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Kyocera 6-K 2006

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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 January 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/ AKIHIKO TOYOTANI


Akihiko Toyotani

General Manager of

Finance Division

 

Date: January 30, 2006


Table of Contents

Information furnished on this form:

 

EXHIBITS

 

Exhibit

  Number  


    
1.    Consolidated Financial Results for the nine Months Ended December 31, 2005
2.    Supplemental Information for Consolidated Financial Results for the nine Months Ended December 31, 2005


Table of Contents

LOGO

 

January 30, 2006

 

KYOCERA CORPORATION

 

Consolidated Financial Highlights (Unaudited)

Results for the Nine Months Ended December 31, 2005

 

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

 
     Nine months ended December 31,

  

Increase
(Decrease)

(%)


 
     2005

   2004

  

Net sales

   864,490    892,642    (3.2 )

Profit from operations

   69,203    81,399    (15.0 )

Income before income taxes

   87,977    88,965    (1.1 )

Net income

   49,993    57,163    (12.5 )

Average exchange rates :

                

US$

   112    109    —    

Euro

   137    135    —    

Earnings per share :

                

Net income

                

Basic

   266.66    304.88    —    

Diluted

   266.64    304.80    —    

Capital expenditures

   70,723    46,202    53.1  

Depreciation

   44,809    42,782    4.7  

R&D expenses

   43,737    41,364    5.7  

Total assets

   1,917,949    1,770,575    —    

Stockholders’ equity

   1,283,130    1,186,851    —    

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

   31.4    33.2    —    

 

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Table of Contents

Consolidated Results of Kyocera Corporation and its Subsidiaries

for the Nine Months Ended December 31, 2005

 

1. The basic items on preparation for consolidated results for the nine months ended December 31, 2005 :

 

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

 

(2) Change in accounting policies : None

 

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

 

     Consolidation

   Equity method

Increase         

   3    0

Decrease        

   2    3

 

 

2. Consolidated financial information for the nine months ended December 31, 2005 :

 

(1) Consolidated results of operations :

 

     Nine months ended December 31,

    Year ended March 31,

 
     2005

    2004

    2005

 

Net sales

   ¥ 864,490 million     ¥ 892,642 million     ¥ 1,180,655 million  

% change from the previous period

     (3.2 )%     9.4 %     3.5 %

Profit from operations

     69,203 million       81,399 million       100,968 million  

% change from the previous period

     (15.0 )%     67.9 %     (7.3 )%

Income before income taxes

     87,977 million       88,965 million       107,530 million  

% change from the previous period

     (1.1 )%     65.7 %     (6.5 )%

Net income

     49,993 million       57,163 million       45,908 million  

% change from the previous period

     (12.5 )%     71.9 %     (32.6 )%

Earnings per share :

                        

Net income

                        

Basic

   ¥ 266.66     ¥ 304.88     ¥ 244.86  

Diluted

     266.64       304.80       244.81  

 

(2) Consolidated financial condition :

 

                        
     As of December 31,

    As of March 31,

 
     2005

    2004

    2005

 

Total assets

     ¥1,917,949 million       ¥1,770,575 million       ¥1,745,519 million  

Stockholders’ equity

       1,283,130 million         1,186,851 million       1,174,851 million  

Stockholders’ equity to total assets

     66.9%       67.0%       67.3%  

Stockholders’ equity per share

     ¥6,844.39       ¥6,330.37       ¥6,266.50  

 

- 2 -


Table of Contents

(3) Consolidated cash flows :

 

     Nine months ended December 31,

   Year ended March 31,

     2005

   2004

   2005

Cash flows from operating activities

   ¥ 97,313 million    ¥ 101,564 million    ¥ 145,523 million

Cash flows from investing activities

     (135,081) million      (144,795) million      (132,494) million

Cash flows from financing activities

     (24,054) million      (58,019) million      (67,344) million

Cash and cash equivalents at end of period

     256,765 million      261,220 million      310,592 million

 

 

3. Consolidated financial forecast for the year ending March 31, 2006 :

 

     Year ending March 31, 2006

Net sales

   ¥ 1,200,000 million

Income before income taxes

   ¥ 125,000 million

Net income

   ¥ 73,000 million

 

Note 1:

 

There are no changes in the above forecast for the year ending March 31, 2006 from the forecast, which was shown in the Form 6-K submitted on October 27, 2005.

 

Note 2:

 

Forecast of earnings per share :

   ¥ 389.34

 

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 nine months ended December 31, 2005.

 

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

 

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Table of Contents

Business Results, Financial Condition and Prospects

 

1. Business Results for the Nine Months Ended December 31, 2005

 

(1) Economic Situation and Business Environment

 

The Japanese economy continued to expand steadily, although moderately, during the nine months ended December 31, 2005 (the nine months) 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 helped the economy to continue on a modest 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 as a whole.

 

In the three months from April 1, 2005 to June 30, 2005 (the first quarter), the business environment was severe in the electronics industry, which is a key market for Kyocera Corporation and its consolidated subsidiaries (Kyocera). Recovery in demand was moderate, while components prices declined significantly. Nonetheless, the environment has 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 has also been on an upward trend.

 

(2) Operating Highlights

 

1) In May 2005, Kyocera decided to outsource the manufacture of mobile phone handsets of Kyocera Wireless Corp. (KWC), a U.S. subsidiary, and to sell KWC’s manufacturing equipment and inventories to Flextronics International Ltd., a leading provider of electronics manufacturing services. The production transfer was completed in September 2005. Through this outsourcing, KWC has realized a major reduction in manufacturing costs, thereby driving a significant improvement in profitability in the three months from October 1, 2005 to December 31, 2005 (the third quarter).

 

 

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Table of Contents

2) Since June 2005, Kyocera implemented a new executive officer system to enhance Kyocera’s management organization under a global consolidation system, and accordingly, appointed a Chief Executive Officer (CEO), a Chief Financial Officer (CFO) and a Chief Operating Officer (COO). The CEO will take responsibility for mid and long-term Kyocera’s management policy and strategy formulation and execution, while the CFO will be responsible for constructing and executing a financial strategy for Kyocera that ensures the effective implementation of these management strategies. The COO will be in charge of daily management issues and business execution to achieve yearly management plans. At the same time, Kyocera also introduced a new corporate business group system, headed by newly appointed executive officers. These business group leaders will be responsible for each product line on a global and consolidated basis.

 

3) In June 2005, Kyocera entered into a purchase agreement with IBM Japan, Ltd. to purchase the land, building and other assets of the Yasu Office (Yasu City, Shiga Prefecture) owned by IBM Japan, Ltd. The transfer took place in August 2005. Kyocera intends to make the most effective use of the acquired assets to provide meaningful enhancement to the future business of Kyocera.

 

4) Kyocera accepted a tender bid by Square Enix Co., Ltd. for shares of Taito Corporation, an equity-method affiliate engaged in the amusement business, and sold its entire holding of shares of Taito Corporation (133,260 shares, 36.02% of outstanding shares) in September, 2005. The gain on sale of shares of Taito Corporation recorded in the six months ended September 2005 (the first half) was ¥6,931 million.

 

5) In November 2005, Kyocera established the Corporate Social Responsibility (CSR) Committee to deliberate upon and decide the policy and material matters with regard to CSR, and the Corporate CSR Division to execute these policies and material matters determined by the CSR Committee throughout Kyocera to strengthen its CSR activities across the board. Kyocera aims to generate sustainable growth by contributing to the healthy development of society through coordinated activities in Japan and overseas that take into consideration both Japanese and overseas trends in CSR.

 

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Table of Contents

(3) Consolidated Financial Results

 

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

 
     Nine months ended December 31,

  

Increase

(Decrease)

%


 
     2005

   2004

  

Net sales

   864,490    892,642    (3.2 )

Profit from operations

   69,203    81,399    (15.0 )

Income before income taxes

   87,977    88,965    (1.1 )

Net income

   49,993    57,163    (12.5 )

Diluted earnings per share

   266.64    304.80    —    

Average US$ exchange rate

   112    109    —    

Average Euro exchange rate

   137    135    —    

 

 

1) Overview of Performance for the Nine Months Ended December 31, 2005

 

     In the components business, the Applied Ceramic Products Group posted a considerable increase in sales compared with the nine months ended December 31, 2004 (the previous nine months) as sales of solar energy products and cutting tools were strong throughout the nine months amid continued global market expansion. Sales and operating profits in the Fine Ceramic Parts Group and the Electronic Device Group decreased compared with the previous nine months, however, due to the substantial decline in component prices in the first half.

 

     Meanwhile, sales in the equipment business decreased compared with the previous nine months due to that a slowdown in sales at KWC which is in the process of executing structural reforms, and a large downsizing of the camera equipment business outweighed robust sales of mobile phone handsets and PHS handsets in the Japanese market. Operating profit in the equipment business increased as operating losses from the Telecommunications Equipment Group and the Optical Equipment Group were significantly reduced owing to increased sales of new products and the positive effects of structural reforms.

 

     As a result of these business performances, overall Kyocera’s sales and profits for the nine months decreased compared with the previous nine months.

 

     In addition, an average rate of the yen depreciated 3 yen against the U.S. dollar and also depreciated 2 yen against the Euro compared with the previous nine months. Accordingly, net sales and income before income taxes after translation into the yen had a positive impact of approximately, ¥16.7 billion and ¥4.3 billion, respectively.

 

     Furthermore, following the merger of Mitsubishi Tokyo Financial Group, Inc. and UFJ Holdings, Inc., on October 1, 2005, Kyocera’s 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 recorded a gain in the amount of ¥5,281 million in the third quarter.

 

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Table of Contents
2) Overview of Performance for the three months from October 1, 2005 to December 31, 2005

 

     Sales in the components business increased considerably compared with the three months from October 1, 2004 to December 31, 2004 (the previous third quarter), reflecting sales growth particularly in the Electronic Device Group and the Semiconductor Parts Group due to increased production of digital consumer products. Furthermore, sales in the Applied Ceramic Products Group increased due mainly to expanded sales of solar energy products and cutting tools compared with the previous third quarter. Operating profits in the components business increased considerably due to the positive effects of higher sales and improved productivity.

 

     The equipment business posted a marked increase in sales compared with the previous third quarter, due to increased sales of new mobile phone handsets and PHS handsets in the Japanese market. Increased sales and improved profitability due to the structural reforms at KWC and the Optical Equipment Group resulted in a remarkable growth of operating profit compared with the previous third quarter.

 

 

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Table of Contents
(4) Consolidated Sales and Operating Profits by Reporting Segment

 

       Consolidated sales and operating profits by reporting segments is as follows.

 

     (Yen in millions)

 

     Nine months ended December 31,

   

Increase

(Decrease)

%


 
     2005

    2004

   

Fine Ceramic Parts Group

   50,839     56,681     (10.3 )

Semiconductor Parts Group

   98,887     98,479     0.4  

Applied Ceramic Products Group

   85,713     69,731     22.9  

Electronic Device Group

   193,897     202,253     (4.1 )
    

 

 

Total components business

   429,336     427,144     0.5  

Telecommunications Equipment Group

   166,297     193,744     (14.2 )

Information Equipment Group

   181,212     177,949     1.8  

Optical Equipment Group

   11,798     28,531     (58.6 )
    

 

 

Total equipment business

   359,307     400,224     (10.2 )

Others

   89,584     84,082     6.5  

Adjustments and eliminations

   (13,737 )   (18,808 )   —    
    

 

 

Net sales

   864,490     892,642     (3.2 )

Fine Ceramic Parts Group

   7,328     8,395     (12.7 )

Semiconductor Parts Group

   11,875     13,886     (14.5 )

Applied Ceramic Products Group

   15,135     12,508     21.0  

Electronic Device Group

   18,988     29,053     (34.6 )
    

 

 

Total components business

   53,326     63,842     (16.5 )

Telecommunications Equipment Group

   (5,683 )   (11,501 )   —    

Information Equipment Group

   21,061     27,470     (23.3 )

Optical Equipment Group

   (4,987 )   (10,123 )   —    
    

 

 

Total equipment business

   10,391     5,846     77.7  

Others

   7,720     8,743     (11.7 )
    

 

 

Operating profit

   71,437     78,431     (8.9 )

Corporate

   17,571     10,651     65.0  

Equity in losses of affiliates and unconsolidated subsidiaries

   (1,062 )   (213 )   —    

Adjustments and eliminations

   31     96     (67.7 )
    

 

 

Income before income taxes

   87,977     88,965     (1.1 )

 

 

 

Notes:

Kyocera had previously classified its operations into four reporting segments: “Fine Ceramics Group,” “Electronic Device Group,” “Equipment Group” and “Others.” Kyocera changed its segmentation to make clarify the nature of each operations and to make its management structure more efficiently. Kyocera currently has the following eight reporting segments: “Fine Ceramic Parts Group,” “Semiconductor Parts Group,” “Applied Ceramic Products Group,” “Electronic Device Group,” “Telecommunications Equipment Group,” “Information Equipment Group,” “Optical Equipment Group” and “Others.” Consolidated results for the nine months ended December 31, 2004 have been reclassified accordingly.

 

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Table of Contents
1) Fine Ceramic Parts Group

 

     Demand for ceramic parts used in semiconductor fabrication equipment was weaker than the previous nine months, and sapphire products for LCD projectors were negatively impacted by a decline in unit prices caused by intensifying market competition. As a result, sales and operating profit in this segment for the nine months decreased compared with the previous nine months.

 

     While sales in this segment for the third quarter decreased slightly, operating profit increased compared with the previous third quarter.

 

2) Semiconductor Parts Group

 

     Although sales of Ceramic package for digital consumer products such as mobile phone handsets and digital cameras declined compared with the previous nine months, sales of organic packages and substrates for servers and digital consumer products increased. As a result, sales in this segment for the nine months slightly increased compared with the previous nine months. Operating profit decreased, however, due to an increase in depreciation costs in the organic package business in line with aggressive capital expenditures to establish a new plant, and to slow demand for ceramic packages in the first half.

 

Both sales and operating profit of this segment in the third quarter, however, substantially increased compared with the previous third quarter due to expanded demand for ceramic packages for digital consumer products and improved productivity.

 

3) Applied Ceramic Products Group

 

     Both sales and operating profit in the nine months and the third quarter grew strongly compared with previous period. The solar system business recorded significant increases in sales and operating profits 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.

 

4) Electronic Device Group

 

     Sales and operating profit in this segment for the nine months were lower than the previous nine months. Despite steady growth in sales of thermal printheads, sales of LCDs for mobile phone handsets decreased. In addition, sales of electronic components such as crystal-related components, ceramic capacitors and connectors were negatively impacted by declines in component prices in the first half. On the other hand, both sales and operating profit in this segment for the third quarter increased compared with the previous third quarter due mainly to increased sales of components for digital consumer products and improved productivity.

 

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Table of Contents
5) Telecommunications Equipment Group

 

     Sales in this segment for the nine months decreased compared with the previous nine months due to a decline in sale of mobile phone handsets at KWC, a U.S. subsidiary, as it is in the process of executing structural reforms. In addition, sales of PHS-related products for overseas market decreased. However, the positive effects of increased sales of mobile phone handsets and PHS handsets in the Japanese market as well as positive results from the structural reform at KWC contributed substantially to a reduction in operating loss as compared with the previous nine months.

 

     Sales in this segment for the third quarter increased due to strong sales of mobile phone handsets and PHS handsets released in the Japanese market. Operating profit also improved substantially compared with the previous third quarter, in which operating loss was recorded. This was due mainly to the effect of increased sales in this segment and of improved profitability at KWC.

 

6) Information Equipment Group

 

     Sales in this segment for the nine months increased compared with the previous nine months. Kyocera enjoyed steady growth in sales of page printers and digital multifunctional products, new models which were continuously introduced into the market, despite intensifying global competition and a severe market environment. Operating profit for the nine months declined, however, due to the impact of a drop in unit prices and increasing development costs for color printers and digital multifunctional products equipped with solution functions set for release from the six months ending March 31, 2006 (the second half).

 

     Although sales in the third quarter increased, operating profit declined slightly compared with the previous third quarter.

 

7) Optical Equipment Group

 

     Sales in this segment decreased compared with the previous nine months and the previous third quarter owing to declining sales of camera equipment in line with the execution of structural reforms. Operating loss was substantially decreased as a result of the positive effects of the structural reforms.

 

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Table of Contents
8) Others

 

     Kyocera Communication Systems Co., Ltd. (KCCS) posted solid growth due to an increase in the sales of its telecommunications engineering business and to the contribution of a new subsidiary of KCCS, which was consolidated into Kyocera during the six months ended March 2005. Consequently, sales in this segment for the nine months increased compared with the previous nine months. Operating profit decreased, however, due mainly to the impact of a decline in profits at Kyocera Chemical Corporation (KCC).

 

     Sales for the third quarter increased due to increased sales of KCCS, and operating profit for the third quarter increased due to increased profit of KCCS and KCC, compared with the previous third quarter.

 

 

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Table of Contents
(5) Consolidated Orders and Production

 

     (Yen in millions)

 
     Nine months ended December 31,

   

Increase

(Decrease)

%


 
     2005

    2004

   

Fine Ceramic Parts Group

   51,436     57,895     (11.2 )

Semiconductor Parts Group

   105,493     96,606     9.2  

Applied Ceramic Products Group

   88,418     72,219     22.4  

Electronic Device Group

   201,750     205,813     (2.0 )

Total components business

   447,097     432,533     3.4  

Telecommunications Equipment Group

   174,333     179,904     (3.1 )

Information Equipment Group

   180,698     177,056     2.1  

Optical Equipment Group

   11,358     27,605     (58.9 )

Total equipment business

   366,389     384,565     (4.7 )

Others

   94,150     88,503     6.4  

Adjustments and eliminations

   (15,068 )   (18,329 )   —    

Orders

   892,568     887,272     0.6  

Fine Ceramic Parts Group

   50,341     56,941     (11.6 )

Semiconductor Parts Group

   99,718     98,890     0.8  

Applied Ceramic Products Group

   86,093     73,430     17.2  

Electronic Device Group

   191,617     209,290     (8.4 )

Total components business

   427,769     438,551     (2.5 )

Telecommunications Equipment Group

   168,647     201,848     (16.4 )

Information Equipment Group

   180,548     186,225     (3.0 )

Optical Equipment Group

   10,945     24,419     (55.2 )

Total equipment business

   360,140     412,492     (12.7 )

Others

   61,536     56,869     8.2  

Production

   849,445     907,912     (6.4 )

 

 

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Table of Contents
(6) Consolidated Sales by Geographic Area

 

     (Yen in millions)

 
     Nine months ended December 31,

  

Increase

(Decrease)

%


 
     2005

   2004

  

        Japan

   344,560    346,163    (0.5 )

        United States of America

   186,042    192,153    (3.2 )

        Asia

   148,746    159,994    (7.0 )

        Europe

   133,535    129,256    3.3  

        Others

   51,607    65,076    (20.7 )

Net Sales

   864,490    892,642    (3.2 )

 

 

1) Japan

 

     Despite an increase in sales of mobile phone handsets and PHS handsets, sales decreased compared with the previous nine months reflecting the downturn in the components business in the first half.

 

2) USA

 

     Although sales of the Electronic Device Group and the Information Equipment Group increased, sales of mobile handsets declined. Consequently, sales decreased compared with the previous nine months.

 

3) Asia

 

     Sales decreased due mainly to decline in sales of PHS-related products in China compared with the previous nine months.

 

4) Europe

 

     Sales increased compared with the previous nine months due to strong sales of solar energy products.

 

5) Others

 

     Sales decreased due to lower sales of mobile handsets in Latin America, although sales of information equipment and solar energy products were robust compared with the previous nine months.

 

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Table of Contents
2. Cash Flows

 

     Cash and cash equivalents at December 31, 2005 decreased by ¥53,827 million to ¥256,765 million compared with at March 31, 2005.

 

     (Yen in millions)

 
     Nine months ended December 31,

 
     2005

    2004

 

    Cash flows from operating activities

   97,313     101,564  

    Cash flows from investing activities

   (135,081 )   (144,795 )

    Cash flows from financing activities

   (24,054 )   (58,019 )

    Effect of exchange rate changes on cash and cash equivalents

   7,995     1,338  

    Net decrease in cash and cash equivalents

   (53,827 )   (99,912 )

    Cash and cash equivalents at beginning of period

   310,592     361,132  

    Cash and cash equivalents at end of period

   256,765     261,220  

 

1) Cash Flows from Operating Activities

 

     Net cash provided by operating activities for the nine months was ¥97,313 million. Although cash flows from inventories and payables increased compared with the previous nine months, cash flows from receivables decreased. Furthermore, net income for the nine months decreased, and it also included gains on exchange for the shares and on sale of investment on an affiliate, which were not recognized as cash flows from operating activities. As a result, net cash provided by operating activities decreased by ¥4,251 million to ¥101,564 million compared with the previous nine months.

 

2) Cash Flows from Investing Activities

 

     Net cash used in investing activities for the nine months decreased by ¥9,714 million to ¥135,081 million from net cash used by for the previous nine months of ¥144,795 million. This was due to that an increase of ¥44,020 million in payments for purchases of securities and payments for purchases of property, plant and equipment, and intangible assets compared with the previous nine months, exceeded an increase of ¥48,658 million in sales and maturities of securities and proceeds from sales of investment in an affiliate compared with the previous nine months.

 

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Table of Contents
3) Cash Flows from Financing Activities

 

     Net cash used in financing activities for the nine months decreased by ¥33,965 million to ¥24,054 million from the previous nine months of ¥58,019 million. This was due to an increase of ¥7,810 million in dividends paid compared with the previous nine months, while a decrease of ¥45,183 million in payments of long-term debt compared with the previous nine months.

 

3. Business Risk

 

     Please see “Forward-Looking Statements” on page 18 for details of business risks.

 

 

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Table of Contents
4. Consolidated Forecast for the Year Ending March 31, 2006

 

  (1) Consolidated Financial Forecast

 

     There is no revision in the financial forecast for the year ending March 31, 2006 (fiscal 2006) from the forecast announced on October 27, 2005. Forecast for fiscal 2006 is as follows.

 

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

     Forecast for fiscal 2006 announced on

   Result for fiscal
2005


  

Increase (Decrease)
to the result for
fiscal 2005

%


     January 30,
2006


   October 27,
2005


     

Net sales

   1,200,000    1,200,000    1,180,655    1.6

Profit from operations

   105,000    105,000    100,968    4.0

Income before income taxes

   125,000    125,000    107,530    16.2

Net income

   73,000    73,000    45,908    59.0

Diluted earnings per share

   389.34    389.34    244.81    —  

Average US$ exchange rate

   112    108    108    —  

Average Euro exchange rate

   136    132    135    —  

 

Note: The above forecast of exchange rates are revised in January 2006, however, the forecast for the sales and profits was not changed because the impact of the change of the exchange rates was not material.

 

 

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Table of Contents
  (2) Consolidated Forecast of Sales and Operating Profits by Reporting Segment

 

       There are no changes in the forecast of each reporting segment for the fiscal 2006 from the forecast announced on October 27, 2005. Forecast of each reporting segment is as follows.

 

     (Yen in millions)

 
     Fiscal 2006
(Forecast)


    Fiscal 2005
(Result)


   

Increase

(Decrease)

%


 

Fine Ceramic Parts Group

   68,000     73,711     (7.7 )

Semiconductor Parts Group

   134,000     127,960     4.7  

Applied Ceramic Products Group

   115,000     93,879     22.5  

Electronic Device Group

   258,000     262,997     (1.9 )
    

 

 

Total components business

   575,000     558,547     2.9  

Telecommunications Equipment Group

   245,000     250,918     (2.4 )

Information Equipment Group

   251,000     241,145     4.1  

Optical Equipment Group

   16,000     35,776     (55.3 )
    

 

 

Total equipment business

   512,000     527,839     (3.0 )

Others

   127,000     118,040     7.6  

Adjustments and eliminations

   (14,000 )   (23,771 )   —    
    

 

 

Net sales

   1,200,000     1,180,655     1.6  

Fine Ceramic Parts Group

   10,500     11,535     (9.0 )

Semiconductor Parts Group

   16,500     17,550     (6.0 )

Applied Ceramic Products Group

   18,500     17,129     8.0  

Electronic Device Group

   26,500     35,406     (25.2 )
    

 

 

Total components business

   72,000     81,620     (11.8 )

Telecommunications Equipment Group

   (1,000 )   (14,918 )   —    

Information Equipment Group

   30,500     36,186     (15.7 )

Optical Equipment Group

   (5,500 )   (15,387 )   —    
    

 

 

Total equipment business

   24,000     5,881     308.1  

Others

   12,000     13,019     (7.8 )
    

 

 

Operating profit

   108,000     100,520     7.4  

Corporate

   17,000     7,010     142.5  
    

 

 

Income before income taxes

   125,000     107,530     16.2  

 

 

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The economic situation in Japan and overseas from the three months from January 1, 2006 to March 31, 2006 (the fourth quarter) onward is expected to improve steadily on the whole. Kyocera also projects strong growth in the electronic equipment market in calendar year 2006 due to expanding demand for mobile phone handsets, PCs and digital consumer product such as digital home appliances.

 

Kyocera will strive to improve profitability from the fourth quarter and beyond by expanding production of organic packages and large ceramic parts for LCD fabrication equipment via newly constructed lines, enhancing development activities and pursuing swift market launches of new products. In the solar energy market, which is expected to continue expanding, Kyocera aims to increase profitability through active utilization of global production sites and further reduction of manufacturing costs.

 

In the equipment business, Kyocera seeks to improve profitability by enhancing development of new products for introduction in a timely manner, especially of information equipment such as color printers and digital multifunctional products, and mobile phone handsets.

 

Kyocera will implement these strategies as a means to achieve the consolidated financial forecast for fiscal 2006 and will continue working to bolster business foundations aimed at capturing future business opportunities and driving growth over the medium to long term through the creation of new businesses.

 

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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Table of Contents

CONSOLIDATED BALANCE SHEETS

 

     Yen in millions

 
     (Unaudited)
December 31, 2005


   March 31, 2005

   Increase
(Decrease)


 
     Amount

    %

   Amount

    %

  

Current assets :

                                  

Cash and cash equivalents

   ¥ 256,765          ¥ 310,592          ¥ (53,827 )

Short-term investments

     84,117            34,938            49,179  

Trade notes receivable

     28,831            29,552            (721 )

Trade accounts receivable

     220,509            201,374            19,135  

Short-term finance receivables

     40,020            40,801            (781 )

Less allowances for doubtful accounts and sales returns

     (9,212 )          (7,981 )          (1,231 )

Inventories

     197,332            213,411            (16,079 )

Deferred income taxes

     38,857            38,659            198  

Other current assets

     33,276            34,229            (953 )
    


 
  


 
  


Total current assets

     890,495     46.4      895,575     51.3      (5,080 )
    


 
  


 
  


Non-current assets :

                                  

Investments and advances :

                                  

Investments in and advances to affiliates and unconsolidated subsidiaries

     10,979            30,623            (19,644 )

Securities and other investments

     569,419            430,437            138,982  
    


 
  


 
  


Total investments and advances

     580,398     30.3      461,060     26.4      119,338  

Long-term finance receivables

     74,422     3.9      66,427     3.8      7,995  

Property, plant and equipment, at cost :

                                  

Land

     58,819            55,210            3,609  

Buildings

     249,454            225,964            23,490  

Machinery and equipment

     698,260            656,780            41,480  

Construction in progress

     9,913            14,384            (4,471 )

Less accumulated depreciation

     (730,256 )          (693,341 )          (36,915 )
    


 
  


 
  


       286,190     14.9      258,997     14.9      27,193  

Goodwill

     31,470     1.6      28,110     1.6      3,360  

Intangible assets

     34,442     1.8      15,847     0.9      18,595  

Other assets

     20,532     1.1      19,503     1.1      1,029  
    


 
  


 
  


Total non-current assets

     1,027,454     53.6      849,944     48.7      177,510  
    


 
  


 
  


Total assets

   ¥ 1,917,949     100.0    ¥ 1,745,519     100.0    ¥ 172,430  
    


 
  


 
  


 

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Table of Contents
     Yen in millions

 
     (Unaudited)
December 31, 2005


    March 31, 2005

    Increase
(Decrease)


 
     Amount

    %

    Amount

    %

   

Current liabilities :

                                    

Short-term borrowings

   ¥ 64,007           ¥ 66,556           ¥ (2,549 )

Current portion of long-term debt

     53,012             44,051             8,961  

Trade notes and accounts payable

     91,633             86,872             4,761  

Other notes and accounts payable

     54,059             34,690             19,369  

Accrued payroll and bonus

     29,167             34,821             (5,654 )

Accrued income taxes

     20,364             31,180             (10,816 )

Other accrued liabilities

     33,684             28,849             4,835  

Other current liabilities

     23,927             17,338             6,589  
    


 

 


 

 


Total current liabilities

     369,853     19.3       344,357     19.7       25,496  

Non-current liabilities :

                                    

Long-term debt

     25,709             33,557             (7,848 )

Accrued pension and severance costs

     27,300             31,166             (3,866 )

Deferred income taxes

     135,475             96,345             39,130  

Other non-current liabilities

     12,597             4,761             7,836  
    


 

 


 

 


Total non-current liabilities

     201,081     10.5       165,829     9.5       35,252  
    


 

 


 

 


Total liabilities

     570,934     29.8       510,186     29.2       60,748  
    


 

 


 

 


Minority interests in subsidiaries

     63,885     3.3       60,482     3.5       3,403  

Stockholders’ equity :

                                    

Common stock

     115,703             115,703             —    

Additional paid-in capital

     162,059             162,061             (2 )

Retained earnings

     947,873             916,628             31,245  

Accumulated other comprehensive income

     88,948             11,839             77,109  

Treasury stock, at cost

     (31,453 )           (31,380 )           (73 )
    


 

 


 

 


Total stockholders’ equity

     1,283,130     66.9       1,174,851     67.3       108,279  
    


 

 


 

 


Total liabilities, minority interests and stockholders’ equity

   ¥ 1,917,949     100.0     ¥ 1,745,519     100.0     ¥ 172,430  
    


 

 


 

 


Note : Accumulated other comprehensive income is as follows:

                                    
     Yen in millions

       
     December 31, 2005

    March 31, 2005

       

Net unrealized gains on securities

   ¥       99,032     ¥       42,461          

Net unrealized gains (losses) on derivative financial instruments

   ¥       15     ¥       (27 )        

Minimum pension liability adjustments

   ¥       (1,629 )   ¥       (1,629 )        

Foreign currency translation adjustments

   ¥       (8,470 )   ¥       (28,966 )        

 

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Table of Contents

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

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

 
     Nine months ended December 31,

   

Increase

(Decrease)


 
     2005

    2004

   
     Amount

    %

    Amount

    %

    Amount

    %

 

Net sales

   ¥ 864,490     100.0     ¥ 892,642     100.0     ¥ (28,152 )   (3.2 )

Cost of sales

     616,615     71.3       643,445     72.1       (26,830 )   (4.2 )
    


 

 


 

 


 

Gross profit

     247,875     28.7       249,197     27.9       (1,322 )   (0.5 )

Selling, general and administrative expenses

     178,672     20.7       167,798     18.8       10,874     6.5  
    


 

 


 

 


 

Profit from operations

     69,203     8.0       81,399     9.1       (12,196 )   (15.0 )

Other income (expenses) :

                                          

Interest and dividend income

     7,335     0.9       5,430     0.6       1,905     35.1  

Interest expense

     (964 )   (0.1 )     (927 )   (0.1 )     (37 )   —    

Foreign currency transaction gains and losses, net

     (650 )   (0.1 )     1,933     0.2       (2,583 )   —    

Equity in losses of affiliates and unconsolidated subsidiaries

     (1,062 )   (0.1 )     (213 )   (0.0 )     (849 )   —    

Gain on sale of investment in an affiliate

     6,931     0.8       —       —         6,931     —    

Gains on exchange for the shares

     5,294     0.6       —       —         5,294     —    

Other, net

     1,890     0.2       1,343     0.2       547     40.7  
                                            

Total other income

     18,774     2.2       7,566     0.9       11,208     148.1  
    


 

 


 

 


 

Income before income taxes and minority interests

     87,977     10.2       88,965     10.0       (988 )   (1.1 )

Income taxes

     35,381     4.1       29,843     3.4       5,538     18.6  
    


 

 


 

 


 

Income before minority interests

     52,596     6.1       59,122     6.6       (6,526 )   (11.0 )

Minority interests

     (2,603 )   (0.3 )     (1,959 )   (0.2 )     (644 )   —    
    


 

 


 

 


 

Net income

   ¥ 49,993     5.8     ¥ 57,163     6.4     ¥ (7,170 )   (12.5 )
    


 

 


 

 


 

Earnings per share :

                                          

Net income :

                                          

Basic

   ¥ 266.66           ¥ 304.88        

Diluted

   ¥ 266.64           ¥ 304.80        

Weighted average number of shares of common stock outstanding :

                            

Basic

     187,476             187,491        

Diluted

     187,495             187,544        

 

- 21 -


Table of Contents

Notes:

 

1. Kyocera applies the Statement of Financial Accounting Standards Board (SFAS) No.130, “Financial Reporting of Comprehensive Income.” Based on this standard, comprehensive income for the nine months ended December 31, 2005 and 2004 was an increase of 127,102 million yen and an increase of 47,642 million yen, respectively.

 

2. Earnings per share amounts were computed based on SFAS No.128, “Earnings per Share.” Under SFAS No.128, basic earnings per share was computed based on the average number of shares of common stock outstanding during each period and diluted earnings per share assumed the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock.

 

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Table of Contents

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

     ( Yen in millions and shares in thousands)

 

(Number of shares of common stock)


   Common
stock


   Additional
paid-in
capital


    Retained
earnings


    Accumulated
other
comprehensive
income


    Treasury stock,
at cost


    Comprehensive
income


 

Balance at March 31, 2004 (187,484) as previously reported

   ¥ 115,703    ¥ 162,091     ¥ 885,262     ¥ 22,046     ¥ (31,356 )        

Adjustment prior to March 31, 2004

                    (3,293 )                        

Balance at March 31, 2004 (187,484) as adjusted

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

  


 


 


 


       

Net income for the year

                    45,908                     ¥ 45,908  

Other comprehensive income

                            (10,207 )             (10,207 )
                                           


Total comprehensive income for the year

                                          ¥ 35,701  
                                           


Cash dividends

                    (11,249 )                        

Purchase of treasury stock (21)

                                    (170 )        

Reissuance of treasury stock (18)

            (5 )                     146          

Stock option plan of a subsidiary

            (25 )                                
    

  


 


 


 


       

Balance, March 31, 2005 (187,481)

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

  


 


 


 


       

(Unaudit)

                                               

Net income for the period

                    49,993                     ¥ 49,993  

Other comprehensive income

                            77,109               77,109  
                                           


Total comprehensive income for the period

                                          ¥ 127,102  
                                           


Cash dividends

                    (18,748 )                        

Purchase of treasury stock (14)

                                    (115 )        

Reissuance of treasury stock (5)

            (2 )                     42          
    

  


 


 


 


       

Balance, December 31, 2005 (187,472 )

   ¥ 115,703    ¥ 162,059     ¥ 947,873     ¥ 88,948     ¥ (31,453 )        
    

  


 


 


 


       
     (Yen in millions and shares in thousands)

 

(Number of shares of common stock)


   Common
stock


   Additional
paid-in
capital


    Retained
earnings


    Accumulated
other
comprehensive
income


    Treasury stock,
at cost


    Comprehensive
income


 

Balance at March 31, 2004 (187,484) as previously reported

   ¥ 115,703    ¥ 162,091     ¥ 885,262     ¥ 22,046     ¥ (31,356 )        

Adjustment prior to March 31, 2004

                    (3,293 )                        

Balance at March 31, 2004 (187,484) as adjusted

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

  


 


 


 


       

(Unaudit)

                                               

Net income for the period

                    57,163                     ¥ 57,163  

Other comprehensive income

                            (9,521 )             (9,521 )
                                           


Total comprehensive income for the period

                                          ¥ 47,642  
                                           


Cash dividends

                    (11,249 )                        

Purchase of treasury stock (16)

                                    (134 )        

Reissuance of treasury stock (17)

            (5 )                     144          
    

  


 


 


 


       

Balance, December 31, 2004 (187,485) as adjusted

   ¥ 115,703    ¥ 162,086     ¥ 927,883     ¥ 12,525     ¥ (31,346 )        
    

  


 


 


 


       

 

Note :   As a result of an increase in an affiliated company accounted for by the equity method in the year ended March 31, 2005, the consolidated financial statements at March 31, 2004 and at December 31, 2004 have been adjusted as if the equity method had been applied at inception in accordance with Accounting Principles Board Opinion No.18, “The Equity Method of Accounting for Investments in Common Stock.”

 

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Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

     Yen in millions

 
     Nine months ended December 31,

 
     2005

    2004

 

Cash flows from operating activities:

                

Net income

   ¥ 49,993     ¥ 57,163  

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

                

Depreciation and amortization

     50,440       48,503  

Write-down of inventories

     6,029       10,397  

Gain on sale of investment in an affiliate

     (6,931 )     —    

Gains on exchange for the shares

     (5,294 )     —    

Foreign currency adjustments

     734       (2,053 )

(Increase) decrease in receivables

     (16,236 )     54,834  

Decrease (increase) in inventories

     16,744       (47,635 )

Increase in other current assets

     (3,370 )     (745 )

Increase (decrease) in notes and accounts payable

     10,817       (11,896 )

Other, net

     (5,613 )     (7,004 )
    


 


Net cash provided by operating activities

     97,313       101,564  
    


 


Cash flows from investing activities :

                

Payments for purchases of securities

     (82,934 )     (67,230 )

Payments for purchases of investments and advances

     (177 )     (19,524 )

Sales and maturities of securities

     48,319       23,794  

Proceeds from sales of investment in an affiliate

     24,133       —    

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

     (76,700 )     (48,384 )

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

     2,068       3,398  

Acquisitions of businesses, net of cash acquired

     3       (2,794 )

Acquisitions of minority interests

     (3,575 )     (5 )

Deposit of negotiable certificate of deposits and time deposits

     (101,101 )     (110,777 )

Withdrawal of negotiable certificate of deposits and time deposits

     53,409       76,387  

Other, net

     1,474       340  
    


 


Net cash used in investing activities

     (135,081 )     (144,795 )
    


 


Cash flows from financing activities :

                

Decrease in short-term debt

     (3,546 )     (6,265 )

Proceeds from issuance of long-term debt

     4,830       8,959  

Payments of long-term debt

     (4,452 )     (49,635 )

Dividends paid

     (20,143 )     (12,333 )

Other, net

     (743 )     1,255  
    


 


Net cash used in financing activities

     (24,054 )     (58,019 )
    


 


Effect of exchange rate changes on cash and cash equivalents

     7,995       1,338  
    


 


Net decrease in cash and cash equivalents

     (53,827 )     (99,912 )

Cash and cash equivalents at beginning of period

     310,592       361,132  
    


 


Cash and cash equivalents at end of period

   ¥ 256,765     ¥ 261,220  
    


 


 

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Table of Contents

SEGMENT INFORMATION (Unaudited)

 

1. Reporting segments :

 

     Yen in millions

 
     Nine months ended December 31,

   

Increase

(Decrease)


 
     2005

    2004

   
     Amount

    Amount

    Amount

    %

 

Net sales :

                              

Fine Ceramic Parts Group

   ¥ 50,839     ¥ 56,681     ¥ (5,842 )   (10.3 )

Semiconductor Parts Group

     98,887       98,479       408     0.4  

Applied Ceramic Products Group

     85,713       69,731       15,982     22.9  

Electronic Device Group

     193,897       202,253       (8,356 )   (4.1 )

Telecommunications Equipment Group

     166,297       193,744       (27,447 )   (14.2 )

Information Equipment Group

     181,212       177,949       3,263     1.8  

Optical Equipment Group

     11,798       28,531       (16,733 )   (58.6 )

Others

     89,584       84,082       5,502     6.5  

Adjustments and eliminations

     (13,737 )     (18,808 )     5,071     —    
    


 


 


 

     ¥ 864,490     ¥ 892,642     ¥ (28,152 )   (3.2 )
    


 


 


 

Operating profit :

                              

Fine Ceramic Parts Group

   ¥ 7,328     ¥ 8,395     ¥ (1,067 )   (12.7 )

Semiconductor Parts Group

     11,875       13,886       (2,011 )   (14.5 )

Applied Ceramic Products Group

     15,135       12,508       2,627     21.0  

Electronic Device Group

     18,988       29,053       (10,065 )   (34.6 )

Telecommunications Equipment Group

     (5,683 )     (11,501 )     5,818     —    

Information Equipment Group

     21,061       27,470       (6,409 )   (23.3 )

Optical Equipment Group

     (4,987 )     (10,123 )     5,136     —    

Others

     7,720       8,743       (1,023 )   (11.7 )
    


 


 


 

       71,437       78,431       (6,994 )   (8.9 )

Corporate

     17,571       10,651       6,920     65.0  

Equity in losses of affiliates and unconsolidated subsidiaries

     (1,062 )     (213 )     (849 )   —    

Adjustments and eliminations

     31       96       (65 )   (67.7 )
    


 


 


 

Income before income taxes

   ¥ 87,977     ¥ 88,965     ¥ (988 )   (1.1 )
    


 


 


 

Depreciation and amortization :

                              

Fine Ceramic Parts Group

   ¥ 3,002     ¥ 3,127     ¥ (125 )   (4.0 )

Semiconductor Parts Group

     7,238       6,046       1,192     19.7  

Applied Ceramic Products Group

     4,847       3,164       1,683     53.2  

Electronic Device Group

     15,390       15,910       (520 )   (3.3 )

Telecommunications Equipment Group

     4,530       6,225       (1,695 )   (27.2 )

Information Equipment Group

     8,828       6,501       2,327     35.8  

Optical Equipment Group

     1,446       2,039       (593 )   (29.1 )

Others

     2,704       3,585       (881 )   (24.6 )

Corporate

     2,455       1,906       549     28.8  
    


 


 


 

Total

   ¥ 50,440     ¥ 48,503     ¥ 1,937     4.0  
    


 


 


 

Capital expenditures :

                              

Fine Ceramic Parts Group

   ¥ 3,242     ¥ 3,448     ¥ (206 )   (6.0 )

Semiconductor Parts Group

     19,157       5,893       13,264     225.1  

Applied Ceramic Products Group

     13,300       5,750       7,550     131.3  

Electronic Device Group

     14,864       14,757       107     0.7  

Telecommunications Equipment Group

     2,011       4,887       (2,876 )   (58.9 )

Information Equipment Group

     8,603       5,751       2,852     49.6  

Optical Equipment Group

     183       2,237       (2,054 )   (91.8 )

Others

     5,845       1,729       4,116     238.1  

Corporate

     3,518       1,750       1,768     101.0  
    


 


 


 

Total

   ¥ 70,723     ¥ 46,202     ¥ 24,521     53.1  
    


 


 


 

 

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Table of Contents

2. Geographic segments (Sales and Operating profits by geographic area) :

 

     Yen in millions

 
     Nine months ended December 31,

    Increase
(Decrease)


 
     2005

    2004

   
     Amount

    Amount

    Amount

    %

 

Net sales:

                              

Japan

   ¥ 367,733     ¥ 389,127     ¥ (21,394 )   (5.5 )

Intra-group sales and transfer between geographic areas

     239,838       241,985       (2,147 )   (0.9 )
    


 


 


 

       607,571       631,112       (23,541 )   (3.7 )
    


 


 


 

United States of America

     212,424       243,200       (30,776 )   (12.7 )

Intra-group sales and transfer between geographic areas

     18,389       20,071       (1,682 )   (8.4 )
    


 


 


 

       230,813       263,271       (32,458 )   (12.3 )
    


 


 


 

Asia

     127,503       112,940       14,563     12.9  

Intra-group sales and transfer between geographic areas

     91,641       91,049       592     0.7  
    


 


 


 

       219,144       203,989       15,155     7.4  
    


 


 


 

Europe

     137,328       132,956       4,372     3.3  

Intra-group sales and transfer between geographic areas

     25,155       22,790       2,365     10.4  
    


 


 


 

       162,483       155,746       6,737     4.3  
    


 


 


 

Others

     19,502       14,419       5,083     35.3  

Intra-group sales and transfer between geographic areas

     5,872       5,805       67     1.2  
    


 


 


 

       25,374       20,224       5,150     25.5  
    


 


 


 

Adjustments and eliminations

     (380,895 )     (381,700 )     805     —    
    


 


 


 

     ¥ 864,490     ¥ 892,642     ¥ (28,152 )   (3.2 )
    


 


 


 

Operating Profits :

                              

Japan

   ¥ 53,864     ¥ 70,459     ¥ (16,595 )   (23.6 )

United States of America

     519       5,482       (4,963 )   (90.5 )

Asia

     11,251       11,152       99     0.9  

Europe

     3,336       (798 )     4,134     —    

Others

     68       1,017       (949 )   (93.3 )
    


 


 


 

       69,038       87,312       (18,274 )   (20.9 )

Adjustments and eliminations

     2,430       (8,785 )     11,215     —    
    


 


 


 

       71,468       78,527       (7,059 )   (9.0 )

Corporate

     17,571       10,651       6,920     65.0  

Equity in losses of affiliates and unconsolidated subsidiaries

     (1,062 )     (213 )     (849 )   —    
    


 


 


 

Income before income taxes

   ¥ 87,977     ¥ 88,965     ¥ (988 )   (1.1 )
    


 


 


 

 

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Table of Contents

3. Geographic segments (Sales by region) :

 

     Yen in millions

 
     Nine months ended December 31,

       Increase
(Decrease)


 
     2005

       2004

      
     Amount

    %

       Amount

    %

       Amount

    %

 

Japan

   ¥ 344,560     39.9        ¥ 346,163     38.8        ¥ (1,603 )   (0.5 )

United States of America

     186,042     21.5          192,153     21.5          (6,111 )   (3.2 )

Asia

     148,746     17.2          159,994     17.9          (11,248 )   (7.0 )

Europe

     133,535     15.4          129,256     14.5          4,279     3.3  

Others

     51,607     6.0          65,076     7.3          (13,469 )   (20.7 )
    


 
      


 
      


 

Net sales

   ¥ 864,490     100.0        ¥ 892,642     100.0        ¥ (28,152 )   (3.2 )
    


 
      


 
      


 

Sales outside Japan

   ¥ 519,930              ¥ 546,479              ¥ (26,549 )   (4.9 )

Sales outside Japan to net sales

     60.1 %              61.2 %                       

 

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Table of Contents

CONSOLIDATED BALANCE SHEETS (Unaudited)

 

     Yen in millions

 
     December 31, 2005

   September 30, 2005

   Increase
(Decrease)


 
     Amount

    %

   Amount

    %

  

Current assets :

                                  

Cash and cash equivalents

   ¥ 256,765          ¥ 253,885          ¥ 2,880  

Short-term investments

     84,117            94,526            (10,409 )

Trade notes receivable

     28,831            25,439            3,392  

Trade accounts receivable

     220,509            196,743            23,766  

Short-term finance receivables

     40,020            42,194            (2,174 )

Less allowances for doubtful accounts and sales returns

     (9,212 )          (7,919 )          (1,293 )

Inventories

     197,332            200,607            (3,275 )

Deferred income taxes

     38,857            38,985            (128 )

Other current assets

     33,276            29,136            4,140  
    


 
  


 
  


Total current assets

     890,495     46.4      873,596     46.9      16,899  
    


 
  


 
  


Non-current assets :

                                  

Investments and advances :

                                  

Investments in and advances to affiliates and unconsolidated subsidiaries

     10,979            12,037            (1,058 )

Securities and other investments

     569,419            539,423            29,996  
    


 
  


 
  


Total investments and advances

     580,398     30.3      551,460     29.6      28,938  

Long-term finance receivables

     74,422     3.9      74,247     4.0      175  

Property, plant and equipment, at cost :

                                  

Land

     58,819            58,553            266  

Buildings

     249,454            241,692            7,762  

Machinery and equipment

     698,260            680,879            17,381  

Construction in progress

     9,913            13,679            (3,766 )

Less accumulated depreciation

     (730,256 )          (713,078 )          (17,178 )
    


 
  


 
  


       286,190     14.9      281,725     15.1      4,465  

Goodwill

     31,470     1.6      30,727     1.7      743  

Intangible assets

     34,442     1.8      30,124     1.6      4,318  

Other assets

     20,532     1.1      21,049     1.1      (517 )
    


 
  


 
  


Total non-current assets

     1,027,454     53.6      989,332     53.1      38,122  
    


 
  


 
  


    Total assets

   ¥ 1,917,949     100.0    ¥ 1,862,928     100.0    ¥ 55,021  
    


 
  


 
  


 

- 28 -


Table of Contents
     Yen in millions

 
     December 31, 2005

    September 30, 2005

    Increase
(Decrease)


 
     Amount

    %

    Amount

    %

   

Current liabilities :

                                    

Short-term borrowings

   ¥ 64,007           ¥ 67,422           ¥ (3,415 )

Current portion of long-term debt

     53,012             53,123             (111 )

Trade notes and accounts payable

     91,633             90,713             920  

Other notes and accounts payable

     54,059             50,208             3,851  

Accrued payroll and bonus

     29,167             36,769             (7,602 )

Accrued income taxes

     20,364             25,137             (4,773 )

Other accrued liabilities

     33,684             31,143             2,541  

Other current liabilities

     23,927             17,595             6,332  
    


 

 


 

 


Total current liabilities

     369,853     19.3       372,110     20.0       (2,257 )

Non-current liabilities :

                                    

Long-term debt

     25,709             25,920             (211 )

Accrued pension and severance costs

     27,300             27,397             (97 )

Deferred income taxes

     135,475             123,151             12,324  

Other non-current liabilities

     12,597             11,595             1,002  
    


 

 


 

 


Total non-current liabilities

     201,081     10.5       188,063     10.1       13,018  
    


 

 


 

 


Total liabilities

     570,934     29.8       560,173     30.1       10,761  
    


 

 


 

 


Minority interests in subsidiaries

     63,885     3.3       61,060     3.3       2,825  

Stockholders’ equity :

                                    

Common stock

     115,703             115,703             —    

Additional paid-in capital

     162,059             162,060             (1 )

Retained earnings

     947,873             931,468             16,405  

Accumulated other comprehensive income

     88,948             63,890             25,058  

Treasury stock, at cost

     (31,453 )           (31,426 )           (27 )
    


 

 


 

 


Total stockholders’ equity

     1,283,130     66.9       1,241,695     66.6       41,435  
    


 

 


 

 


Total liabilities, minority interests and stockholders’ equity

   ¥ 1,917,949     100.0     ¥ 1,862,928     100.0     ¥ 55,021  
    


 

 


 

 


 

Note : Accumulated other comprehensive income is as follows:

 

 

                     
     Yen in millions

       
     December 31, 2005

    September 30, 2005

       

Net unrealized gains on securities

   ¥       99,032     ¥       84,536          

Net unrealized gains (losses) on derivative financial instruments

   ¥       15     ¥       (13 )        

Minimum pension liability adjustments

   ¥       (1,629 )   ¥       (1,629 )        

Foreign currency translation adjustments

   ¥       (8,470 )   ¥       (19,004 )        

 

- 29 -


Table of Contents

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

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

 
     Three months ended December 31,

   

Increase

(Decrease)


 
     2005

    2004

   
     Amount

    %

    Amount

    %

    Amount

    %

 

Net sales

   ¥ 319,232     100.0     ¥ 292,080     100.0     ¥ 27,152     9.3  

Cost of sales

     224,748     70.4       213,802     73.2       10,946     5.1  
    


 

 


 

 


 

Gross profit

     94,484     29.6       78,278     26.8       16,206     20.7  

Selling, general and administrative expenses

     60,630     19.0       58,971     20.2       1,659     2.8  
    


 

 


 

 


 

Profit from operations

     33,854     10.6       19,307     6.6       14,547     75.3  

Other income (expenses) :

                                          

Interest and dividend income

     3,449     1.1       2,702     0.9       747     27.6  

Interest expense

     (331 )   (0.1 )     (314 )   (0.1 )     (17 )   —    

Foreign currency transaction gains and losses, net

     (559 )   (0.2 )     (163 )   (0.0 )     (396 )   —    

Equity in losses of affiliates and unconsolidated subsidiaries

     (826 )   (0.3 )     (795 )   (0.3 )     (31 )   —    

Gains on exchange for the shares

     5,281     1.7       —       —         5,281     —    

Other, net

     974     0.3       975     0.3       (1 )   (0.1 )
    


 

 


 

 


 

Total other income

     7,988     2.5       2,405     0.8       5,583     232.1  
    


 

 


 

 


 

Income before income taxes and minority interests

     41,842     13.1       21,712     7.4       20,130     92.7  

Income taxes

     14,932     4.7       7,095     2.4       7,837     110.5  
    


 

 


 

 


 

Income before minority interests

     26,910     8.4       14,617     5.0       12,293     84.1  

Minority interests

     (1,131 )   (0.3 )     (3 )   (0.0 )     (1,128 )   —    
    


 

 


 

 


 

Net income

   ¥ 25,779     8.1     ¥ 14,614     5.0     ¥ 11,165     76.4  
    


 

 


 

 


 

Earnings per share :

                                          

Net income :

                                          

Basic

   ¥ 137.51           ¥ 77.94                      

Diluted

   ¥ 137.49           ¥ 77.94                      

Weighted average number of shares of common stock outstanding :

                                          

Basic

     187,473             187,488                      

Diluted

     187,492             187,492                      

 

- 30 -


Table of Contents

Notes:

 

1. Kyocera applies the Statement of Financial Accounting Standards Board (SFAS) No.130, “Financial Reporting of Comprehensive Income.” Based on this standard, comprehensive income for the three months ended December 31, 2005 and 2004 was an increase of 50,837 million yen and an increase of 14,877 million yen, respectively.

 

2. Earnings per share amounts were computed based on SFAS No.128, “Earnings per Share.” Under SFAS No.128, basic earnings per share was computed based on the average number of shares of common stock outstanding during each period and diluted earnings per share assumed the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock.

 

- 31 -


Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

     Yen in millions

 
     Three months ended December 31,

 
     2005

    2004

 

Cash flows from operating activities:

                

Net income

   ¥ 25,779     ¥ 14,614  

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

                

Depreciation and amortization

     18,677       17,414  

Write-down of inventories

     1,726       2,904  

Gains on exchange for the shares

     (5,281 )     —    

Foreign currency adjustments

     (27 )     (204 )

(Increase) decrease in receivables

     (24,007 )     4,562  

Decrease (increase) in inventories

     6,327       (3,311 )

Increase in other current assets

     (2,354 )     (356 )

Increase (decrease) in notes and accounts payable

     5,500       (15,118 )

Other, net

     (799 )     (7,832 )
    


 


Net cash provided by operating activities

     25,541       12,673  
    


 


Cash flows from investing activities :

                

Payments for purchases of securities

     (6,191 )     (6,890 )

Payments for purchases of investments and advances

     (50 )     (19,072 )

Sales and maturities of securities

     9,780       3,865  

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

     (27,045 )     (17,810 )

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

     135       1,416  

Acquisitions of businesses, net of cash acquired

     3       —    

Deposit of negotiable certificate of deposits and time deposits

     (24,045 )     (38,177 )

Withdrawal of negotiable certificate of deposits and time deposits

     35,288       75,871  

Other, net

     135       179  
    


 


Net cash used in investing activities

     (11,990 )     (618 )
    


 


Cash flows from financing activities :

                

(Decrease) increase in short-term debt

     (3,913 )     782  

Proceeds from issuance of long-term debt

     47       297  

Payments of long-term debt

     (696 )     (788 )

Dividends paid

     (9,696 )     (5,924 )

Other, net

     (139 )     1,196  
    


 


Net cash used in financing activities

     (14,397 )     (4,437 )
    


 


Effect of exchange rate changes on cash and cash equivalents

     3,726       (3,363 )
    


 


Net increase in cash and cash equivalents

     2,880       4,255  

Cash and cash equivalents at beginning of period

     253,885       256,965  
    


 


Cash and cash equivalents at end of period

   ¥ 256,765     ¥ 261,220  
    


 


 

- 32 -


Table of Contents

SEGMENT INFORMATION (Unaudited)

 

1. Reporting segments :

 

     Yen in millions

 
     Three months ended December 31,

   

Increase

(Decrease)


 
     2005

    2004

   
     Amount

    Amount

    Amount

    %

 

Net sales :

                              

Fine Ceramic Parts Group

   ¥ 17,581     ¥ 17,761     ¥ (180 )   (1.0 )

Semiconductor Parts Group

     35,343       30,331       5,012     16.5  

Applied Ceramic Products Group

     29,961       24,740       5,221     21.1  

Electronic Device Group

     68,514       62,463       6,051     9.7  

Telecommunications Equipment Group

     75,213       61,387       13,826     22.5  

Information Equipment Group

     62,779       61,149       1,630     2.7  

Optical Equipment Group

     3,542       11,815       (8,273 )   (70.0 )

Others

     30,550       27,889       2,661     9.5  

Adjustments and eliminations

     (4,251 )     (5,455 )     1,204     —    
    


 


 


 

     ¥ 319,232     ¥ 292,080     ¥ 27,152     9.3  
    


 


 


 

Operating profit :

                              

Fine Ceramic Parts Group

   ¥ 2,523     ¥ 2,171     ¥ 352     16.2  

Semiconductor Parts Group

     4,624       3,274       1,350     41.2  

Applied Ceramic Products Group

     5,798       4,945       853     17.2  

Electronic Device Group

     7,817       6,812       1,005     14.8  

Telecommunications Equipment Group

     3,672       (6,602 )     10,274     —    

Information Equipment Group

     7,817       8,066       (249 )   (3.1 )

Optical Equipment Group

     (938 )     (2,766 )     1,828     —    

Others

     3,016       2,583       433     16.8  
    


 


 


 

       34,329       18,483       15,846     85.7  

Corporate

     8,401       3,968       4,433     111.7  

Equity in losses of affiliates and unconsolidated subsidiaries

     (826 )     (795 )     (31 )   —    

Adjustments and eliminations

     (62 )     56       (118 )   —    
    


 


 


 

Income before income taxes

   ¥ 41,842     ¥ 21,712     ¥ 20,130     92.7  
    


 


 


 

Depreciation and amortization :

                              

Fine Ceramic Parts Group

   ¥ 1,065     ¥ 1,104     ¥ (39 )   (3.5 )

Semiconductor Parts Group

     2,889       2,177       712     32.7  

Applied Ceramic Products Group

     2,017       1,172       845     72.1  

Electronic Device Group

     5,246       5,776       (530 )   (9.2 )

Telecommunications Equipment Group

     1,481       2,206       (725 )   (32.9 )

Information Equipment Group

     3,583       2,306       1,277     55.4  

Optical Equipment Group

     502       794       (292 )   (36.8 )

Others

     911       1,222       (311 )   (25.5 )

Corporate

     983       657       326     49.6  
    


 


 


 

Total

   ¥ 18,677     ¥ 17,414     ¥ 1,263     7.3  
    


 


 


 

Capital expenditures :

                              

Fine Ceramic Parts Group

   ¥ 800     ¥ 1,597     ¥ (797 )   (49.9 )

Semiconductor Parts Group

     3,673       2,528       1,145     45.3  

Applied Ceramic Products Group

     3,602       3,637       (35 )   (1.0 )

Electronic Device Group

     5,980       4,437       1,543     34.8