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Kyocera 6-K 2006

Documents found in this filing:

  1. 6-K
  2. 6-K
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 December 2006

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/ SHOICHI AOKI

Shoichi Aoki
Executive Officer
General Manager of
Corporate Financial & Accounting Group

Date: December 19, 2006


Table of Contents

Information furnished on this form:

EXHIBITS

 

Exhibit
Number
    
1.    English summary and translation of Semiannual Report (“hanki-houkokusho”) for the six months ended September 30, 2006 filed with the Japanese government pursuant to the Securities and Exchange Law of Japan


Table of Contents

Information on Kyocera Corporation and its Consolidated Subsidiaries

Item 1. Summary of Kyocera Corporation and its Consolidated Subsidiaries

1. Selected Financial Data

(1) Consolidated Financial Data

 

     (Yen in millions, except per share amounts and employees)  

Kyocera Corporation’s Terms

   51st interim     52nd interim     53rd interim     51st     52nd  

Fiscal Periods

   Apr.1, 2004 -
Sep.30, 2004
    Apr.1, 2005 -
Sep.30, 2005
    Apr.1, 2006 -
Sep.30, 2006
    Apr.1, 2004 -
Mar.31, 2005
    Apr.1, 2005 -
Mar.31, 2006
 

Net sales

   596,904     542,238     615,390     1,173,660     1,173,544  

Income from continuing operations before income taxes

   65,420     44,329     72,385     104,013     117,237  

Net income

   42,549     24,214     53,493     45,908     69,696  

Stockholders’ equity

   1,177,648     1,241,695     1,373,567     1,174,851     1,289,077  

Total assets

   1,785,505     1,862,928     1,951,702     1,745,519     1,931,522  

Stockholders’ equity per share

   6,281.06     6,623.25     7,306.02     6,266.50     6,865.75  

Earnings per share – Basic

   226.94     129.16     284.64     244.86     371.68  

Earnings per share – Diluted

   226.85     129.15     284.14     244.81     371.43  

Stockholders’ equity to total assets (%)

   66.0     66.6     70.4     67.3     66.7  

Cash flows from operating activities

   88,891     71,772     47,923     145,523     171,077  

Cash flows from investing activities

   (144,177 )   (123,091 )   (74,084 )   (132,494 )   (165,467 )

Cash flows from financing activities

   (53,582 )   (9,657 )   (13,079 )   (67,344 )   (23,289 )

Cash and cash equivalents at the end of period

   256,965     253,885     263,751     310,592     300,809  

Number of employees

   60,163     59,347     63,235     58,559     61,468  

(Notes)

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

The interim consolidated financial statements and the consolidated financial statements are expressed rounding off to millions of yen.

2. Earnings per share amounts are computed based on Statement of Financial Accounting Standards No.128, “Earnings per Share.”
3. In accordance with Statement of Financial Accounting Standards No.144, “Accounting for the Impairment of Disposal of Long-Lived Assets,” the consolidated financial data for the six months ended September 30, 2004 and 2005 and for the years ended March 31, 2005 and 2006 have been retrospectively reclassified as for the discontinued operations.
4. Consumption taxes and local consumption taxes are not included in net sales.

 

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Table of Contents

(2) Non-Consolidated Financial Data

 

     (Yen in millions, except per share amounts, and number of shares issued and employees)

Kyocera Corporation’s Terms

   51st interim    52nd interim    53rd interim    51st    52nd

Fiscal Periods

   Apr.1, 2004 -
Sep.30, 2004
   Apr.1, 2005 -
Sep.30, 2005
   Apr.1, 2006 -
Sep.30, 2006
   Apr.1, 2004 -
Mar.31, 2005
   Apr.1, 2005 -
Mar.31, 2006

Net sales

   250,463    220,901    259,738    493,271    477,379

Recurring profit

   34,937    26,903    32,844    66,434    68,182

Net income

   20,512    31,865    33,655    34,327    68,712

Common stock

   115,703    115,703    115,703    115,703    115,703

Number of shares issued

   191,309,290    191,309,290    191,309,290    191,309,290    191,309,290

Net assets

   1,025,776    1,100,768    1,191,940    1,036,744    1,132,261

Total assets

   1,233,908    1,343,060    1,471,385    1,232,069    1,389,396

Interim (Annual) dividends per share

   30.00    50.00    50.00    80.00    100.00

Net assets to total assets (%)

   83.1    82.0    81.0    84.1    81.5

Number of employees

   12,656    12,522    12,457    12,682    12,457

(Notes)

1. The interim non-consolidated financial statements and the non-consolidated financial statements are expressed rounding off to millions of yen.
2. Consumption taxes and local consumption taxes are not included in net sales.

 

2. Business Overview

In August 2006, Kyocera Corporation sold its shares of Kyocera Leasing Co., Ltd., a subsidiary engaged in financing business, to Diamond Lease Company Limited., reflecting a part of promoting its policy of business selection and concentration and the financing business was accounted as a discontinued operation for the six months ended September 30, 2006 (the first half). Except this sale, there is no material change in the business of Kyocera Corporation and its consolidated subsidiaries (Kyocera) for the first half.

3. Scope of Consolidation and Application of the Equity Method

Kyocera Corporation sold Kyocera Leasing Co., Ltd., a 100% subsidiary, to Diamond Lease Company Limited in the first half. As a result of this sale, Kyocera Corporation discontinued to apply subsidiary to Kyocera Leasing Co., Ltd.

4. Employees

As of September 30, 2006, Kyocera had 63,235 employees, of whom 2,616 work in the Fine Ceramic Parts Group, 10,029 work in the Semiconductor Parts Group, 5,605 work in the Applied Ceramic Products Group, 22,240 work in the Electronic Device Group, 3,081 work in the Telecommunications Equipment Group, 12,699 work in the Information Equipment Group, 1,495 work in the Optical Equipment Group, 3,900 work in Others and 1,570 work in Corporate. Kyocera Corporation had 12,457 employees.

Kyocera Corporation’s labor union does not belong to labor unions organized by industry. The labor unions of several subsidiaries belong to labor unions organized by industry. There is no material item to be specifically addressed regarding relationship between labor and management.

 

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Table of Contents

Item 2. Business Results and Financial Position

1. Summary of Financial Results

(1) Consolidated Financial Results

 

     (Yen in millions, except per share amounts and exchange rates)
     Six months ended September 30,   

Increase

Decrease

(%)

   2005    2006   
   Amount   

% to

net sales

   Amount   

% to

net sales

  

Net sales

   542,238    100.0    615,390    100.0    13.5

Profit from operations

   33,764    6.2    63,128    10.3    87.0

Income from continuing operations before income taxes

   44,329    8.2    72,385    11.8    63.3

Net income

   24,214    4.5    53,493    8.7    120.9

Diluted earnings per share

   129.15    —      284.14    —      —  

Average exchange rates:

              

US$

   109    —      115    —      —  

Euro

   136    —      146    —      —  

 

Note 1. Kyocera sold its shares of Kyocera Leasing Co., Ltd., a subsidiary engaged in financing, and as a result, operating results and gain on sales of Kyocera Leasing Co., Ltd. for the first half have been recorded as income from discontinued operations in accordance with accounting principles generally accepted in the U.S. Accordingly, figures for the six months ended September 30, 2005 (the previous first half) also have been retrospectively reclassified. As a result, reclassified consolidated net sales for the previous first half decreased by ¥3,020 million compared with the result previously announced. Reclassified profit from operations and income from continuing operations before income taxes decreased by ¥1,585 million and ¥1,806 million, respectively compared with the result previously announced.

[Reporting Segments]

 

     (Yen in millions)  

Orders

   Six months ended September 30,    

Increase

Decrease

(%)

 
   2005     2006    
   Amount    

% to

the total

    Amount     % to
the total
   

Fine Ceramic Parts Group

   33,566     5.9     39,785     6.2     18.5  

Semiconductor Parts Group

   68,971     12.0     76,861     12.0     11.4  

Applied Ceramic Products Group

   58,241     10.1     66,757     10.4     14.6  

Electronic Device Group

   130,768     22.7     147,734     23.1     13.0  

Total components business

   291,546     50.7     331,137     51.7     13.6  

Telecommunications Equipment Group

   110,467     19.2     129,231     20.2     17.0  

Information Equipment Group

   118,275     20.5     124,136     19.4     5.0  

Optical Equipment Group

   7,962     1.4     5,958     0.9     (25.2 )

Total equipment business

   236,704     41.1     259,325     40.5     9.6  

Others

   57,622     10.0     61,745     9.6     7.2  

Adjustments and eliminations

   (10,487 )   (1.8 )   (12,025 )   (1.8 )   —    

Total orders

   575,385     100.0     640,182     100.0     11.3  

 

Note 2. Commencing in the first half, operating results of the Precision Machine Division of Kyocera Corporation, previously included within “Corporate,” have been reclassified into “Others.” Accordingly, previously reported operating results of these reporting segments in the previous first half have been retrospectively reclassified.

 

Note 3. By the reasons in notes 1 and 2, order of “Others” in the previous first half decreased by ¥4,308 million and “Adjustments and eliminations” increased by ¥ (133) million, compared with those previously announced.

 

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Table of Contents

 

     (Yen in millions)  

Production (Sales price)

   Six months ended September 30,   

Increase

Decrease

(%)

 
   2005    2006   
   Amount   

% to

the total

   Amount   

% to

the total

  

Fine Ceramic Parts Group

   32,963    6.1    38,959    6.1    18.2  

Semiconductor Parts Group

   64,055    11.9    77,929    12.2    21.7  

Applied Ceramic Products Group

   55,164    10.3    65,436    10.2    18.6  

Electronic Device Group

   124,363    23.2    144,236    22.5    16.0  

Total components business

   276,545    51.5    326,560    51.0    18.1  

Telecommunications Equipment Group

   93,910    17.5    126,414    19.8    34.6  

Information Equipment Group

   116,617    21.8    137,311    21.5    17.7  

Optical Equipment Group

   7,616    1.4    5,923    0.9    (22.2 )

Total equipment business

   218,143    40.7    269,648    42.2    23.6  

Others

   41,778    7.8    43,724    6.8    4.7  

Total production

   536,466    100.0    639,932    100.0    19.3  

 

 

     (Yen in millions)  

Net Sales

   Six months ended September 30,    

Increase

Decrease

(%)

 
   2005     2006    
   Amount    

% to

the total

    Amount    

% to

the total

   

Fine Ceramic Parts Group

   33,258     6.1     38,564     6.3     16.0  

Semiconductor Parts Group

   63,544     11.7     75,843     12.3     19.4  

Applied Ceramic Products Group

   55,752     10.3     64,132     10.4     15.0  

Electronic Device Group

   125,383     23.1     139,984     22.7     11.6  

Total components business

   277,937     51.2     318,523     51.7     14.6  

Telecommunications Equipment Group

   91,084     16.8     117,181     19.0     28.7  

Information Equipment Group

   118,433     21.8     124,619     20.3     5.2  

Optical Equipment Group

   8,256     1.5     5,890     1.0     (28.7 )

Total equipment business

   217,773     40.1     247,690     40.3     13.7  

Others

   56,049     10.3     60,850     9.9     8.6  

Adjustments and eliminations

   (9,521 )   (1.6 )   (11,673 )   (1.9 )   —    

Total net sales

   542,238     100.0     615,390     100.0     13.5  

 

Note 4. By the reasons in notes 1 and 2, net sales of “Others” in the previous first half decreased by ¥2,985 million and “Adjustments and eliminations” increased by ¥ (35) million, compared with those previously announced.

 

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Table of Contents
     (Yen in millions)  
     Six months ended September 30,   

Increase

Decrease

(%)

 
     2005    2006   
     Amount    

% to

net sales

   Amount    

% to

net sales

  

Fine Ceramic Parts Group

   4,805     14.4    7,373     19.1    53.4  

Semiconductor Parts Group

   7,251     11.4    11,887     15.7    63.9  

Applied Ceramic Products Group

   9,337     16.7    8,966     14.0    (4.0 )

Electronic Device Group

   11,171     8.9    21,573     15.4    93.1  

Total components business

   32,564     11.7    49,799     15.6    52.9  

Telecommunications Equipment Group

   (9,355 )   —      (1,016 )   —      —    

Information Equipment Group

   13,244     11.2    15,491     12.4    17.0  

Optical Equipment Group

   (4,049 )   —      (899 )   —      —    

Total equipment business

   (160 )   —      13,576     5.5    —    

Others

   3,186     5.7    3,748     6.2    17.6  

Total operating profit

   35,590     6.6    67,123     10.9    88.6  

Corporate

   8,882     —      5,152     —      (42.0 )

Equity in earnings of affiliates and unconsolidated subsidiaries

   (236 )   —      259     —      —    

Adjustments and eliminations

   93     —      (149 )   —      —    

Income from continuing operations before income taxes

   44,329     8.2    72,385     11.8    63.3  

 

Note 5. By the reasons in notes 1 and 2, operating profit of “Others” in the previous first half decreased by ¥1,518 million and “Corporate” decreased by ¥288 million, compared with those previously announced.

Kyocera develops, produces and markets various kinds of products for the telecommunications and information processing and environmental preservation markets. Kyocera Corporation was established in 1959 as a manufacturer of ceramic parts for electronic equipment and has been expanding and diversifying its business mainly through merger and acquisition activities, as well as applying its ceramic technologies to the areas of semiconductor parts, electronic components, telecommunication, metal processing, medical and dental implants and solar energy fields. Kyocera develops, produces and markets a variety of parts and devices for electronic equipment such as computers, automobiles, printers and copiers as well as consumer electronic products such as mobile phone handsets and digital still cameras. Kyocera earns revenue and income and generates cash from sales of these products.

Kyocera’s revenue and profits mostly come through sales of products and providing services in IT industries, including electronic equipment industries. During the first half, in the electronics industry, a year-on-year increase in production of mobile phone handsets and digital TVs led to a considerable increase in demand for electronic components for these products. Kyocera achieved an increase in orders, production, sales and income from continuing operations before income taxes in the first half compared with the previous first half in both the components and equipment businesses thanks to active efforts to launch new products in the favorable market environment and to improved productivity. In addition, tax refunds in the amount of ¥4,356 million accompanying the correction disposition related to transfer pricing adjustment.

Kyocera’s sales in overseas markets increased by 16.5% compared with the previous first half. Since almost all overseas sales were denominated in the U.S. dollars or Euro, the yen depreciated ¥6 against the U.S. dollar and ¥10 against the Euro compared with the average exchange rates in the previous half, respectively. As a result, net sales after translation into yen were pushed up by approximately ¥ 21.8 billion compared with the previous first half.

 

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Table of Contents

1) Fine Ceramic Parts Group

Orders, production and sales in this reporting segment increased significantly compared with the previous first half. This was mainly because a recovery in the semiconductor industry led to a considerable increase in demand for ceramic parts for semiconductor fabrication equipment. As a result, operating profit in this reporting segment increased significantly compared with the previous first half.

2) Semiconductor Parts Group

Orders, production and sales in this reporting segment increased compared with the previous first half due to active demand for ceramic packages used in digital consumer equipment such as mobile phone handsets. As a result, operating profit in this reporting segment increased significantly compared with the previous first half.

3) Applied Ceramic Products Group

Orders, production and sales in this reporting segment increased in the first half compared with the previous first half due to the favorable performance of the solar energy business, amid an expanding global market spurred by rising environmental awareness, and also to increased sales of cutting tools for the automotive industry. Operating profit from solar energy business decreased due to costs for repair of defects in a portion of the products sold overseas up to the year ended March 31, 2004. Kyocera provides long-term warranties for such products, and accordingly set aside a reservation in the amount of approximately ¥3.9 billion in the first half for warranty costs. As a result, operating profit in this reporting segment as a whole decreased as compared with the previous first half.

4) Electronic Device Group

Orders, production and sales increased substantially in this reporting segment compared with the previous first half. Along with a particularly significant increase of operating at AVX Corporation, a U.S. subsidiary, compared with the previous first half, demand for capacitors, crystal-related components and connectors, etc., expanded due to strong production activity for digital consumer equipment. As a result, operating profit in this reporting segment increased significantly compared with the previous first half.

5) Telecommunications Equipment Group

Orders, production and sales in this reporting segment increased compared with the previous first half due mainly to favorable sales of new models of mobile phone handsets in the domestic market. Operating profit also improved significantly compared with the previous first half, due to the positive effect of increased sales in the domestic mobile phone handset business and to decreased loss at Kyocera Wireless Corp., a U.S. subsidiary.

6) Information Equipment Group

Orders, production and sales in this reporting segment increased compared with the previous first half due to sales growth of digital multifunctional products and printers overseas and to the positive effect of the yen’s depreciation against the Euro and the U.S. dollar. As a result, operating profit in this reporting segment increased compared with the previous first half.

 

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7) Optical Equipment Group

Orders, production and sales in this reporting segment decreased compared with the previous first half due mainly to the downsizing of the camera equipment business, while operating loss was reduced by effects of a decrease in expenses for structural reforms.

8) Others

Orders, production and sales in “Others” increased compared with the previous first half due to sales growth in the telecommunications engineering business at Kyocera Communication Systems Co., Ltd. Operating profit also increased due primarily to an increase in profits in the electronic device materials business at Kyocera Chemical Corporation.

[Geographic Segments]

 

      (Yen in millions)
     Six months ended September 30,   

Increase

(Decrease)

(%)

     2005    2006   
     Amount   

% to

the total

   Amount   

% to

the total

  

Japan

   217,171    40.0    236,735    38.5    9.0

United States of America

   112,642    20.8    130,265    21.2    15.6

Asia

   91,643    16.9    107,111    17.4    16.9

Europe

   87,848    16.2    97,464    15.8    10.9

Others

   32,934    6.1    43,815    7.1    33.0

Total net sales

   542,238    100.0    615,390    100.0    13.5

 

Note 6. By the reason in note 1, consolidated net sales in Japan in the previous first half decreased by ¥3,020 million compared with the results previously announced.

1) Japan

Sales increased compared with the previous first half due to burgeoning demand for products in the Fine Ceramic Parts Group and the Semiconductor Parts Group.

2) United States of America

Sales of the Semiconductor Parts Group and the Electronic Device Group increased due to expanded demand for components for digital consumer products. Sales of the Information Equipment Group also increased.

3) Asia

Sales increased compared with the previous first half due to expanded component demand, particularly in the Electronic Device Group.

4) Europe

Increased demand for solar energy products and products in the Electronic Device Group, coupled with sales growth in the Information Equipment Group, resulted in an increase in sales compared with the previous first half.

 

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5) Others

Sales increased due to sales growth in the Telecommunications Equipment Group and the Information Equipment Group.

(2) Cash flow

Cash and cash equivalent at September 30, 2006 decreased by ¥37,058 million to ¥263,751 million compared with at March 31, 2006.

1) Cash flow from operating activities

Net cash provided by operating activities for the first half decreased by ¥23,849 million to ¥ 47,923 million from the previous first half of ¥71,772 million. Although net income increased by ¥29,279 million, cash and cash equivalent in connection with receivables and inventories decreased compared with the previous first half.

2) Cash flow from investing activities

Net cash used in investing activities in the first half decreased by ¥49,007 million to ¥74,084 million from the previous first half of ¥123,091 million. This was due to decreases in payment for purchases of available-for-sale securities and property, plant, equipment and intangible assets and an increase in maturities of held-to-maturity securities, which exceeded decreases in sales and maturities of available-for-sale securities.

3) Cash flow from financing activities

Net cash used in financing activities for the first half increased by ¥3,422 million to ¥13,079 million from the previous first half of ¥9,657 million. This was due to a decrease in proceeds from issuance of long-term debt and an increase in payments of long-term debt, which exceeded an increase in short-term debt.

2. Production, Orders and Distribution

Production, orders and distribution of Kyocera are disclosed related to each reporting segment in “1. Summary of Financial Results.”

3. Management Challenges

Kyocera aims to maintain ongoing sales expansion and high profitability in its components and equipment businesses in order to be “a creative company that continues to grow.” In this regard, Kyocera has implemented several initiatives outlined below to quickly achieve its target of a pre-tax profit ratio of 15% or higher.

1) Reinforce the “Amoeba Management System” Kyocera is strengthening its “Amoeba Management System,” which is unique management resource of Kyocera and remains a source of competitive advantage over other companies. It has been a major driving force for growth since its foundation. Kyocera plans to reinforce this system to revitalize operations across development, manufacturing, sales and back office divisions. The aim is to boost ability to achieve targets.

 

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2) Boost profitability in the equipment business

Kyocera has been conducting fundamental structural reforms in the Telecommunications Equipment Group over the past two years as a means of raising profitability. The positive effects of the reform have been reflected in steadily improving business performance in the first half. In the second half of the year ending March 31, 2007 and onward, Kyocera will strive to expand its sales and profits by maximizing group-wide synergies to promote business development.

Kyocera also seeks to further improve business performance in the Information Equipment Group. To achieve this, Kyocera will expand sales of multifunctional products and printers that are distinctive from the competition through effective utilization of component and device technology within Kyocera. Kyocera will also continue to release new high-value-added products, such as color and network compatible models.

4. Significant Patents and Licenses

New significant license agreements concluded in the first half are as follows.

Agreement concerning stock transfer

Kyocera Corporation and Diamond Lease Company Limited reached an agreement for the transfer of 100% of the shares of Kyocera Leasing Co., Ltd. from Kyocera to Diamond Lease on July 27, 2006 and Kyocera Corporation transferred its shares to Diamond Lease Company Limited in August 1, 2006.

5. Research and Development Activities

Kyocera aims to be “a creative company that continues to grow.” To achieve this objective, Kyocera seeks to enhance its components and equipment businesses and create new technologies, products and businesses by integrating group-wide management resources while advancing, focusing and integrating technological capabilities. Kyocera will channel its energies into two high-growth-potential areas; the markets for telecommunications and information processing and for environmental preservation. R&D activities are conducted in all of these markets in the realms of materials, components, devices and equipment.

Specific initiatives in each reporting segment are as follows.

1) Fine Ceramic Parts Group

By leveraging competitive advantages in fine ceramic materials technology, process technology and design technology, Kyocera can strengthen the development of fine ceramic components for next-generation semiconductor fabrication equipment and large LCD fabrication equipment, as well as high-quality, cost-competitive sapphire substrates for LEDs, which are expected to have growing application in the lighting field going forward. In the growing automotive market, efforts are being undertaken to develop products that meet the need for advanced electronics and growing concerns with safety and the environment. Specific projects include the development of glow plugs by fully utilizing the high temperature durability of ceramics and piezo actuators that enable precision control for the fuel injection of diesel engine cars, which are becoming more widespread in Europe.

 

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2) Semiconductor Parts Group

Kyocera is developing new ceramic and organic packages for digital consumer equipment, an area in which demand is expected to continue expanding. In the ceramic package business, Kyocera is developing sophisticated, small, slim packages in response to advancements in mobile phones, and low-temperature co-fired multilayer substrates built in various functionalities. Elsewhere, efforts are being made to develop packages for sensors in the automotive market and ceramic substrates for the medical equipment market to keep pace with the growing application of ceramic packages. In the organic packages business, Kyocera is also developing high density printed wiring boards for next-generation MPUs and their peripheral devices.

3) Applied Ceramic Products Group

Kyocera is working on the development of products for the environmental preservation market. In solar energy business, which is becoming increasingly mainstream, Kyocera is developing various next-generation solar batteries while striving to further enhance conversion efficiency. Kyocera is also working toward the practical application of solid oxide fuel cells (SOFCs) for residential use, which are expected to be the next-generation distributed power generation system for small-scale power sources.

4) Electronic Device Group

Kyocera is developing various products for the digital consumer equipment market as the increasing sophistication of items in this sector is expected to bring about the need for a more diverse array of components for them. Products developed by Kyocera include smaller, higher-capacitance ceramic capacitors and low-inductance ceramic capacitors, ultra-small low-frequency crystal units, ceramic resonators and shock sensors. Kyocera is also developing GPS (Global Positioning System) modules and various capacitors by utilizing enhanced material properties.

In the thin-film devices, Kyocera is developing thermal printheads for high-resolution digital photo printers, and LCDs for industrial use equipped with an LED backlight to meet needs from an environmental perspective. Work is also being done towards the commercial application of organic light emitting diode displays that realize low power consumption and that have moving image quality seen as outstanding for mobile equipment.

5) Telecommunications Equipment Group

Kyocera is developing advanced CDMA handsets with terrestrial digital TV and IP telephony capabilities for the mobile telecommunications market, which is characterized by diversifying functionality. Development is also proceeding for sophisticated PHS base stations and handsets with multiple service capability in response to the increasing speed of data transmission in the domestic PHS market. Further, Kyocera is strengthening the development of wireless broadband systems capable of stable high-speed, high-volume data transmission, such as iBurstTM related equipment.

6) Information Equipment Group

Kyocera is working on the development of new products based on its unique ECOSYS concept, realized by the amorphous silicon drum with superior wear resistance. These new products focus on color capability and increased speed. Besides seeking to expand its color model lineup, Kyocera is also developing document solutions equipment that can handle the integrated management of documents and digital information.

 

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7) Optical Equipment Group

Through the fusion of electronic material and device technologies in the optical field held within the Group, Kyocera is developing various lenses, such as aspheric lens and optical components.

8) Others

The Kyocera Chemical Group is working on the development of semiconductors and LCD related materials. Specifically, it is developing high-temperature photo-sensitive resins used to protect the surface of semiconductors as well as photo spacers for LCDs. It is also pushing ahead with the development of materials for capacitors and solar cells, thereby maximizing synergies with Kyocera businesses.

The Kyocera Communication Systems Group is developing technologies for mobile communications equipment, including next-generation mobile phones, for FMC (Fixed Mobile Convergence) related products with wireless technology, and for wave measurement tools. It is also developing general authentication and security technologies that are ideal for various advanced networks.

Research and development expenses for the first half increased by ¥929 million, or 3.2%, to ¥30,257 million, compared with the previous first half, which accounted for 4.9% of Kyocera’s total net sales. Research and development expenses by reporting segment were as follows; the Fine Ceramic Parts Group: ¥1,976 million (increased by ¥438 million, or 28.5% compared with the previous first half), the Semiconductor Parts Group: ¥1,783 million (decreased by ¥14 million, or 0.8%); the Applied Ceramic Products Group: ¥2,014 million (decreased by ¥36 million, or 1.8%); the Electronic Device Group: ¥5,822 million (increased by ¥522 million, or 9.8%); the Telecommunications Equipment Group: ¥7,897 million (decreased by ¥200 million, or 2.5%); the Information Equipment Group; ¥8,584 million (increased by ¥85 million, or 1.0%); the Optical Equipment Group: ¥344 million (decreased by ¥257 million, or 42.8%); and Others: ¥1,837 million (increased by ¥391 million, or 27.0%).

 

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Table of Contents

Item 3. Equipment and Facilities

 

1. Information on Equipment and Facilities

There was no material change in equipment and facilities in the first half.

2. Plan for new additions or disposal

(1) New Additions

In the first half, there was no material change in plan for new additions, which prepared on March 31, 2006.

(2) Material Sale and Disposal of Equipment and Facilities

Kyocera does not plan to sell or dispose equipment or facilities that significantly affect its production capability, except for its sale and disposal of ordinary renewal of equipment and facilities.

 

Item 4. Information on Kyocera Corporation

 

1. Authorized Capital and Common Stock

(1) Number of Authorized Capital and Common Stock

<Authorized Capital>

The total number of common stock authorized for issuance by Kyocera Corporation    600,000,000 shares

<Number of Shares of Common Stock Issued>

As of September 30, 2006, and December 19, 2006, 191,309,290 shares of common stock were issued, registered on Tokyo Stock Exchange, Osaka Securities Exchange in Japan and New York Stock Exchange in the United States as follows:

 

   

            Title of Each Class            

        Name of Each Exchange on Which Registered     
 

Common Stock

Common Stock

American Depositary Share

      Tokyo Stock Exchange
Osaka Securities Exchange
New York Stock Exchange
  

 

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Table of Contents

(2) Stock Acquisition Rights

The following table shows stock acquisition rights issued pursuant to Articles 280-20 and 280-21 of the former Commercial Code of Japan.

<Stock acquisition rights approved at the stockholders’ meeting held on June 25, 2003>

 

Date    As of September 30, 2006    As of November 30, 2006
           

Number of stock acquisition rights

   4,878    4,199

Class of shares issued for stock

acquisition rights

   Common Stock    Same as on the left

Number of shares issued for stock acquisition rights

   487,800    419,900

Amount to be paid in upon exercise of

stock acquisition rights

   7,900    Same as on the left

Exercise period for stock acquisition rights

   From October 1, 2003 to September 30, 2008    Same as on the left

Issue price of the shares to be issued upon exercise of stock acquisition rights

   7,900    Same as on the left

Amount out of issue price of new shares to be accounted as paid-in capital of

Kyocera Corporation

   3,950    Same as on the left

Conditions for exercise of stock

acquisition rights

  

(i)In order to exercise stock acquisition rights, the person who has been allocated such stock acquisition rights (the “Acquisition Rights Holder”) must be a Director, Corporate Auditor, Executive Officer or employee of Kyocera Corporation or a subsidiary thereof at the time of exercise.

(ii)In the event of the death of the Acquisition Rights Holder, the heir(s) thereof may exercise inherited stock acquisition rights for a period of 6 months (or until the date of expiration of the exercise period thereof, if such date comes earlier),up to the maximum number of stock acquisition rights the deceased could have exercised at the time of death.

(iii) Upon approval by the Bonus Committee of Kyocera Corporation, the exercise of stock acquisition rights may be permitted under conditions different from those described in (i) and (ii) above.

(iv)Other terms and conditions shall be provided for in an agreement between Kyocera Corporation and each Acquisition Rights Holder, pursuant to resolutions of this Ordinary General Meeting of Shareholders and the Board of Directors of Kyocera Corporation.

   Same as on the left

Restriction on transfer of the stock acquisition rights

   Transfer and pawn are prohibited.    Same as on the left

 

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Table of Contents

<Stock acquisition rights approved at the stockholders’ meeting held on June 25, 2004>

 

Date    As of September 30, 2006    As of November 30, 2006
           

Number of stock acquisition rights

   10,811    9,554

Class of shares issued for stock acquisition rights

   Common Stock    Same as on the left

Number of shares issued for stock acquisition rights

   1,081,100    955,400

Amount to be paid in upon exercise of

stock acquisition rights

   8,725    Same as on the left

Exercise period for stock acquisition rights

   From October 1, 2004 to September 30, 2008    Same as on the left

Issue price of the shares to be issued upon exercise of stock acquisition rights

   8,725    Same as on the left

Amount out of issue price of new shares to

be accounted as paid-in capital of

Kyocera Corporation

   4,363    Same as on the left

Conditions for exercise of stock

acquisition rights

  

(i)In order to exercise stock acquisition rights, the person who has been allocated such stock acquisition rights (the “Acquisition Rights Holder”) must be a Director, Corporate Auditor, Executive Officer or employee of Kyocera Corporation or a subsidiary thereof at the time of exercise.

(ii)In the event of the death of the Acquisition Rights Holder, the heir(s) thereof may exercise inherited stock acquisition rights for a period of 6 months (or until the date of expiration of the exercise period thereof, if such date comes earlier),up to the maximum number of stock acquisition rights the deceased could have exercised at the time of death.

(iii) Upon approval by the Bonus Committee of Kyocera Corporation, the exercise of stock acquisition rights may be permitted under conditions different from those described in (i) and (ii) above.

(iv)Other terms and conditions shall be provided for in an agreement between Kyocera Corporation and each Acquisition Rights Holder, pursuant to resolutions of this Ordinary General Meeting of Shareholders and the Board of Directors of Kyocera Corporation.

   Same as on the left

Restriction on transfer of the stock acquisition rights

   Transfer and pawn are prohibited.    Same as on the left

 

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<Stock acquisition rights approved at the stockholders’ meeting held on June 28, 2005>

 

Date

  

As of September 30, 2006

  

As of November 30, 2006

Number of stock acquisition rights

   12,209    11,933

Class of shares issued for stock

acquisition rights

   Common Stock    Same as on the left

Number of shares issued for stock acquisition rights

   1,220,900    1,193,300

Amount to be paid in upon exercise of

stock acquisition rights

   8,619    Same as on the left

Exercise period for stock acquisition rights

   From October 1, 2005 to September 30, 2008    Same as on the left

Issue price of the shares to be issued upon exercise of stock acquisition rights

   8,619    Same as on the left

Amount out of issue price of new shares to be accounted as paid-in capital of Kyocera Corporation

   4,310    Same as on the left

Conditions for exercise of stock

acquisition rights

  

(i)In order to exercise stock acquisition rights, the person who has been allocated such stock acquisition rights (the “Acquisition Rights Holder”) must be a Director, Corporate Auditor, Executive Officer or employee of Kyocera Corporation or a subsidiary thereof at the time of exercise.

(ii)In the event of the death of the Acquisition Rights Holder, the heir(s) thereof may exercise inherited stock acquisition rights for a period of 6 months (or until the date of expiration of the exercise period thereof, if such date comes earlier),up to the maximum number of stock acquisition rights the deceased could have exercised at the time of death.

(iii) Upon approval by the Bonus Committee of Kyocera Corporation, the exercise of stock acquisition rights may be permitted under conditions different from those described in (i) and (ii) above.

(iv)Other terms and conditions shall be provided for in an agreement between Kyocera Corporation and each Acquisition Rights Holder, pursuant to resolutions of this Ordinary General Meeting of Shareholders and the Board of Directors of Kyocera Corporation.

   Same as on the left

Restriction on transfer of the stock acquisition rights

   Transfer and pawn are prohibited.    Same as on the left

 

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(3) Status of Common Stock and Capital

 

     (Yen in millions, except number of shares)

Date

   Increased
number of
shares issued
  

Number

of

shares issued

  

Increased
amount of

capital

  

Total
amount of

capital

  

Increased amount of

additional

paid- in capital

  

Total amount of

additional

paid-in capital

September 30, 2006

   —      191,309,290    —      115,703    —      192,555

(4) Major Shareholders

The following table shows the ten largest shareholders of record of Kyocera Corporation as of September 30, 2006.

 

Name

   Shares owned
(in thousands)
   Ownership (%)

Japan Trustee Services Bank, Ltd. (Trust Account)

   14,046    7.34

The Master Trust Bank of Japan, Ltd. (Trust Account)

   11,802    6.17

The Bank of Kyoto, Ltd.

   7,218    3.77

Kazuo Inamori

   6,806    3.56

Bank of Tokyo-Mitsubishi UFJ, Ltd.

   5,076    2.65

The Inamori Foundation

   4,680    2.45

Keiai Kosan K.K.

   3,550    1.86

Deutsche Securities, Ltd.

   3,448    1.80

Nats Cumuco (Standing proxy: Sumitomo Mitsui Banking Corporation)

   2,817    1.47

Sumitomo Trust and Banking Co., Ltd. (Trust Account B)

   2,753    1.44
         

Total

   62,196    32.51

(Note 1) Kyocera Corporation which holds 3,305 thousand shares of treasury stock without voting rights is excluded from the list of major shareholders above.

(Note 2) Nats Cumco represents the registered name of Citibank, N.A. which is a depositary of American Depositary Share of Kyocera Corporation.

(Note 3) On August 15, 2006, in accordance with the Securities and Exchange Law of Japan, Mitsubishi UFJ Financial Group informed Kyocera Corporation that they became a holder of over 5% of the total issued voting shares of Kyocera Corporation, and they held shares of Kyocera Corporation as shown in the following table as of July 31, 2006. However, they were not included in the above major shareholders as a single major holder because all of certain partners of Mitsubishi UFJ Financial Group were not the shareholders of record as of September 30, 2006.

 

Name of Holders

   Shares owned
in thousands

Bank of Tokyo-Mitsubishi UFJ, Ltd.

   5,076

Mitsubishi UFJ Trust and Banking Corporation

   3,623

Mitsubishi UFJ Securities Co., Ltd.

   570

Mitsubishi UFJ Asset Management Co., Ltd.

   1,457

MU Investments Co., Ltd.

   119

Mitsubishi UFJ Asset Management (UK) Co., Ltd.

   3
    

Total

   10,848

 

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Table of Contents

(5) Voting Rights

The following table shows voting rights of common stock of Kyocera Corporation as of September 30, 2006.

 

     Number of shares    Number of voting rights

Shares without voting rights

   —      —  

Shares with limited voting rights

   —      —  

Shares with full voting rights (treasury stock)

   3,304,500 shares of
common stock
   —  

Shares with full voting rights (other)

   187,528,500 shares of
common stock
   1,875,285

Shares constituting less than one unit

   476,290 shares of
common stock
   —  

Total number of shares issued

   191,309,290 shares of
common stock
   —  

Total voting rights of all shareholders

   —      1,875,285

Kyocera Corporation held treasury stocks of 3,304,500 shares, and its ownership to total number of shares issued was 1.73% as of September 30, 2006.

 

2. Price Range of Shares

The following table shows price range of shares of Kyocera Corporation for the six months ended September 30, 2006.

 

     Tokyo Stock Exchange
    

Price per share of

common stock

(yen)

     High    Low

April 2006

   11,590    10,370

May 2006

   10,820    9,200

June 2006

   9,680    8,180

July 2006

   9,480    8,300

August 2006

   10,190    9,010

September 2006

   10,250    9,770

 

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3. Directors

The following table shows the change in members of Directors since Kyocera Corporation filed its Annual Report (“Yuukashouken-houkokusho”) for the year ended March 31, 2006 with the Director of the Kanto Local Finance Bureau of the Ministry of Finance pursuant to the Securities and Exchange Law of Japan on June 26, 2006.

 

New title

  

Former title

   Name    Effective Date

Representative Director and

Vice Chairman

(General Manager of Corporate

Communication Equipment Group)

   Representative Director and Vice Chairman    Yuzo Yamamura    August 1, 2006

Director

(Vice General Manager of

Corporate Communication

Equipment Group)

  

Director

(General Manager of Corporate Optical Equipment Division)

   Michihisa Yamamoto    August 1, 2006

 

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Item 5. Accounting Information

1. Interim Consolidated Financial Statements and Interim Non-consolidated Financial Statements

(1) Pursuant to the article 81 of “Regulations Concerning the Terminology, Forms and Preparation Methods of Interim Consolidated Financial Statements” (Ministry of Finance Ordinance No. 24, 1999), the interim consolidated financial statements are prepared in conformity with the accounting principles generally accepted in the United States of America (U.S. GAAP).

(2) Pursuant to “Regulations Concerning the Terminology, Forms and Preparation Methods of Interim Financial Statements” (Ministry of Finance Ordinance No. 38, 1977, “Regulation for Interim Financial Statements”), the interim non-consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Japan (Japanese GAAP).

The interim non-consolidated financial statements for the six months ended September 30, 2005 are prepared in conformity with pre-amendment of Regulation for Interim Financial Statements. The interim non-consolidated financial statements for the six months ended September 30, 2006 are prepared in conformity with amended Regulation for Interim Financial Statements.

 

2. Independent Accountants Report

In accordance with the article 193-2 of the Securities Exchange Law, the interim consolidated financial statements and the interim non-consolidated financial statements for the six months ended September 30, 2005 are reviewed by ChuoAoyama PricewaterhouseCoopers. The interim consolidated financial statements and the interim non-consolidated financial statements for the six months ended September 30, 2006 are reviewed by Misuzu PricewaterhouseCoopers. ChuoAoyama PricewaterhouseCoopers was renamed Misuzu PricewaterhouseCoopers on September 1, 2006.

 

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Table of Contents

1. CONSOLIDATED FINANCIAL STATEMENTS

< CONSOLIDATED BALANCE SHEETS >

 

          Yen in millions
          September 30,    March 31,
          2005    2006    2006
          Amount     %    Amount     %    Amount     %

I        Current assets :

                 

Cash and cash equivalents

      ¥ 253,885        ¥ 263,751        ¥ 300,809    

Short-term investments

   Note 4      94,526          128,747          87,942    

Trade notes receivable

        25,439          25,181          24,597    

Trade accounts receivable

        196,743          228,198          210,393    

Short-term finance receivables

   Note 3      42,194          —            39,505    
                                   
        264,376          253,379          274,495    

Less allowances for doubtful accounts and sales returns

        (7,919 )        (7,384 )        (7,425 )  
                                   
        256,457          245,995          267,070    

Inventories

        200,607          220,879          190,564    

Deferred income taxes

        38,985          45,609          40,411    

Other current assets

        29,136          46,151          33,872    
                                         

Total current assets

        873,596     46.9      951,132     48.7      920,668     47.7
                                         

II      Investments and advances :

                 

Investments in and advances to affiliates and unconsolidated subsidiaries

   Note 5      12,037          7,499          7,355    

Securities and other investments

   Note 4      539,423          622,344          553,377    
                                         
        551,460     29.6      629,843     32.3      560,732     29.0

III     Long-term finance receivables

   Note 3      74,247     4.0      —       —        80,970     4.2

IV    Property, plant and equipment, at cost :

   Note 5               

Land

        58,553          56,969          58,286    

Buildings

        241,692          253,643          249,506    

Machinery and equipment

        680,879          717,718          697,383    

Construction in progress

        13,679          11,817          13,473    
                                   
        994,803          1,040,147          1,018,648    

Less accumulated depreciation

        (713,078 )        (752,878 )        (733,302 )  
                                         
        281,725     15.1      287,269     14.7      285,346     14.8

V      Goodwill

        30,727     1.7      31,615     1.6      31,351     1.6

VI    Intangible assets

        30,124     1.6      29,516     1.5      31,227     1.6

VII   Other assets

        21,049     1.1      22,327     1.2      21,228     1.1
                                         

Total assets

      ¥ 1,862,928     100.0    ¥ 1,951,702     100.0    ¥ 1,931,522     100.0
                                         

 

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Table of Contents
           Yen in millions  
          September 30,     March 31,  
          2005     2006     2006  
          Amount     %     Amount     %     Amount     %  

I        Current liabilities :

               

Short-term borrowings

   Note 3    ¥ 67,422       ¥ 12,929       ¥ 90,865    

Current portion of long-term debt

   Notes 3,5      53,123         6,643         16,347    

Trade notes and accounts payable

        90,713         111,059         103,503    

Other notes and accounts payable

        50,208         52,365         51,997    

Accrued payroll and bonus

        36,769         39,417         37,998    

Accrued income taxes

        25,137         31,343         27,658    

Other accrued liabilities

        31,143         36,230         31,414    

Other current liabilities

        17,595         24,217         18,841    
                                             

Total current liabilities

        372,110     20.0       314,203     16.1       378,623     19.6  
                                             

II      Non-current liabilities :

               

Long-term debt

   Notes 3,5      25,920         9,243         33,360    

Accrued pension and severance liabilities

        27,397         23,541         27,092    

Deferred income taxes

        123,151         149,097         125,686    

Other non-current liabilities

        11,595         12,992         12,742    
                                             

Total non-current liabilities

        188,063     10.1       194,873     10.0       198,880     10.3  
                                             

Total liabilities

        560,173     30.1       509,076     26.1       577,503     29.9  
                                             

Minority interests in subsidiaries

        61,060     3.3       69,059     3.5       64,942     3.4  

Commitments and Contingencies

   Note 7             

Stockholders’ equity :

               

I        Common stock

        115,703     6.2       115,703     5.9       115,703     6.0  

II      Additional paid-in capital

        162,060     8.7       162,080     8.3       161,994     8.4  

III     Retained earnings

        931,468     50.0       1,011,682     51.9       967,576     50.1  

IV    Accumulated other comprehensive income

   Note 8      63,890     3.4       111,211     5.7       72,947     3.7  

V      Treasury stock, at cost

        (31,426 )   (1.7 )     (27,109 )   (1.4 )     (29,143 )   (1.5 )
                                             

Total stockholders’ equity

        1,241,695     66.6       1,373,567     70.4       1,289,077     66.7  
                                             

Total liabilities, minority interests and stockholders’ equity

      ¥ 1,862,928     100.0     ¥ 1,951,702     100.0     ¥ 1,931,522     100.0  
                                             

 

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Table of Contents

< CONSOLIDATED STATEMENTS OF INCOME >

 

          Yen in millions, except per share amounts  
          Six months ended September 30,     Year ended March 31,  
          2005     2006     2006  
          Amount     %     Amount     %     Amount     %  

I        Net sales

      ¥ 542,238     100.0     ¥ 615,390     100.0     ¥ 1,173,544     100.0  

II      Cost of sales

        390,902     72.1       429,681     69.8       835,042     71.2  
                                             

Gross profit

        151,336     27.9       185,709     30.2       338,502     28.8  

III     Selling, general and administrative expenses

   Note 9      117,572     21.7       122,581     19.9       238,807     20.3  
                                             

Profit from operations

        33,764     6.2       63,128     10.3       99,695     8.5  

IV    Other income or expenses :

               

Interest and dividend income

        3,896         6,790         8,990    

Interest expense

        (633 )       (782 )       (1,301 )  

Foreign currency transaction (losses)gains, net

   Note 6      (91 )       273         (316 )  

Equity in (losses)earnings of affiliates and unconsolidated subsidiaries

        (236 )       259         (1,216 )  

Gains on sale of securities, net of losses

        478         3,252         1,472    

Gains on exchange for the shares

        13         24         5,294    

Gain on sales of investment in an affiliate

   Note 14      6,931         —           6,931    

Loss on impairment of investment in an affiliate

        —           —           (3,492 )  

Other, net

        207         (559 )       1,180    
                                             

Total other income

        10,565     2.0       9,257     1.5       17,542     1.5  
                                             

Income from continuing operations before income taxes and minority interests

        44,329     8.2       72,385     11.8       117,237     10.0  

Income taxes :

               

Current

   Note 13      23,757         25,790         46,240    

Deferred

        (3,833 )       (4,836 )       520    
                                             
        19,924     3.7       20,954     3.4       46,760     4.0  
                                             

Income from continuing operations before minority interests

        24,405     4.5       51,431     8.4       70,477     6.0  

Minority interests

        (1,472 )   (0.3 )     (3,113 )   (0.5 )     (4,389 )   (0.4 )
                                             

Income from continuing operations

        22,933     4.2       48,318     7.9       66,088     5.6  

Income from discontinued operations

   Notes 3,6      1,281     0.3       5,175     0.8       3,608     0.3  
                                             

Net income

      ¥ 24,214     4.5     ¥ 53,493     8.7     ¥ 69,696     5.9  
                                             

Earnings per share :

   Note 11             

Income from continuing operations

               

Basic

      ¥ 122.32       ¥ 257.10       ¥ 352.44    

Diluted

        122.31         256.65         352.21    

Income from discontinued operations

               

Basic

        6.84         27.54         19.24    

Diluted

        6.84         27.49         19.22    

Net income

               

Basic

        129.16         284.64         371.68    

Diluted

        129.15         284.14         371.43    

Cash dividends declared per share (yen) :

               

Per share of common stock

        50.00         50.00         100.00    

Weighted average number of shares of common stock outstanding (shares in thousands) :

               

Basic

        187,478         187,932         187,514    

Diluted

        187,497         188,266         187,640    

 

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< 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 (Note 8)
   Treasury stock     Comprehensive
income

Balance, March 31, 2005 (187,481)

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

Net income for the year

          69,696          ¥ 69,696

Other comprehensive income

            61,108        61,108
                  

Total comprehensive income for the year

               ¥ 130,804
                  

Cash dividends

          (18,748 )       

Purchase of treasury stock (20)

               (170 )  

Reissuance of treasury stock (294)

        (67 )          2,407    
                                        

Balance, March 31, 2006 (187,755)

     115,703      161,994       967,576       72,947      (29,143 )  

Net income for the period

          53,493          ¥ 53,493

Other comprehensive income

            38,264        38,264
                  

Total comprehensive income for the period

               ¥ 91,757
                  

Cash dividends

          (9,387 )       

Purchase of treasury stock (11)

               (104 )  

Reissuance of treasury stock (261)

        (23 )          2,138    

Stock option plan of a subsidiary

        109           
                                        

Balance, September 30, 2006 (188,005)

   ¥ 115,703    ¥ 162,080     ¥ 1,011,682     ¥ 111,211    ¥ (27,109 )  
                                        
     (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 (Note 8)
   Treasury stock     Comprehensive
income

Balance, March 31, 2005 (187,481)

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

Net income for the period

          24,214          ¥ 24,214

Other comprehensive income

            52,051        52,051
                  

Total comprehensive income for the period

               ¥ 76,265
                  

Cash dividends

          (9,374 )       

Purchase of treasury stock (10)

               (77 )  

Reissuance of treasury stock (4)

        (1 )          31    
                                        

Balance, September 30, 2005 (187,475)

   ¥ 115,703    ¥ 162,060     ¥ 931,468     ¥ 63,890    ¥ (31,426 )  
                                        

 

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< CONSOLIDATED STATEMENTS OF CASH FLOWS >

 

          Yen in millions  
          Six months ended
September 30,
    Year ended
March 31,
 
          2005     2006     2006  

Cash flows from operating activities:

         

Net income

      ¥ 24,214     ¥ 53,493     ¥ 69,696  

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

         

Depreciation and amortization

        31,763       38,836       73,186  

Provision for doubtful accounts

        99       667       (466 )

Write-down of inventories

        4,303       3,829       8,446  

Deferred income taxes

        (3,833 )     (4,836 )     (218 )

Minority interests

        1,472       3,113       4,389  

Gains on sales of securities, net of losses

        (478 )     (3,252 )     (1,652 )

Equity in losses (earnings) of affiliates and unconsolidated subsidiaries

        236       (259 )     1,216  

Gain on sale of investment in an affiliate

   Note 14      (6,931 )     —         (6,931 )

Loss on impairment of investment in an affiliate

        —         —         3,492  

Gain on sale of investment in a subsidiary

   Note 3      —         (8,228 )     —    

Gains on exchange for the shares

        (13 )     (24 )     (5,294 )

Foreign currency adjustments

        761       (287 )     272  

Change in assets and liabilities :

         

Decrease (increase) in receivables

        7,771       (31,595 )     (9,237 )

Decrease (increase) in inventories

        10,417       (31,174 )     21,263  

Increase in other current assets

        (1,016 )     (4,894 )     (3,331 )

Increase in notes and accounts payable

        5,317       18,915       14,390  

(Decrease) increase in accrued income taxes

        (6,859 )     3,989       (4,720 )

Increase in other current liabilities

        2,847       10,921       3,284  

Increase (decrease) in other non-current liabilities

        163       (3,166 )     (118 )

Other, net

        1,539       1,875       3,410  
                           

Net cash provided by operating activities

        71,772       47,923       171,077  
                           

Cash flows from investing activities :

         

Payments for purchases of available-for-sale securities

        (68,013 )     (22,396 )     (98,219 )

Payments for purchases of held-to-maturity securities

        (8,730 )     (9,125 )     (11,070 )

Payments for purchases of investments and advances

        (127 )     (87 )     (224 )

Sales and maturities of available-for-sale securities

        38,539       14,744       50,090  

Maturities of held-to-maturity securities

        —         15,968       2,340  

Proceeds from sale of investment in an affiliate

   Note 14      24,133       —         24,133  

Proceeds from sale of investment in a subsidiary

   Note 3      —         24,553       —    

Payments for purchases of property, plant and equipment

        (45,222 )     (31,023 )     (91,436 )

Payments for purchases of intangible assets

        (4,433 )     (4,486 )     (10,589 )

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

        1,933       785       3,350  

Acquisition of businesses, net of cash acquired

        —         (756 )     3  

Acquisitions of minority interests

        (3,575 )     (8 )     (3,575 )

Deposit of negotiable certificate of deposits and time deposits

        (77,056 )     (147,457 )     (132,286 )

Withdrawal of negotiable certificate of deposits and time deposits

        18,121       85,081       100,923  

Other, net

        1,339       123       1,093  
                           

Net cash used in investing activities

        (123,091 )     (74,084 )     (165,467 )
                           

Cash flows from financing activities :

         

Increase in short-term debt

        367       7,316       23,363  

Proceeds from issuance of long-term debt

        4,783       1,928       19,876  

Payments of long-term debt

        (3,756 )     (10,713 )     (48,458 )

Dividends paid

        (10,447 )     (10,385 )     (20,473 )

Payment for purchase of treasury stock

        (77 )     (104 )     (170 )

Proceed from sale of treasury stock

        30       2,115       2,339  

Other, net

        (557 )     (3,236 )     234  
                           

Net cash used in financing activities

        (9,657 )     (13,079 )     (23,289 )
                           

Effect of exchange rate changes on cash and cash equivalents

        4,269       2,182       7,896  
                           

Net decrease in cash and cash equivalents

        (56,707 )     (37,058 )     (9,783 )

Cash and cash equivalents at beginning of period

        310,592       300,809       310,592  
                           

Cash and cash equivalents at end of period

      ¥ 253,885     ¥ 263,751     ¥ 300,809  
                           

 

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<Notes to the Interim Consolidated Financial Statements>

1. Accounting Principles, Procedures and Financial Statements’ Presentation

In December 1975, Kyocera Corporation filed a registration statement, Form S-1 and a registration form for American Depositary Receipt (ADR), in accordance with the Securities Exchange Act of 1933, with the United States Securities and Exchange Commission (SEC) and made a registration of its common stock and ADR there. In accordance with the mentioned act, Kyocera Corporation again filed Form S-1 and a registration form for ADR with SEC in February 1980, and listed its ADR on the New York Stock Exchange in May 1980.

Kyocera Corporation has filed Form 20-F as an annual report, which is prepared in accordance with U.S. GAAP with SEC once a year in order to conform to the section 13 of the Securities Exchange Act of 1934. Kyocera Corporation and its consolidated subsidiaries (Kyocera) have also prepared interim consolidated financial statements in accordance with U.S. GAAP. The followings are accounting principles and regulations with which Kyocera is required to comply: Regulations for filing and reporting to SEC (Regulation S-X, Accounting Series Releases, Staff Accounting Bulletins, and etc.), Statements of Financial Accounting Standards Board (SFAS), Accounting Principles Board (APB) Opinions and Accounting Research Bulletin (ARB), and etc.

The following paragraphs describe the major differences between U.S. GAAP and Japanese GAAP, and where the significant differences exist, the amount of effect to income before income taxes pursuant to Japanese GAAP are also disclosed.

(1) Revenue Recognition

Kyocera adopts Staff Accounting Bulletin (SAB) No. 104 “Revenue Recognition in Financial Statements.”

(2) Foreign Currency Translation and Forward Exchange Contracts

Assets and liabilities denominated in foreign currencies and financial statements of foreign subsidiaries are translated based on SFAS No. 52 “Foreign Currency Translation.” Forward exchange contracts are accounted for by SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”, as amended by SFAS No. 138 “Accounting for Certain Derivative Instruments and Certain Hedging Activities-”an Amendment of SFAS No. 133.”

(3) Accrued Pension and Severance Costs

Accrued pension and severance costs are computed based on SFAS No. 87 “Employer’s Accounting for Pensions.” This effect for the six months ended September 30, 2005, 2006 and for the year ended March 31, 2006 amounted to ¥416 million, ¥539 million and ¥124 million, respectively.

(4) Minority Interests

Minority interests is presented as a separate category between liabilities and stockholders’ equity in the consolidated balance sheets.

(5) Comprehensive Income

Kyocera applies SFAS No. 130 “Reporting Comprehensive Income” and discloses comprehensive income in stockholders’ equity. According to this standard, comprehensive income is defined as the change in equity except for capital transaction and it consists of net income and other comprehensive income. Other comprehensive income includes foreign currency translation adjustments, minimum pension liability adjustments, net unrealized gains (losses) on securities and net unrealized gains (losses) on derivative financial instruments.

 

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(6) Stock Issuance Costs

Stock issuance costs, net of tax are deducted from the additional paid-in capital.

(7) Business Combinations

Kyocera adopts SFAS No. 141 “Business Combinations.”

(8) Goodwill and Other Intangible Assets

Kyocera adopts SFAS No. 142 “Goodwill and Other intangible assets.”

(9) Derivative Financial Instruments

Kyocera adopts SFAS No. 133, as amended by SFAS No. 138.

2. Summary of Accounting Policies

The accounts of Kyocera Corporation and its Japanese subsidiaries are generally maintained to conform to Japanese accounting practices. Adjustments, including the applicable income tax effects, which are not recorded in Kyocera Corporation’s books of account, have been made to the accompanying interim consolidated financial statements in order to present them in conformity with accounting principles generally accepted in the United States of America.

(1) Basis of Consolidation and Accounting for Investments in Affiliated Companies

The interim consolidated financial statements include the accounts of Kyocera Corporation, its majority-owned subsidiaries and a variable interest entity for which Kyocera Corporation is a primarily beneficiary under the Financial Accounting Standard Board Interpretation No. 46 (revised 2003), “ Consolidation of Variable Interest Entities”. The consolidated variable interest entity for which Kyocera Corporation is the primary beneficiary does not have a material effect on Kyocera’s financial position and result of operations.

All significant inter-company transactions and accounts are eliminated. Investments in 20% to 50% owned companies and insignificant subsidiaries are accounted for by the equity method, whereby Kyocera includes in net income its equity in the earnings or losses of these companies.

 

     

(Number of companies)

  

(Major companies)

Consolidated subsidiaries:    168    AVX CORPORATION
      KYOCERA WIRELESS CORP.
      KYOCERA MITA CORPORATION
      KYOCERA ELCO CORPORATION
Affiliates and unconsolidated subsidiaries:    14    WILLCOM, INC.

(2) Revenue Recognition

Kyocera sells various types of products, including fine ceramic parts, semiconductor parts, and telecommunications equipment. Kyocera recognizes revenue upon completion of the earnings process, which occurs when products are shipped and delivered to the customer in accordance with the terms of an agreement of sale, there is a fixed or determinable selling price, title and risk of loss have been transferred, and collectibility is reasonably assured. These conditions are satisfied at the time of delivery to customers in domestic sales (FOB destination) and at the time of shipment (FOB shipping) for export sales.

Sales returns

Kyocera records an estimated sales return allowance at the time of sales based on its historical returns experience.

Products warranty

For after-service costs to be paid during warranty periods, Kyocera accrues a product warranty liability for claims under warranties relating to the products that have been sold. Kyocera records an estimated based on its historical repair experience.

 

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(3) Cash and Cash Equivalents

Cash and cash equivalents include time deposits and certificates of deposit with original maturities of three months or less.

(4) Translation of Foreign Currencies

Assets and liabilities of consolidated foreign subsidiaries and affiliates accounted for by the equity method are translated into Japanese yen at the exchange rates in effect on the respective balance sheet dates. Operating accounts are translated at the average rates of exchange for the respective years. Translation adjustments result from the process of translating foreign currency financial statements into Japanese yen. These translation adjustments, which are not included in the determination of net income, are reported in other comprehensive income.

Assets and liabilities denominated in foreign currencies are translated at the exchange rates in effect at the respective balance sheet dates, and resulting transaction gains or losses are included in the determination of net income.

(5) Allowances for Doubtful Accounts

Kyocera maintains allowances for doubtful accounts related to both trade and finance receivables for estimated losses resulting from customers’ inability to make timely payments, including interest on finance receivables. Kyocera’s estimates are based on various factors including the length of past due payments, historical experience and current business environments. In circumstances where it is aware of specific customer’s inability to meet its financial obligations, a specific allowance against these amounts is provided considering the fair value of assets pledged by the customer as collateral.

(6) Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the average method for approximately 55% and 61% and 57% of finished goods and work in process at September 30, 2005, 2006 and March 31, 2006, respectively, and by the first-in, first-out method for all other inventories. Kyocera recognizes estimated write-down of inventories for excess, slow-moving and obsolete inventories.

(7) Securities

Certain investments in debt and equity securities are accounted for by SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities.” Securities classified as available-for-sale are recorded at the fair value, with unrealized gains and losses excluded from income and reported in other comprehensive income, net of tax. Securities classified as held-to-maturity securities are recorded at amortized cost.

(8) Property, Plant and Equipment and Depreciation

Property, Plant and Equipment are recorded at cost less accumulated depreciation. Kyocera provides for depreciation of buildings, machinery and equipment over their estimated useful lives primarily on the declining balance method. The principal estimated useful lives used for computing depreciation are as follows:

 

Buildings    2 to 50 years
Machinery and equipment    2 to 20 years

The cost of maintenance, repairs and minor renewals is charged to expense in the year incurred; major renewals and betterments are capitalized.

When assets are sold or otherwise disposed of, the profits or losses thereon, computed on the basis of the difference between depreciated costs and proceeds, are credited or charged to income in the year of disposal, and costs and accumulated depreciation are removed from accounts.

 

(9) Goodwill and Other Intangible Assets

Kyocera has adopted SFAS No. 142. This required that, rather than being amortized, goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually, and also following any events and changes in circumstances that might lead to impairment. Intangible assets with definite useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

The principal estimated amortizations for intangible assets are as follows:

 

Patent rights    2 to 8 years
Software    2 to 5 years

(10) Impairment of long-lived assets

Kyocera has adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This requires Kyocera to review its long-lived assets and intangible assets with definite useful lives for impairment periodically. Long-lived assets and intangible assets with definite useful lives are considered to be impaired when the expected undiscounted cash flow from the asset is less than its carrying value. A loss on impairment is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets and intangible assets with definite useful lives.

 

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(11) Derivative Financial Instruments

Kyocera utilizes derivative financial instruments to manage its exposure resulting from fluctuations of foreign currencies and interest rates. These derivative financial instruments include foreign currency forward contracts and interest rate swaps. Kyocera does not hold or issue such derivative financial instruments for trading purposes.

Kyocera applies SFAS No. 133, as amended by SFAS No. 138. All derivatives are recorded as either assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives are charged in current earnings. However cash flow hedges which meet the criteria of SFAS No. 133 may qualify for hedge accounting treatment. Changes in the fair value of the effective portion of these hedge derivatives are deferred in other comprehensive income and charged to earnings when the underlying transaction being hedged occurs.

Kyocera designated certain interest rate swaps and foreign currency forward contracts as cash flow hedges under SFAS No. 133 to hedge cash inflow or outflow related with existing assets, liabilities or forecasted transactions such as purchase commitments and sales. Most of foreign currency forward contracts are entered into as hedges of existing foreign currency denominated assets and liabilities and as such do not qualify for special hedge accounting. Accordingly, Kyocera records changes in fair value of these foreign currency forward contracts currently in earnings. It is expected that such changes will be offset by corresponding gains or losses on the underlying assets and liabilities.

Kyocera formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes all derivatives designated as cash flow hedge are linked to specific assets and liabilities on the balance sheet or forecasted transactions. Kyocera also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, Kyocera discontinues hedge accounting prospectively. When hedge accounting is discontinued, the derivative will continue to be carried on the balance sheet at its fair value, with deferred unrealized gains or losses charged immediately in current earnings.

(12) Stock-Based Compensation

Prior to April 1, 2006, Kyocera accounted for stock-based compensation in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an Amendment of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” As allowed by SFAS No. 148, Kyocera measured stock-based compensation expense using the intrinsic value method in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related interpretations. In fiscal 2007, Kyocera adopted SFAS No. 123 (revised 2004) (SFAS No. 123R), “Share-Based Payment.” This statement is a revision of SFAS No.123 and supersedes APB Opinion No. 25 and its related interpretations. Kyocera recognized the cost resulting from share-based payment transactions in financial statements by adopting fair-value based measurement method in accordance with SFAS No. 123R.

(13) Earnings and Cash Dividends per Share

Basic earnings per share is computed based on the weighted average number of shares outstanding during each period. Diluted earnings per share assumes the dilution that could occur if all stock options were exercised and resulted in the issuance of common stock.

Cash dividends per share are those declared with respect to the earnings for the respective periods for which dividends are proposed by the Board of Directors. Dividends are charged to retained earnings in the period in which they are paid.

(14) Research and Development Expenses and Advertising Expenses

Research and development expenses and advertising expenses are charged to operations as incurred.

(15) Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

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(16) New Accounting Standards

In December 2004, the FASB issued SFAS No. 123R. This statement is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 123R supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related interpretations. SFAS No. 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. SFAS No. 123R establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans. Kyocera adopted SFAS No.123R effective on April 1 2006, and the impact of SFAS No. 123R was ¥ 158 million on Kyocera’s consolidated results of operations for the six months ended September 30, 2006.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 also provides guidance on derecognition, classification, interest and penalties, disclosure and transitional measures. FIN 48 shall be effective for fiscal years beginning after December 15, 2006. Kyocera is currently evaluating the impact of FIN 48 on the Consolidated Financial Statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” The purpose of SFAS No. 157 is to define fair value, establish a framework for measuring fair value and enhance disclosures about fair value measurements. The measurement and disclosure requirements are effective beginning after November 15, 2007. Kyocera is currently evaluating the impact of SFAS No. 157 in its consolidated results of operations and financial position.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”, which requires an employer to recognize the overfunded or underfunded status of its defined benefit postretirement plans as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. Kyocera is required to initially recognize the funded status of its defined benefit plans and to provide the required disclosures in accordance with SFAS No. 158 as of the year ending March 31, 2007. SFAS No. 158 also requires an employer to measure the funded status of a plan as of the date of its year end statement of financial position. Kyocera will be required to measure the funded status of its plans at the date of its year end as of the year ending March 31, 2009. Kyocera is currently evaluating the impact of SFAS No. 158 on the consolidated financial statements.

(17) Reclassification

Certain reclassifications of previously reported amounts have been made to the consolidated statements of income, cash flows and corresponding footnote disclosures for the six months ended September 30, 2005 and for the year ended March 31, 2006 to conform to the current period presentation. Such reclassifications have no effect on Kyocera’s stockholders’ equity, net income and cash flows.

 

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3. Discontinued Operations

On August 1, 2006, Kyocera sold 100% of the shares of Kyocera Leasing Co., Ltd. (KLC) to Diamond Lease Company Limited for ¥25,274 million, aimed to concentrate management resources on its businesses to enhance and improve its corporate value. The results of operations of KLC had been reported as the “Others” segment previously. Kyocera has accounted for the results of operations and the sale of KLC less appreciable income tax, as discontinued operations in accordance with SFAS No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets” in its consolidated statements of income. Accordingly, the prior periods’ financial statements and related footnote disclosures have been reclassified.

The results of operations of discontinued operations for the six months ended September 30, 2005 and 2006 and for the year ended March 31, 2006 are summarized as follows:

 

     Yen in millions
     September 30,
2005
   September 30,
2006
   March 31,
2006

Net sales

   ¥ 3,664    ¥ 1,779    ¥ 9,213

Income before income taxes*

     1,806      9,090      4,150

Income taxes

     525      3,915      542

Income from discontinued operations

     1, 281      5,175      3,608

 

* Income before income taxes for September 30, 2006 includes gain on sales of ¥8,228 million.

The financial positions of discontinued operations as of September 30, 2005 and March 31, 2006 are summarized as follows:

 

     Yen in millions
     September 30,
2005
   March 31,
2006

Short-term finance receivables

   ¥ 49,974    ¥ 48,121

Long-term finance receivables

     74,247      80,971

Other assets

     5,819      4,981
             

Total assets

   ¥ 130,040    ¥ 134,073
             

Short-term borrowings

     55,934      80,351

Long-term debt (including portion due within one year)

     50,459      25,857

Other liabilities

     9,849      11,772
             

Total liabilities

   ¥ 116,242    ¥ 117,980
             

 

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4. Investment in Debt and Equity Securities

Investments in debt and equity securities as of September 30, 2005, 2006 and March 31, 2006, included in short-term investments (current assets) and in securities and other investments (non-current assets) are summarized as follows:

 

     Yen in millions
     September 30, 2005    September 30, 2006
     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

   ¥ 2,724    ¥ 2,769    ¥ 55    ¥ 10    ¥ 3,008    ¥ 3,143    ¥ 150    ¥ 15

Other debt securities

     101,653      101,490      87      250      137,668      137,960      316      24

Equity securities

     272,147      414,354      142,264      57      272,054      466,156      194,335      233
                                                       

Total available-for-sale securities

     376,524      518,613      142,406      317      412,730      607,259      194,801      272
                                                       

Held-to-maturity securities:

                       

Other debt securities

     33,224      32,834      —        390      27,726      27,574      —        152
                                                       

Total held-to-maturity securities

     33,224      32,834      —        390      27,726      27,574      —        152
                                                       

Total investments in debt and equity securities

   ¥ 409,748    ¥ 551,447    ¥ 142,406    ¥ 707    ¥ 440,456    ¥ 634,833    ¥ 194,801    ¥ 424
                                                       

 

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     Yen in millions
     March 31, 2006
     Cost*   

Aggregate
fair

values

   Gross
unrealized
gains
   Gross
unrealized
losses

Available-for-sale securities:

           

Corporate debt securities

   ¥ 3,745    ¥ 3,908    ¥ 184    ¥ 21

Other debt securities

     133,758      132,660      29      1,127

Equity securities

     274,985      415,950      141,059      94
                           

Total available-for-sale securities

     412,488      552,518      141,272      1,242
                           

Held-to-maturity securities:

           

Other debt securities

     34,398      34,015      —        383
                           

Total held-to-maturity securities

     34,398      34,015      —        383
                           

Total investments in debt and equity securities

   ¥ 446,886    ¥ 586,533    ¥ 141,272    ¥ 1,625
                           

 

* Cost represents amortized cost for held-to-maturity securities and acquisition cost for available-for-sales 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.

5. Assets Pledged as Collateral and Liabilities with Assets Pledged

Kyocera’s assets pledged as collateral for long-term debt at September 30, 2005, 2006 and at March 31, 2006 amounted to ¥5,876 million, ¥5,857 million and ¥5,692 million of property and equipment, net of accumulated depreciation, respectively.

Kyocera’s current portion of long-term debt with assets pledged at September 30, 2005, 2006 and at March 31, 2006 amounted to ¥527 million, ¥577 million and ¥702 million, respectively. Kyocera’s long-term debt (excluding current portion) with assets pledged at September 30, 2005, 2006 and at March 31, 2006 amounted to ¥3,783 million, ¥3,082 million and ¥3,447 million, respectively.

Kyocera’s investment in WILLCOM, INC., which was ¥4,618 million at September 30, 2005 and ¥3,571 million at March 31, 2006 accounted for by the equity method, was pledged as collateral for loans from financial institutions of WILLCOM, INC.

 

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6. Derivative Financial Instruments and Hedging Activities

Kyocera’s activities expose it to a variety of market risks, including the effects of changes in foreign currency exchange rates and interest rates. Approximately 60% of Kyocera’s revenues are generated from overseas customers, which exposes to foreign currency exchange rates. These financial exposures are monitored and managed by Kyocera as an integral part of its overall risk management program. Kyocera’s risk management program focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.

Kyocera maintains a foreign currency risk management strategy that uses derivative financial instruments, such as foreign currency forward contracts, to minimize the volatility in its cash flows caused by changes in foreign currency exchange rates. Movements in foreign currency exchange rates pose a risk to Kyocera’s operations and competitive position, since exchange rates changes may affect the profitability, cash flows, and business and or pricing strategies of non Japan-based competitors. These movements affect cross-border transactions that involve, but not limited to, direct export sales made in foreign currencies and raw material purchases incurred in foreign currencies.

Kyocera maintains an interest rate risk management strategy that uses derivative financial instruments, such as interest rate swaps, to minimize significant, unanticipated cash flow fluctuations caused by interest rate volatility.

By using derivative financial instruments to hedge exposures to changes in exchange rates and interest rates, Kyocera exposes itself to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes Kyocera, which creates repayment risk for Kyocera. When the fair value of a derivative contract is negative, Kyocera owes the counterparty and, therefore, it does not possess repayment risk. Kyocera minimizes the credit (or repayment) risk in derivative financial instruments by (1) entering into transactions with creditworthy counterparties, (2) limiting the amount of exposure to each counterparty, and (3) monitoring the financial condition of its counterparties.

Cash Flow Hedges

Kyocera uses interest rate swaps mainly to convert a portion of its variable rate debt to fixed rates. Kyocera charged deferred net loss of ¥27 million, ¥8 million and ¥27 million from accumulated other comprehensive income to interest expense in the consolidated statement of income, for the six months ended September 30, 2005 and 2006 and for the year ended March 31, 2006, respectively.

Also, Kyocera uses certain foreign currency forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in its forecasted transactions related to purchase commitments and sales. Kyocera charged deferred net loss of ¥23 million from accumulated other comprehensive income to income from discontinued operations in the consolidated statement of income for the six months ended September 30, 2006.

Other Derivatives

Kyocera’s main direct foreign export sales and some import purchases are denominated in the customers’ and suppliers’ local currency, principally the U.S. dollar, Euro and STG. Kyocera purchases foreign currency forward contracts with terms normally lasting less than three months to protect against the adverse effects that exchange-rate fluctuations may have on foreign-currency-denominated trade receivables and payables. The gain and losses on both the derivatives and the foreign currency-denominated trade receivable and payables are recorded as foreign currency transaction gains (losses) in the consolidated statements of income. Kyocera also utilizes indexed share options to decrease the adverse effects that price fluctuations of the holding securities may have on its consolidated results of operations

Kyocera does not adopt hedge accounting for such derivatives.

The aggregate contract amounts of derivative financial instruments to which hedge accounting is not applied are as follows:

 

     Yen in millions
     September 30,
2005
   September 30,
2006
  

March 31,

2006

Foreign currency forward contracts to sell

   ¥ 115,515    ¥ 152,866    ¥ 118,911

Foreign currency forward contracts to purchase

     12,777      15,102      8,572

Interest rate swaps

     15,770      —        13,000

Indexed share options

     —        4,728      —  

 

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7. Commitments and Contingencies

At September 30, 2006, Kyocera had contractual obligations for the acquisition or construction of property, plant and equipment aggregating ¥19,836 million principally due within one year.

Kyocera is lessee under long-term operating leases primarily for office space and equipment. Future minimum lease commitments under non-cancelable operating leases at September 30, 2006 are as follows:

 

     Yen in millions

Due within 1 year

   ¥ 6,551

Due after 1 year within 2 years

     4,726

Due after 2 year within 3 years

     2,901

Due after 3 year within 4 years

     2,277

Due after 4 year within 5 years

     1,877

Thereafter

     5,601
      
   ¥ 23,933

Kyocera has purchase agreements for a part of its anticipated amount of a certain material. Under the agreements, Kyocera purchased ¥1,133 million for the six months ended September 30, 2006 and is obligated to purchase ¥91,688 million by the end of December 2018.

Kyocera guarantees the debt of a customer, employees and an unconsolidated subsidiary. At September 30, 2006, each amount of these guarantees was ¥34 million, ¥160 million and ¥550 million. The financial guarantees are made in the form of commitments and letters of awareness issued to financial institutions and generally obligate Kyocera to make payments in the event of default by the borrowers. Kyocera also guarantees the leasing debts of customers of the Information Equipment Group. At September 30, 2006, the amount of such guarantee was ¥324 million.

Kyocera is subject to various lawsuits and claims, which arise, in the ordinary course of business. Kyocera consults with legal counsel and assesses the likelihood of adverse outcome of these contingencies. Kyocera records liabilities for these contingencies when the likelihood of an adverse outcome is probable and amount is reasonably estimate. However, based on the information available, management believes that damages, if any, resulting from these actions will not have a significant effect on Kyocera’s consolidated results of operations and financial position.

8. Accumulated Other Comprehensive Income

Kyocera’s accumulated other comprehensive income is as follows:

 

     Yen in millions  
     September 30,
2005
    September 30,
2006
    March 31,
2006
 

Foreign currency translation adjustments

   ¥ (19,004 )   ¥ (1,482 )   ¥ (7,570 )

Minimum pension liability adjustments

     (1,629 )     (2,057 )     (2,057 )

Net unrealized gains on securities

     84,536       114,808       82,649  

Net unrealized losses on derivative financial instruments

     (13 )     (58 )     (75 )
                        

Total accumulated other comprehensive income

   ¥ 63,890     ¥ 111,211     ¥ 72,947  
                        

9. Supplemental Expense Information

Research and development expenses for the six months ended September 30, 2005, 2006 and for the year ended March 31, 2006 amounted to ¥29,328 million, ¥30,257 million and ¥57,436 million, respectively.

Advertising expenses for the six months ended September 30, 2005, 2006 and for the year ended March 31, 2006 amounted to ¥5,010 million, ¥5,694 million and ¥10,840 million, respectively.

Shipping and handling costs for the six months ended September 30, 2005, 2006 and for the year ended March 31, 2006 amounted to ¥6,474 million, ¥7,527 million and ¥13,984 million, respectively, and were included in selling, general and administrative expenses in the consolidated statements of income.

 

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10. Segment Reporting

Main products or businesses of each reporting segment are as follows;

 

(Fine Ceramic Parts Group)

Information & Telecommunication Components

Sapphire Substrates

Semiconductor Process Equipment Components

LCD Process Equipment Components

General Industrial Ceramic Components

Automotive & ITS related Components

 

(Semiconductor Parts Group)

Ceramic Packages for Surface Mount Devices (SMD)

Ceramic Multilayer Packages/Multilayer Substrates

Metallized Products

Organic Packages/Substrates

 

(Applied Ceramic Products Group)

Solar Cells & Modules

Cutting Tools

Dental & Orthopedic Implants

Jewelry

 

(Electronic Device Group)

Passive Components (Ceramic Chip Capacitors, Tantalum Capacitors)

Timing Devices (Temperature Compensated Crystal Oscillators (TCXO)

Connectors

Thin-Film Products (Thermal Printheads, Liquid Crystal Displays)

 

(Telecommunications Equipment Group)

CDMA Mobile Handsets

PHS Related Products

 

(Information Equipment Group)

ECOSYS Non-cartridge Printers

Copiers

Digital Network Multifunction Products

 

(Optical Equipment Group)

Lenses

 

(Others)

Telecommunications Network Systems Business

Chemical Materials for Electronic Components

Hotel Business

Kyocera has sold its share in Kyocera Leasing Co., Ltd. (KLC), a subsidiary engaged financial services included in “Others,”, as a result, business results and profit on sales for KLC for the first half have been recorded as income from discontinued operations in conformity with accounting principles generally accepted in the U.S.

Additionally, commencing in the first half, results of Precision Machine Division of Kyocera Corporation, previously included within “Corporate,” has been reclassified into “Others.”

Accordingly, previously reported results of related segments for September 30, 2005 and 2006 and for the year ended March 31, 2006 have been reclassified.

Inter-segment sales, operating revenue and transfers are made with reference to prevailing market prices. Transactions between reportable segments are immaterial and not shown separately. Operating profit for each reporting segment represents net sales, less related costs and operating expenses, excluding corporate revenue and expenses, equity in earnings (losses), income taxes and minority interest.

Information by reporting segments for the six months ended September 30, 2005 and 2006 and for the year ended March 31, 2006 is summarized as follows:

 

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Reporting Segments

 

     Yen in millions  
     Six months ended
September 30,
    Year ended
March 31,
 
     2005     2006     2006  
     Amount     Amount     Amount  

Net sales:

      

Fine Ceramic Parts Group

   ¥ 33,258     ¥ 38,564     ¥ 69,373  

Semiconductor Parts Group

     63,544       75,843       135,299  

Applied Ceramic Products Group

     55,752       64,132       117,555  

Electronic Device Group

     125,383       139,984       259,592  

Telecommunications Equipment Group

     91,084       117,181       229,035  

Information Equipment Group

     118,433       124,619       249,381  

Optical Equipment Group

     8,256       5,890       14,947  

Others

     56,049       60,850       117,409  

Adjustments and eliminations

     (9,521 )     (11,673 )     (19,047 )
                        
   ¥ 542,238     ¥ 615,390     ¥ 1,173,544  
                        

Operating profit:

      

Fine Ceramic Parts Group

   ¥ 4,805     ¥ 7,373     ¥ 11,014  

Semiconductor Parts Group

     7,251       11,887       17,742  

Applied Ceramic Products Group

     9,337       8,966       21,876  

Electronic Device Group

     11,171       21,573       27,170  

Telecommunications Equipment Group

     (9,355 )     (1,016 )     (1,706 )

Information Equipment Group

     13,244       15,491       26,412  

Optical Equipment Group

     (4,049 )     (899 )     (5,774 )

Others

     3,186       3,748       8,983  
                        
     35,590       67,123       105,717  

Corporate

     8,882       5,152       12,785  

Equity in (losses) earnings of affiliates and unconsolidated subsidiaries

     (236 )     259       (1,216 )

Adjustments and eliminations

     93       (149 )     (49 )
                        

Income from continuing operations before income taxes

   ¥ 44,329     ¥ 72,385     ¥ 117,237  
                        

Depreciation and amortization *:

      

Fine Ceramic Parts Group

   ¥ 1,937     ¥ 1,943     ¥ 4,126  

Semiconductor Parts Group

     4,349       5,853       10,623  

Applied Ceramic Products Group

     2,830       3,791       7,167  

Electronic Device Group

     10,144       9,598       21,202  

Telecommunications Equipment Group

     3,049       3,201       8,692  

Information Equipment Group

     5,245       8,239       12,641  

Optical Equipment Group

     944       343       1,635  

Others

     1,856       4,241       3,989  

Corporate

     1,353       1,507       2,996  
                        
   ¥ 31,707     ¥ 38,716     ¥ 73,071  
                        

Capital expenditures:

      

Fine Ceramic Parts Group

   ¥ 2,442     ¥ 2,900     ¥ 4,182  

Semiconductor Parts Group

     15,484       5,721       24,136  

Applied Ceramic Products Group

     9,698       2,510       14,545  

Electronic Device Group

     8,884       10,893       21,562  

Telecommunications Equipment Group

     1,015       1,745       2,639  

Information Equipment Group

     6,633       8,061       12,389  

Optical Equipment Group

     111       134       199  

Others

     4,375       4,195       5,654  

Corporate

     1,995       1,080       3,554  
                        
   ¥ 50,637     ¥ 37,239     ¥ 88,860  
                        

 

* In accordance with SFAS No.144, “Accounting for the Impairment of Disposal of Long-Lived Assets,” Depreciation and amortization in Reporting Segments have been reclassified. As a result, compared to the amounts in the Cash Flow Statement for the six months ended September 30, 2005, 2006 and the year ended March 31, 2006, there are differences of ¥56 million, ¥120 million and ¥115 million, respectively.

 

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Geographic Segments (Sales by Region)

 

     Yen in millions
     Six months ended
September 30,
   Year ended
March 31,
     2005    2006    2006
     Amount    Amount    Amount

Japan

   ¥ 217,171    ¥ 236,735    ¥ 467,035

United States of America

     112,642      130,265      253,696

Asia

     91,643      107,111      198,731

Europe

     87,848      97,464      184,351

Others

     32,934      43,815      69,731
                    

Net sales

   ¥ 542,238    ¥ 615,390    ¥ 1,173,544
                    

There are no individual countries of which proportion of sales to Kyocera’s consolidated net sales is material in “Asia”, “Europe” and “Others”.

 

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Geographic Segments (Sales and Operating Profit by Geographic area)

 

     Yen in millions  
     Six months ended
September 30,
    Year ended
March 31,
 
     2005     2006     2006  
     Amount     Amount     Amount  

Net sales:

      

Japan

   ¥ 231,633     ¥ 250,962     ¥ 497,758  

Intra-group sales and transfer between geographic areas

     153,233       199,385       327,786  
                        
     384,866       450,347       825,544  
                        

United States of America

     127,527       155,355       288,746  

Intra-group sales and transfer between geographic areas

     11,007       17,783       26,246  
                        
     138,534       173,138       314,992  
                        

Asia

     81,144       95,265       171,015  

Intra-group sales and transfer between geographic areas

     55,529       78,505       125,586  
                        
     136,673       173,770       296,601  
                        

Europe

     89,666       101,494       189,750  

Intra-group sales and transfer between geographic areas

     16,593       19,784       33,764  
                        
     106,259       121,278       223,514  
                        

Others

     12,268       12,314       26,275  

Intra-group sales and transfer between geographic areas

     3,783       5,534       8,274  
                        
     16,051       17,848       34,549  
                        

Adjustments and eliminations

     (240,145 )     (320,991 )     (521,656 )
                        

Net sales

   ¥ 542,238     ¥ 615,390     ¥ 1,173,544  
                        

Operating profits:

      

Japan

   ¥ 28,805     ¥ 49,773     ¥ 79,278  

United States of America

     (3,054 )     9,947       3,317  

Asia

     5,864       11,068       14,880  

Europe

     533       3,825       4,748  

Others

     69       852       757  
                        
     32,217       75,465       102,980  

Adjustments and eliminations

     3,466       (8,491 )     2,688  
                        
     35,683       66,974       105,668  

Corporate

     8,882       5,152       12,785  

Equity in (losses) earnings of affiliates and unconsolidated subsidiaries

     (236 )     259       (1,216 )
                        

Income from continuing operations before income taxes

   ¥ 44,329     ¥ 72,385     ¥ 117,237  
                        

 

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11. Earnings Per Share

A reconciliation of the numerators and the denominators of basic and diluted earnings per share (EPS) computations is as follows:

 

     Yen in millions and shares in thousands,
except per share amounts
     Six months ended
September 30,
   Year ended
March 31,
     2005    2006    2006

Income from continuing operations

   ¥ 22,933    ¥ 48,318    ¥ 66,088

Income from discontinued operations

     1,281      5,175      3,608

Net income

     24,214      53,493      69,696
                    

Basic earnings per share:

        

Income from continuing operations

     122.32      257.10      352.44

Income from discontinued operations

     6.84      27.54      19.24

Net income

     129.16      284.64      371.68

Diluted earnings per share:

        

Income from continuing operations

     122.31      256.65      352.21

Income from discontinued operations

     6.84      27.49      19.22

Net income

     129.15      284.14      371.43
                    

Basic weighted average number of shares outstanding

     187,478      187,932      187,514

Dilutive effect of stock options

     19      334      126

Diluted weighted average number of shares outstanding

     187,497      188,266      187,640
                    

 

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12. Supplemental Cash Flow Information

Supplemental information related to the consolidated statements of cash flows is as follows:

 

     Yen in millions  
    

Six months ended

September 30,

   

Year ended

March 31,

 
     2005    2006     2006  

Cash paid during the period for:

       

Interest

   ¥ 917    ¥ 979     ¥ 1,933  

Income taxes

     31,586      30,045       53,037  

Acquisitions of business:

       

Fair value of assets acquired

     —      ¥ 1,151     ¥ 65  

Fair value of liabilities assumed

     —        (333 )     (45 )

Minority interest

     —        —         (8 )

Cash acquired

     —        (62 )     (15 )
                       
     —      ¥ 756     ¥ (3 )
                       

13. Notice of tax assessment based on transfer pricing adjustment

On March 28, 2005, Kyocera Corporation received a notice of tax assessment based 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 not appropriate for the five years from the year ended March 31, 1999 through the year ended March 31, 2003. The notice indicated that income should be adjusted upwards ¥24,394 million and that resultant additional tax, including local taxes, etc., amounted to ¥12,748 million. On May 24, 2005, Kyocera Corporation filed a complaint against tax assessment based on transfer pricing adjustments with the Osaka Regional Tax Bureau.

On September 25, 2006, Kyocera Corporation received an opposition decision letter from the Bureau that voided a portion of the original disposition. In accordance with this opposition decision, ¥4,356 million of tax refunds, including local taxes, is recognized as income tax benefits for the six months ended September 30, 2006. Kyocera Corporation remains in disagreement with the decision concerning the portion of the original disposition that was not voided, and therefore on October 23, 2006, Kyocera Corporation submitted a written claim for examination with the Osaka Board of Tax Appeals. Concurrently, Kyocera Corporation is undertaking comprehensive deliberations that include consideration of a motion for mutual agreement procedures with the aim of avoiding double taxation within Kyocera.

 

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14. Sale of Share of Taito Corporation

On September 28, 2005, Kyocera Corporation sold its entire holding of shares of Taito Corporation (Taito) (36.02% of outstanding shares), an equity-method affiliate, engaged in the amusement business, in a tender offer bid for Taito shares by Square Enix Co., Ltd., one of the leading companies in the game software industry. As a result of this sale of Taito shares, Kyocera Corporation recorded a gain of ¥6,931 million for the six months ended September, 2005.

 

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Non-Consolidated Results of Kyocera Corporation (parent company)

for the Six Months Ended September 30, 2006

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

 

Date of the board of directors’ meeting for the interim results : October 30, 2006
Payment date of interim dividends : December 5, 2006

1. Results for the six months ended September 30, 2006 :

(1) Results of operations :

 

     Japanese yen
     Six months ended September 30,    

Year ended March 31,

2006

     2006     2005    

Net sales

   ¥ 259,738 million     ¥ 220,901 million     ¥ 477,379 million

% change from the previous period

     17.6 %     (11.8 )%  

Profit from operations

     21,284 million       12,383 million       39,937 million

% change from the previous period

     71.9 %     (41.9 )%  

Recurring profit

     32,844 million       26,903 million       68,182 million

% change from the previous period

     22.1 %     (23.0 )%  

Net income

     33,655 million       31,865 million       68,712 million

% change from the previous period

     5.6 %     55.3 %  
                      

Earnings per share

   ¥ 179.08     ¥ 169.97     ¥ 366.07
                      

Notes :

1. Average number of common stock outstanding during the period :

 

Six months ended September 30, 2006

   187,932,385 shares

Six months ended September 30, 2005

   187,478,104 shares

Year ended March 31, 2006

   187,513,918 shares

2. Change in accounting policies : None

 

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(2) Financial position :

 

     Japanese yen  
     September 30,    

March 31,

2006

 
     2006     2005    

Total assets

   ¥ 1,471,385 million     ¥ 1,343,060 million     ¥ 1,389,396 million  

Net assets

     1,191,940 million       1,100,768 million       1,132,261 million  
                        

Net assets to total assets

     81.0 %     82.0 %     81.5 %
                        

Net assets per share

   ¥ 6,339.95     ¥ 5,871.53     ¥ 6,030.17  

Notes : Total number of shares outstanding as of:

      

 

September 30, 2006    188,004,780 shares
September 30, 2005    187,475,323 shares
March 31, 2006    187,754,750 shares
Total number of treasury stock as of :   
September 30, 2006    3,304,510 shares
September 30, 2005    3,833,967 shares
March 31, 2006    3,554,540 shares

 

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BALANCE SHEETS

 

     Yen in millions
    

September 30,

2006

  

March 31,

2006

  

September 30,

2005

     Amount     %    Amount     %    Amount     %

Current assets :

              

Cash and bank deposits

   ¥ 119,336        ¥ 136,870        ¥ 142,633    

Trade notes receivable

     46,376          43,325          39,963    

Trade accounts receivable

     96,306          90,073          84,134    

Marketable securities

     37,997          19,331          208    

Finished goods and merchandise

     17,818          17,588          17,450    

Raw materials

     16,546          14,152          18,353    

Work in process

     20,416          17,104          18,710    

Supplies

     745          751          553    

Deferred income taxes

     16,590          15,375          15,144    

Short-term loans to subsidiaries

     14,372          1,316          2,191    

Other accounts receivable

     8,048          9,012          7,302    

Other current assets

     6,904          3,401          1,913    

Allowances for doubtful accounts

     (164 )        (142 )        (133 )  
                                      

Total current assets

     401,290     27.3      368,156     26.5      348,421     25.9
                                      

Non-current assets :

              

Tangible fixed assets :

              

Buildings

     35,770          36,978          36,411    

Structures

     2,197          2,268          2,165    

Machinery and equipment

     47,358          44,113          40,804    

Vehicles

     26          25          30    

Tools, furniture and fixtures

     7,679          7,477          7,578    

Land

     33,381          33,323          33,323    

Construction in progress

     947          4,533          5,783    
                                      

Total tangible fixed assets

     127,358     8.6      128,717     9.3      126,094     9.4
                                      

Intangible assets :

              

Patent rights and others

     13,365          14,298          11,234    
                                      

Total intangible assets

     13,365     0.9      14,298     1.0      11,234     0.8
                                      

Investments and other assets :

              

Investments in securities

     577,884          536,019          519,536    

Investments in subsidiaries and affiliates

     262,627          278,817          278,675    

Investments in subsidiaries and affiliates other than equity securities

     27,054          27,033          27,033    

Long-term loans

     22,659          30,428          31,581    

Long-term prepaid expenses

     3,051          3,785          4,296    

Long-term deposits

     34,000          —            —      

Security deposits

     1,880          1,918          1,922    

Other investments

     571          592          569    

Allowances for doubtful accounts

     (354 )        (367 )        (351 )  

Allowances for impairment loss on investments

     —            —            (5,950 )  
                                      

Total investments and other assets

     929,372     63.2      878,225     63.2      857,311     63.9
                                      

Total non-current assets

     1,070,095     72.7      1,021,240     73.5      994,639     74.1
                                      

Total assets

   ¥ 1,471,385     100.0    ¥ 1,389,396     100.0    ¥ 1,343,060     100.0
                                      

 

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Table of Contents
     Yen in millions  
    

September 30,

2006

   

March 31,

2006

   

September 30,

2005

 
     Amount     %     Amount     %     Amount     %  

Current liabilities :

            

Trade accounts payable

   ¥ 56,667       ¥ 49,570       ¥ 45,926    

Other payables

     20,763         29,659         25,250    

Accrued expenses

     8,014         7,610         5,799    

Income taxes payables

     13,052         14,200         10,700    

Deposits received

     2,738         2,315         2,519    

Accrued bonuses

     10,447         10,109         9,849    

Accrued bonuses for directors

     34         —           —      

Warranty reserves

     4,596         521         332    

Allowances for sales returns