Interest and dividend income

     28,083     5.7       17,757    3.6      10,326     58.2  

Foreign currency transaction gains, net

     1,445     0.3       1,267    0.3      178     14.1  

Other non-operating income

     8,510     1.7       4,666    0.9      3,844     82.4  
    


 

 

  
  


 

Total non-operating income

     38,038     7.7       23,690    4.8      14,348     60.6  
    


 

 

  
  


 

Non-operating expenses :

                                        

Interest expense

     15     0.0       16    0.0      (1 )   (3.2 )

Loss on disposal of inventories

     3,863     0.8       2,023    0.4      1,840     91.0  

Rework expenses

               481    0.1      (481 )    

Compensation for defective goods

     696     0.1               696      

Other non-operating expenses

     852     0.2       604    0.1      248     40.9  
    


 

 

  
  


 

Total non-operating expenses

     5,426     1.1       3,124    0.6      2,302     73.7  
    


 

 

  
  


 

Recurring profit

     66,434     13.5       61,788    12.5      4,646     7.5  
    


 

 

  
  


 

Non-recurring gain

     2,187     0.4       36,701    7.4      (34,514 )   (94.0 )

Non-recurring loss

     12,738     2.6       1,414    0.3      11,324     800.9  
    


 

 

  
  


 

Income before income taxes

     55,883     11.3       97,075    19.6      (41,192 )   (42.4 )

Income taxes – current

     9,320     1.9       3,807    0.7      5,513     144.8  

Income taxes – previous years

     12,748     2.5               12,748      

Income taxes – deferred

     (512 )   (0.1 )     32,605    6.6      (33,117 )    
    


 

 

  
  


 

Net income

     34,327     7.0       60,663    12.3      (26,336 )   (43.4 )
    


 

 

  
  


 

Unappropriated retained earnings brought forward from the previous year

     8,293             6,553                    

Net realized loss on treasury stock, at cost

     5             3                    

Interim dividends

     5,625             5,625                    
    


       

                   

Unappropriated retained earnings at the end of the year

   ¥ 36,990           ¥ 61,588                    
    


       

                   

 

- 36 -


Table of Contents

PROPOSED APPROPRIATION OF RETAINED EARNINGS

 

     Yen in millions

 
     Years ended March 31,

   Increase
(Decrease)


 
     2005

   2004

  

Unappropriated retained earnings

   ¥ 36,990    ¥ 61,588    ¥ (24,598 )

Reversal of reserves:

                      

Reversal of reserve for special depreciation

     740      710      30  
    

  

  


Total

     37,730      62,298      (24,568 )
    

  

  


To be appropriated as follows:

                      

Dividends

     9,374      5,624      3,750  

Directors’ bonuses (Note)

     60      60      —    

Reserve for special depreciation

     322      321      1  

General reserve

     18,000      48,000      (30,000 )