Kyocera 6-K 2006
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of April 2006
Commission File Number: 1-07952
6 Takeda Tobadono-cho, Fushimi-ku,
Kyoto 612-8501, Japan
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F X Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b); 82-
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
Date: April 27, 2006
Information furnished on this form:
Consolidated Financial Highlights
Results for the Year Ended March 31, 2006
Kyocera Corporation and its Consolidated Subsidiaries
The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.
Date of the board of directors meeting for the consolidated results for the year: April 27, 2006
1. Results for the year ended March 31, 2006:
(1) Consolidated results of operations:
(2) Consolidated financial position:
(3) Consolidated cash flows:
(4) Scope of consolidation and application of the equity method:
Number of consolidated subsidiaries: 168
Number of non-consolidated subsidiaries accounted for by the equity method: 2
Number of affiliates accounted for by the equity method: 12
(5) Changes in scope of consolidation and application of the equity method:
2. Forecast for the year ending March 31, 2007:
Forecast of earnings per share: ¥442.34
Net income per share amounts is computed based on Statement of Financial Accounting Standards No.128.
Forecast of earnings per share is computed based on the diluted average number of shares outstanding during the year ended March 31, 2006.
With regard to forecasts set forth above, please refer to the accompanying Forward Looking Statements on page 16.
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Kyocera group consists of Kyocera Corporation, 170 subsidiaries and 12 affiliates.
(Chart of the group companies)
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Kyocera Corporation and its consolidated subsidiaries (Kyocera) aim to be The Company respected by society from the perspective of corporate ethics, while maintaining continuous sales growth and high profitability. To achieve this management vision, Kyoceras management policy is to further drive business expansion to be a creative company that continues to grow in the 21st century. Kyocera promotes efficient resource management and emphasizes consolidated group management and intends to increase corporate value (aggregate market value of its shares) through improvement of business performance.
Kyocera promotes high-value-added diversification as its management strategy to realize this management policy. By making each individual business highly profitable and maximizing group synergies, Kyocera seeks to propel continuous corporate growth even in a tough, rapidly changing business environment.
In particular, Kyocera aims to: (1) exploit competitive advantages; (2) strengthen existing businesses; and (3) create new businesses.
(1) Exploit competitive advantages
The Kyocera Philosophy, a corporate philosophy of Kyocera that is run with faith in the human spirit, and the so-called amoeba management system, which has been a unique management system of Kyocera based on small business units and has been a driving force for corporate growth since Kyocera Corporation was founded, as well as its strong financial basis have been Kyoceras particular competitive advantages in promoting its diversification strategy. Leveraging off this sturdy base, Kyocera will focus its energies into two high-growth-potential areas going forward, namely the markets for telecommunications and information processing and for environmental preservation. By establishing further competitive advantages in technology, and sales and marketing, Kyocera intends to improve business performance through its diversification strategy.
(2) Strengthen existing businesses
Kyocera will improve profitability of each existing business on a daily basis and improve profitability of each operating segment on a consolidated business by deepening the ties between Kyocera Group companies and each Corporate Business Group of Kyocera Corporation to pursue maximization of synergies. Kyocera will also employ a global strategy in each business and integrate group-wide management resources to establish the structure to undertake R&D, production and sales at optimal localities. As a result, Kyocera can hone the competitive edge of each of its existing businesses. Kyocera also regularly reviews those businesses that have lost market competitiveness or where significant performance improvement is not expected in the future.
(3) Create new businesses
Kyocera will create new core businesses to spur growth over the medium to long term by integrating group-wide management resources and developing new technologies, products and markets. Special emphasis will be placed on generating new business domains in the markets for telecommunications and information processing and for environmental preservation.
Kyocera aims to be a creative company that continues to grow in the 21st century. To achieve such management policy, Kyocera seeks to improve the profitability of its component and equipment businesses, and is working to rapidly attain a pre-tax income ratio of 15% or more on a group-wide basis. Toward this goal, Kyocera will strive to achieve its financial forecasts set for the year ending March 31, 2007 (fiscal 2007) and to further strengthen its business foundation.
The following outlines specific measures being undertaken to accomplish these goals.
(1) Further strengthen amoeba management system
Kyoceras amoeba management system offers a unique competitive advantage over rival companies, and as such, Kyocera aims to further strengthen such management system. Since Kyocera Corporation was founded, this system has been a driving force for growth of Kyocera. Kyocera will further seek to thoroughly implement such management system and invigorate competencies in its development, manufacturing, sales and marketing departments, which in turn will boost the ability to achieve objectives. In particular, Kyocera is working to strengthen its capabilities in manufacturing, which is the profit center of Kyocera.
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(2) Translate results of strategic investment and structural reform into improved performance
Kyocera aims to ensure that strategic investment during the year ended March 31, 2006 (fiscal 2006) will translate into improved performance in fiscal 2007 and beyond. Concrete initiatives include launching new businesses and improving profitability in the components business, especially the Fine Ceramic Parts Group (ceramic parts for LCD fabrication equipment), the Semiconductor Parts Group (ceramic packages and organic packages) and the Applied Ceramic Products Group (solar energy products and cutting tools).
Kyocera also expects structural reforms implemented in fiscal 2006 to lead to improved sales and profit.
(3) Promote commercialization of strategic businesses from a medium term perspective
Kyocera will promote the commercialization of new businesses that will be key growth drivers for Kyocera in the medium term. In addition to pursuing business expansion in prospective markets including ceramic parts for diesel engines, Kyocera aims to realize practical application of next-generation solar cells and solid oxide fuel cells (SOFCs), and to make these businesses contribute to our business performance as quickly as possible.
Basic Profit Distribution Policy
Historically, Kyocera has set dividend amounts with the policy of maintaining stable payment of dividends. In order to implement its policy of giving more weight to the interests of shareholders, however, Kyocera decided, commencing with the year end dividend relating to the year ended March 31, 2005 (fiscal 2005), to change this policy to establish a greater linkage between dividend amounts and Kyoceras performance. In particular, Kyocera will determine dividend amounts based on an overall assessment that will take into consideration capital expenditures necessary for the further development of Kyocera from a medium to long-term perspective, while also aiming for a payout ratio of approximately 20 to 25% on a consolidated basis.
Based on this policy, Kyocera plans to distribute the year-end dividend in the amount of ¥50 per share for fiscal 2006. As a result, when aggregated with the interim dividend in the amount of ¥50 per share, which has been already paid, the total amount of dividends per share through fiscal 2006 will be ¥100 per share. Accordingly, the dividend payout ratio will be 26.9%.
Policy Encouraging Individual Share Ownership
In February 1997, to make share transactions easier for individuals, Kyocera Corporation revised the number of shares in a minimum trading unit, reducing it from 1,000 to 100 shares. These efforts have proven highly rewarding as the number of stockholders in Kyocera Corporation continues to rise. At present, Kyocera Corporation has secured sufficient liquidity in its shares and so has no further plans to reduce the size of trading units.
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Business Results and Financial Condition
1. Business Results for the Year Ended March 31, 2006
(1) Economic Situation and Business Environment
The Japanese economy continued to expand steadily during fiscal 2006 on the back of improved corporate earnings, increased capital investment and robust personal consumption. As to the world economy, the U.S. economy continued to grow through healthy expansion in personal consumption, while in Europe an increase in exports and production actively helped the economy towards a moderate recovery track. The Chinese economy maintained high growth as exports increased due to expanded production of electronic equipment and strong capital investment in the private sector. Other economies in Asia also expanded steadily on the whole.
In the first quarter of fiscal 2006, the business environment was severe in the electronics industry, which is a key market for Kyocera. Recovery in demand was moderate, while components prices declined significantly. Nonetheless, the environment made an about-turn since last summer. Not only has production of core digital consumer products such as mobile phone handsets, PCs and digital home appliances expanded remarkably, but demand for related electronic components also maintained an upward trend until the end of the fourth quarter of fiscal 2006.
(2) Management Initiatives
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(3) Consolidated Financial Results
Overview of Performance for the Year Ended March 31, 2006
Consolidated net sales remained roughly the same as in fiscal 2005, while profits increased due to a substantial improvement in profits from the equipment business as a result of the positive effects of structural reforms.
In the component business, sales and profits in the Applied Ceramic Products Group increased considerably compared with the previous year due to expansion of sales of solar energy products and cutting tools. However, sales and profits in the Fine Ceramic Parts Group and the Electronic Device Group declined due to slumping component demand until the end of the first quarter of fiscal 2006 and to a substantial decline in component prices.
In the equipment business, sales in the Telecommunications Equipment Group and the Optical Equipment Group declined compared with fiscal 2005 due to continued structural reforms at KWC and the material downsizing of the camera equipment business. Despite this, there was a considerable improvement on a profit front as the positive effects of structural reforms in both of these business groups began to emerge, accompanied by and increased sales in Japan of new products in the Telecommunications Equipment Group, namely mobile phone handsets and PHS handsets.
The yen depreciated 5 yen against the U.S. dollar and 3 yen against the Euro compared with the average exchange rates in fiscal 2005. Accordingly, net sales and income before income taxes after translation into yen were pushed up by ¥32.2 billion and ¥8.0 billion, respectively, compared with fiscal 2005.
Besides, the merger of Mitsubishi Tokyo Financial Group, Inc. and UFJ Holdings, Inc., on October 1, 2005, Kyocera Groups holding shares in UFJ Holdings, Inc. were exchanged for shares of the new company, Mitsubishi UFJ Financial Group. As a result of this share exchange, Kyocera recognized a gain in the amount of ¥5,281million. Furthermore, a subsidiary of Kyocera recognized loss on devaluation of investment in an affiliate of ¥3,492 million in the fourth quarter of fiscal 2006.
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(4) Consolidated Sales and Operating Profits by Reporting Segment
Kyocera previously classified its operations into four reporting segments: Fine Ceramics Group, Electronic Device Group, Equipment Group and Others. Kyocera changed its segmentation to clarify the nature of each of its operations and to rationalize its management structure more efficiently. Kyocera currently has the following eight reporting segments: Fine Ceramic Parts Group, Semiconductor Parts Group, Applied Ceramic Products Group, Electronic Device Group, Telecommunications Equipment Group, Information Equipment Group, Optical Equipment Group and Others. Consolidated results for the year ended March 31, 2005 have been retroactively reclassified accordingly.
1) Fine Ceramic Parts Group
Sales and operating profit in this segment decreased compared with fiscal 2005. Demand for ceramic parts used in semiconductor fabrication equipment was weaker than fiscal 2005, and sales of sapphire products for LCD projectors decreased by intensifying market competition with other materials.
2) Semiconductor Parts Group
Although demand for ceramic packages for digital consumer products such as mobile phone handsets and digital cameras declined in the first half of fiscal 2006, it recovered in the second half of fiscal 2006. Sales of organic packages for servers and digital consumer products increased. Operating profit was negatively impacted by an increase in depreciation costs in line with aggressive capital expenditures, including those to establish a new plant aimed at future business expansion. As a result, sales and operating profit in this segment increased compared with fiscal 2005.
3) Applied Ceramic Products Group
Both sales and operating profit in this segment increased significantly compared with fiscal 2005. Strong sales growth was recorded in the solar system business amid an expanding global market spurred by rising environmental awareness. Sales of cutting tools also grew due to healthy production activity in the automobile industry.
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4) Electronic Device Group
Sales in this segment for fiscal 2006 declined slightly, and operating profit decreased compared with fiscal 2005. Although business environment in the first quarter of fiscal 2006 was stagnant, components demand for digital consumer products such as mobile handsets increased since last summer. However, this was insufficient to absorb a decline in sales and profits in the first half of fiscal 2006 because of slow sales of crystal related components for digital still cameras and mobile handsets and so on.
5) Telecommunications Equipment Group
Sales of mobile phone handsets decreased at KWC because it was in the process of executing structural reforms in the first half of fiscal 2006. In addition, sales of PHS-related products for the overseas market decreased. As a result, sales in this segment decreased compared with fiscal 2005. Nonetheless, operating loss was greatly reduced compared to fiscal 2005 due to increased sales of mobile phone handsets and PHS handsets in Japan combined with the positive effects of structural reforms at KWC.
6) Information Equipment Group
Sales in this segment increased compared with fiscal 2005 due to the introduction of a series of new machines and encouraged sales activities despite intensifying global competition and a severe market environment. Operating profit decreased compared with fiscal 2005, however, due to the impact of a decline in unit prices and increasing development costs for color printers and digital multifunction products equipped with solution functions.
7) Optical Equipment Group
Sales of camera equipment decreased in line with the execution of structural reforms. Operating loss in this segment, however, decreased considerably as a result of the positive effects of structural reforms.
Kyocera Communication Systems Co., Ltd. (KCCS) posted solid sales growth due to an increase in sales by its telecommunications engineering business and to the contribution of a new subsidiary of KCCS, which was consolidated in fiscal 2005. Consequently, sales in this segment increased compared with fiscal 2005. Operating profit decreased slightly, however, due mainly to the impact of a decline in profits at Kyocera Chemical Corporation (KCC).
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(5) Consolidated Orders and Production
(6) Consolidated Sales by Geographic Area
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Sales increased compared with fiscal 2005 due to steady growth in sales of solar energy products, mobile phone handsets and PHS-related products in the Telecommunications Equipment Group, as well as telecommunications engineering and other businesses at KCCS.
Although sales of the Telecommunications Equipment Group declined, sales of the Electronic Device Group, the solar energy business and the Information Equipment Group increased. Consequently, sales increased compared with fiscal 2005.
Sales decreased due to slumping sales of the Telecommunications Equipment Group, even though sales of solar energy products and cutting tools in the Applied Ceramic Products Group and of the Electronic Device Group grew.
Sales increased compared with fiscal 2005 due mainly to increased sales of solar energy products.
Sales decreased compared with fiscal 2005 due to lower sales of the Telecommunications Equipment Group in Latin America.
2. Cash Flow
Cash and cash equivalents at the end of fiscal 2006 decreased by ¥9,783 million to ¥300,809 million compared with the end of fiscal 2005.
(1) Cash flow from operating activities
Net cash provided by operating activities in fiscal 2006 was ¥171,077 million. Cash flow from receivables decreased by ¥77,795 million compared with fiscal 2005, although due to an increase in cash flows from inventories and notes and accounts payable by ¥93,165 million compared with fiscal 2005, in addition, net income in fiscal 2006 increased by ¥23,788 million compared with fiscal 2005. As a result net cash provided by operating activities increased by ¥25,554 million compared with fiscal 2005 of ¥145,523 million.
(2) Cash flow from investing activities
Net cash used in investing activities in fiscal 2006 increased by ¥32,973 million to ¥165,467 million from net cash used in fiscal 2005 of ¥132,494 million. This was due to proceeds from sales of investment in an affiliate to ¥24,133 million, in addition decrease in payments for purchases of investments and advances by ¥11,634 million, on the other hand, an increase in payments for purchase of securities and payments for purchases of property, plant and equipment, and intangible assets, also deposit of negotiable certificate of deposits and time deposits increased by ¥74,409 million compared with fiscal 2005.
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(3) Cash flow from financing activities
Net cash used in investing activities in fiscal 2006 decreased by ¥44,055 million to ¥23,289 million from fiscal 2005 of ¥67,344 million. This was due mainly to an increase in short-term debt.
<Cash Flows Indexes (Consolidated)>
All indexes are computed on a consolidated basis.
Interest bearing debts represent all debts with interest expense included in consolidated balance sheets.
3. Capital Expenditures and Depreciation (Consolidated)
During fiscal 2006, Kyocera made aggressive capital expenditures in its organic packages business and solar energy business including the establishment of new production bases and the expansion of production capacity. Due mainly to these factors, capital expenditures for fiscal 2006 increased significantly compared with fiscal 2005.
4. Non-Consolidated Results for the Year Ended March 31, 2006
5. Business Risk
Please see Forward-Looking Statements on page 16 for details of business risk.
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Basic Outlook and Future Management and Business Strategies
1. Economic Situation and Business Environment for the Year Ending March 31, 2007
The economy in Japan is expected to continue expanding in fiscal 2007 due to continued improvement in corporate earnings. As for overseas economy, although the U.S., Asian and European economies are forecasted to grow steadily, there are concerns over the impact of crude oil price trends on material prices and world economies.
In the electronics industry, Kyocera projects an increase in demand for digital TVs and next-generation game consoles, and for mobile phone handsets in the BRICs (Brazil, Russia, India, China) markets, and therefore an increase in demand of components for these digital consumer products. In the semiconductor industry, Kyocera expects an increase in capital investment from equipment manufacturers and a generally favorable business environment in the electronics market in fiscal 2007.
2. Consolidated Forecasts for the Year Ending March 31, 2007
In light of the aforementioned outlook for the business environment, Kyocera forecasts year-on-year increases in both consolidated sales and profits on a basis for fiscal 2007.
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3. Consolidated Outlook and Future Business Strategies by Reporting Segment
Kyocera aims to be a creative company that continues to grow in the 21st century. To this end, Kyocera intends to confidently seize opportunities for growth in each of its businesses under the expected favorable business conditions and to strengthen its business foundations with a view towards attaining a pre-tax income ratio of over 15%.
In the components business, Kyocera expects that strategic investments during the year will translate into improved performance from the next fiscal year onward. Specifically, Kyocera seeks to create sound business foundations in ceramic parts for LCD fabrication equipment, ceramic packages, organic packages, solar energy products and cutting tools aimed at improving profitability and driving future growth.
In the equipment business, Kyocera expects the positive effects of structural reforms implemented in during the year to emerge in the form of higher sales and profits. In the Telecommunications Equipment Group, Kyocera will increase sales through the timely launch of new products and by cultivating new markets. Efforts will be made to expand mobile phone handset sales and boost profitability at KWC. Elsewhere, Kyocera will work to expand market share of PHS handsets in Japan and to develop the PHS market overseas. In the Information Equipment Group, Kyocera will strengthen its lineup of models with color capability and solution functionality in order to expand sales.
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4. Non-Consolidated Forecasts for the Year Ending March 31, 2007
Note: Forward-Looking Statements
Certain of the statements made in this document are forward-looking statements (within the meaning of Section 21E of the U.S. Securities and Exchange Act of 1934), which are based on our current assumptions and beliefs in light of the information currently available to us. These forward-looking statements involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors include, but are not limited to: general economic conditions in our markets, which are primarily Japan, North America, Europe, and Asia, including in particular China; changes in exchange rates, particularly between the yen and the U.S. dollar and euro, respectively, in which we make significant sales; our ability to launch innovative products and otherwise meet the advancing technical requirements of our customers, particularly in the highly competitive markets for ceramics, semiconductor parts and electronic components; and the extent and pace of future growth or contraction in information technology-related markets around the world, including those for communications and personal computers; fluctuations in the value of securities and other assets held by us and changes in accounting principles; business performance of other companies with which we maintain business alliances; laws and regulations relating to the taxation, and to manufacturing and trade; events that may impact negatively on our markets or supply chain, including terrorist acts and outbreaks of diseases; and the occurrence of natural disasters, such as earthquakes, in locations where our manufacturing and other key business facilities are located. Such risks, uncertainties and other factors may cause our actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements included in this document.
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CONSOLIDATED BALANCE SHEETS
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Note : Accumulated other comprehensive income is as follows:
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CONSOLIDATED STATEMENTS OF INCOME
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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SUPPLEMENTAL CASH FLOW INFORMATION
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1. Reporting segments:
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2. Geographic segments (Sales and operating profit by geographic area):
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3. Geographic segments (Sales by region):
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INVESTMENTS IN DEBT AND EQUITY SECURITIES
Investments in debt and equity securities at March 31, 2006 and 2005, included in short-term investments (current assets) and securities and other investments (non-current assets) are summarized as follows:
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BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
Kyoceras consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.
Finished goods and work in process are mainly stated at the lower cost of market, the cost being determined by the average method. All other inventories are mainly stated at the lower cost of market, the cost being determined by the first-in, first-out method.
Kyocera adopts Statement of Financial Accounting Standards No.115, Accounting for Certain Investments in Debt and Equity Securities.
Held-to-maturity securities are recorded at amortized cost.
Available-for-sales securities are recorded at fair value, with unrealized gains and losses excluded from income and recorded in other comprehensive income, net of tax.
Depreciation is computed at rates based on the estimated useful lives of assets mainly using the declining balance method.
Kyocera adopts Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.
Goodwill and intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually.
Intangible assets with definite useful lives are amortized over their respective estimated useful lives.
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Allowance for doubtful accounts:
Kyocera provided based on the past actual ratio of losses on bad debt in addition to estimation of uncollectible
amount based on the analysis of certain individual receivables.
Accrued pension and severance cost:
Kyocera adopts Statement of Financial Accounting Standards No. 87, Employers Accounting for Pensions,
pension and severance cost is accrued based on the projected benefit obligations and the fair value of plan
assets at the balance sheet date. If the accumulated benefit obligation (i.e., obligations deducting an effect of future compensation levels from projected benefit obligations) exceeds the fair value of plan assets, a minimum pension liability equal to this difference is reflected in the consolidated balance sheets by recognizing an additional minimum pension liability. Unrecognized prior service cost is amortized by the straight-line method over the average remaining service period of employees. Unrecognized actuarial loss is recognized by amortizing a portion in excess of 10% of the greater of the projected benefit obligations or the market-related value of plan assets by the straight-line method over the average remaining service period of employees.
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The non-consolidated financial statements are in conformity with accounting principles generally accepted in Japan.
Date of the board of directors meeting for the results for the year: April 27, 2006
Date of the general meeting of shareholders: June 23, 2006
1. Results for the year ended March 31, 2006:
(1) Results of operations:
1. Average number of common stock outstanding during the year
2. Change in accounting policies: None except for the adoption of new accounting standard described in page 37.
(2) Dividend information:
(3) Financial Position:
2. Forecast for the year ending March 31, 2007:
Note: Forecast of earnings per share: ¥ 282.28
With regard to the forecasts set forth above, please refer to the accompanying Forward Looking Statements on page 16.
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STATEMENTS OF INCOME
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PROPOSED APPROPRIATION OF RETAINED EARNINGS
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Finished good, merchandise and work in process:
Finished goods and work in process are stated at the lower of cost or market, the cost being determined by the average method. Merchandise are stated at the lower of cost or market, the cost being determined by the last purchase method.
Raw materials and supplies:
Raw materials and supplies, except those for telecommunications equipment, are valued at cost, the cost being determined by the last purchase method.
Raw materials for telecommunications equipment are valued at cost, the cost being determined by the first-in, first-out method.
Tangible fixed assets:
Intangible fixed assets and long-term prepaid expenses:
Amortization is computed at rates based on the estimated useful lives of assets using the straight-line method.
Allowances for doubtful accounts:
Allowances for doubtful accounts are provided at an estimated amount of the past actual ratio of losses on bad debts.
Certain allowances are provided for estimated uncollectible receivables.
Allowances for impairment losses on investments:
Allowances for impairment losses on investments are provided at an estimated uncollectible amount of investments in subsidiaries or affiliates.
Accrued bonuses are provided based upon the amounts expected to be paid which is determined by actual payment of previous year.
Warranty reserves are provided based upon the estimated after-service costs to be paid during warranty periods, which is determined by actual payment of past years, for communication equipments.
Allowances for sales return
Allowances for sales return are provided based upon the estimated loss on returned products, which is determined by the historical experience of sales returns.
Accrued pension and severance costs:
Pension and severance costs are recognized based on projected benefit obligation and plan assets at the year end.
Past service liability is amortized over estimated average remaining service period of employees by using the straight-line method.
Actuarial gains or losses are amortized over estimated average remaining service period of employees by using the straight-line method following the year incurred.
Retirement allowance for Directors and Corporate Auditors
Retirement allowances for Directors and Corporate Auditors are provided at an estimated amount in accordance with Kyocera Corporations internal regulation.
Finance lease other than those which are deemed to transfer the ownership of leased assets to lessees are accounted for by the method similar to that applicable to an ordinary operating lease.
The consumption taxes withheld upon sale and the consumption taxes paid for purchases of goods and services are not included in the amounts of respective revenue and cost or expense items in the accompanying statements of income.
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2. New Accounting Standard
The accounting standard for an impairment of tangible and intangible fixed assets was effective for the years beginning on or after April 1, 2005. As a result of adopting the new accounting standard there was no impact on the non-consolidated result of operation and financial condition.
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Notes to the balance sheets:
Notes to the statements of income:
(1) Major items in non-recurring gain and loss:
(2) Depreciation and amortization:
Note for marketable securities:
Market value for investment in subsidiaries and affiliates: