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Kyocera 6-K 2007

Documents found in this filing:

  1. 6-K
  2. Graphic
  3. Graphic
  4. Graphic
Form 6-K
Table of Contents

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of April 2007

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: April 26, 2007

 


Table of Contents

Information furnished on this form :

EXHIBITS

 

Exhibit

    Number    

 

   
1.   Consolidated and Non-consolidated Financial Results for the Year Ended March 31, 2007
2.   Notice Regarding Election of Accounting Auditor


Table of Contents

Consolidated Results of Kyocera Corporation and its Subsidiaries

for the Year Ended March 31, 2007

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

1. Consolidated financial information for the year ended March 31, 2007 :

 

(1) Consolidated results of operations :

 

     Japanese yen  
     Years ended March 31,  
     2006     2007  

Net sales

   ¥ 1,173,544 million     ¥ 1,283,897 million  

% change from the previous year

     (0.0 )%     9.4 %

Profit from operations

     99,695 million       135,102 million  

% change from the previous year

     2.1 %     35.5 %

Income from continuing operations before income taxes

     117,237 million       156,540 million  

% change from the previous year

     12.7 %     33.5 %

Net income

     69,696 million       106,504 million  

% change from the previous year

     51.8 %     52.8 %

Earnings per share :

    

Basic

     ¥371.68       ¥566.03  

Diluted

     371.43       564.79  

Return on equity

     5.7 %     7.6 %

Income from continuing operations before income taxes to total assets

     6.4 %     7.7 %

Profit from operations to net sales

     8.5 %     10.5 %

Notes :

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

 

Year ended March 31, 2007 :

   ¥ 2,621 million   

Year ended March 31, 2006 :

   ¥ (1,216) million   

2. In accordance with Statement of Financial Accounting Standards No.144, “Accounting for the Impairment of Disposal of Long-Lived Assets,” the consolidated statements of income for the year ended March 31, 2006 have been retrospectively reclassified as for the discontinued operations.

 

(2) Consolidated financial position :

 

     Japanese yen  
     March 31,  
     2006     2007  

Total assets

   ¥ 1,931,522 million     ¥ 2,130,464 million  

Stockholders’ equity

     1,289,077 million       1,514,560 million  

Stockholders’ equity to total assets

     66.7 %     71.1 %

Stockholders’ equity per share

     ¥6,865.75       ¥8,028.45  

 

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(3) Consolidated cash flows :

 

     Japanese yen
     Years ended March 31,
     2006    2007

Cash flows from operating activities

   ¥ 171,077 million    ¥ 149,644 million

Cash flows from investing activities

     (165,467) million      (151,703) million

Cash flows from financing activities

     (23,289) million      (20,645) million

Cash and cash equivalents at end of year

     300,809 million      282,208 million

 

2. Dividends :

 

     Japanese yen  
     Years ended March 31,     Year ending March 31,  
                 2006                             2007                 2008  

Interim dividends per share

   ¥50     ¥50      

Year-end dividends per share

   50     60      

Annual dividends per share

   100     110     ¥110  

Annual aggregate amount of dividends paid

   18,760     20,719      

Dividends to net income

   26.9 %   19.4 %   20.1 %

Dividends to stockholders’ equity

   1.5 %   1.5 %    

Note :

Dividends per share for the year ending March 31, 2008 are forecasted to be 110 yen on annual basis.

 

3. Consolidated financial forecast for the year ending March 31, 2008 :

 

    Japanese yen  
    Year ending March 31, 2008  

Net sales

  ¥1,330,000  million  

    % change from the previous year

    3.6 %

Profit from operations

  ¥151,000  million  

    % change from the previous year

    11.8 %

Income from continuing operations before income taxes

  ¥166,000  million  

    % change from the previous year

    6.0 %

Net income

  ¥103,000  million  

    % change from the previous year

    (3.3 )%

Note :

Forecast of earnings per share :                             ¥546.21

Earnings per share amount 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, 2007.

 

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4. Others

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

 

     Consolidation    Equity method

Increase

   7    0

Decrease

   8    2

Please refer to the accompanying “BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS” on page 30.

(2) Change in accounting policies :

There were changes in accounting policies due to new accounting standards.

Please refer to the accompanying “BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS” on page 30.

(3) Number of shares (common stock) :

 

     March 31,
     2006    2007

Number of shares issued

   191,309,290    191,309,290

Number of shares in treasury

   3,554,540    2,660,201

Number of shares outstanding (average)

   187,513,918    188,160,482

 

(Reference) Outline of Non-Consolidated Results for Kyocera Corporation

1. Results for the year ended March 31, 2007 :

(1) Results of operations :

 

     Japanese yen  
     Years ended March 31,  
     2006     2007  

Net sales

     ¥477,379 million       ¥531,557 million  

    % change from the previous year

     (3.2 )%     11.3 %

Profit from operations

     39,937 million       49,432 million  

    % change from the previous year

     18.1 %     23.8 %

Recurring profit

     68,182 million       73,729 million  

    % change from the previous year

     2.6 %     8.1 %

Net income

     68,712 million       62,029 million  

    % change from the previous year

     100.2 %     (9.7 )%
                

Earnings per share :

    

Basic

     ¥366.07       ¥329.66  

Diluted

     ¥365.83       ¥328.94  
                

(2) Financial Position :

    
     Japanese yen  
     March 31,  
     2006     2007  

Total assets

   ¥ 1,389,396 million     ¥ 1,611,891 million  

Net assets

     1,132,261 million       1,286,361 million  

Net assets to total assets

     81.5 %     79.8 %

Net assets per share

     6,030.17       6,818.80  

Stockholders’ equity (Reference)

     1,132,261 million       1,286,361 million  

With regard to forecasts set forth above, please refer to the accompanying “Forward Looking Statements” on page 13.

 

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Table of Contents

Business Results

1. Business Results for the Year Ended March 31, 2007

 

(1) Economic Situation and Business Environment

Despite slow growth in individual consumption, the Japanese economy expanded moderately during the year ended March 31, 2007 (fiscal 2007) due to increasing capital expenditures on the back of rising corporate earnings supported by strong exports. The U.S. economy continued to expand steadily on account of growth in private capital investment, although signs of a decrease in housing investment began to appear in the second half of fiscal 2007. Increasing capital expenditures and exports drove ongoing growth in the European economy. The Chinese economy remained buoyant due to persistent growth in corporate production activities and exports.

In the digital consumer equipment market, which is the principal market for Kyocera Corporation and its consolidated subsidiaries (“Kyocera Group” or “Kyocera”), a significant year-on-year increase in production of mobile phone handsets and digital TVs coupled with expanded production of new game consoles led to strong demand for components for these electronic devices.

 

(2) Consolidated Financial Results

During fiscal 2007, efforts were made to strengthen Kyocera’s “Amoeba Management System,” which is the unique management control system of Kyocera, in order to revitalize all business segments (“operational excellence”) within Kyocera Group and to boost ability to achieve goals (“executional excellence”) across Kyocera Group. Amid a favorable market environment manifesting strong demand for digital consumer equipment throughout fiscal 2007, Kyocera Group worked aggressively to launch new products and to improve productivity with the goal of achieving continuous sales expansion and high profitability. As a result, sales and profits increased in both the Components and the Equipment Businesses compared with the year ended March 31, 2006 (fiscal 2006).

Consolidated net sales for fiscal 2007 amounted to ¥1,283,897 million, an increase of 9.4% compared with fiscal 2006. Sales in each of the four reporting segments in the Components Business increased over 10% as compared with fiscal 2006. Sales also increased in the Equipment Business due to higher sales in the Telecommunications Equipment Group and the Information Equipment Group.

All reporting segments in the Components and the Equipment Businesses recorded increases in profits. Profit from operations increased by 35.5% to ¥135,102 million, and income from continuing operations before income taxes and minority interests increased by 33.5% to ¥156,540 million. Net income increased by 52.8% to ¥106,504 million compared to fiscal 2006 due to tax refunds of ¥4,305 million pursuant to the voidance of a portion of the tax assessment relating to transfer pricing adjustment.

 

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Table of Contents
     (Yen in millions, except per share amounts and exchange rate)
     Years ended March 31,    Increase
(Decrease)
(%)
     2006    2007   
     Amount    % of
net
sales
   Amount    % of
net
sales
  

Net sales

   1,173,544    100.0    1,283,897    100.0    9.4

Profit from operations

   99,695    8.5    135,102    10.5    35.5

Income from continuing operations before income taxes

   117,237    10.0    156,540    12.2    33.5

Net income

   69,696    5.9    106,504    8.3    52.8

Diluted earnings per share

   371.43       564.79       52.1

Average US$ exchange rate

   113       117      

Average Euro exchange rate

   138       150      

Note 1. Kyocera sold its shares in Kyocera Leasing Co., Ltd., a subsidiary engaged in financing services; as a result, business results and profit on sales for Kyocera Leasing Co., Ltd. for fiscal 2007 have been recorded as income from discontinued operations in conformity with accounting principles generally accepted in the U.S. Figures for fiscal 2006 have been retrospectively reclassified. As a result, reclassified consolidated net sales for fiscal 2006 decreased by ¥7,945 million compared with the result previously announced, reclassified operating profit decreased by ¥3,512 million and income from continuing operations before income taxes for fiscal 2006 decreased by ¥4,151 million, respectively.

 

(3) Implemented Management Measures and Significant Decision

1) Effective April 1, 2006, Kyocera shifted to a new management system. The executive officer system undertaken by the officers with the titles of Chief Executive Officer, Chief Financial Officer and Chief Operating Officer was abandoned, and a new system was introduced in which the President, Representative Director and Executive Officers have total responsibility for formulation and execution of group management strategies.

2) In July 2006, Kyocera Kinseki Corporation acquired Hertz Technology Inc. as a wholly-owned subsidiary in order to further enhance its crystal products business. Through this move, the Kyocera Group will gain new technology for tuning-fork crystal units, demand for which is expected to grow for mobile phones and mobile music players, in particular, and thus expand its business as a total crystal device manufacturer. A wide range of products will be developed in the crystal products business going forward. Hertz Technology Inc. was renamed Kyocera Kinseki Hertz Corporation on October 1, 2006.

3) As part of its policy of business selection and concentration, Kyocera transferred its shares of Kyocera Leasing Co., Ltd., a subsidiary engaged in financing, to Diamond Lease Company Limited in August 2006. In line with this, ¥5,175 million was recorded as income from discontinued operations.

4) In the fiscal year ended March 31, 2005, Kyocera Corporation recorded ¥12,748 million as additional taxes accompanying the receipt of a tax assessment notice based on transfer pricing adjustments from the Osaka Regional Taxation Bureau. On May 24, 2005, Kyocera filed a notice of complaint in respect of such assessment with the Bureau. On September 25, 2006, Kyocera Corporation received decision letter from the Bureau that voided a portion of the original assessment. In accordance with this decision, ¥4,305 million of tax refunds, including local taxes, was recognized as tax refunds in fiscal 2007. Kyocera Corporation remains in disagreement with the decision concerning the portion of the original assessment that was not voided, and therefore, on October 23, 2006, Kyocera submitted a written claim for examination with the Osaka Board of Tax Appeals. Furthermore, with the objective of avoiding duplicate taxation within Kyocera Group, a notice stating mutual agreement with the United States was submitted to the National Tax Agency on December 26, 2006.

 

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Table of Contents
(4) Consolidated Financial Results by Reporting Segment

Components Business:

Sales in the Components Business increased by 11.9% compared with fiscal 2006 due to rising demand for digital consumer equipment such as mobile phone handsets, digital TVs and new game consoles. Operating profit in the Components Business increased by 34.6% as a result of improved profitability achieved through the effects of sales growth and reinforcement of the “Amoeba Management System.”

Consolidated results by reporting segment in the Components Business are as follows.

1) Fine Ceramic Parts Group

Sales and operating profit in this reporting segment increased compared with fiscal 2006 due primarily to increased demand for ceramic parts for semiconductor fabrication equipment, spurred by strong production activities in the semiconductor industry.

2) Semiconductor Parts Group

Sales and operating profit in this reporting segment increased compared with fiscal 2006 due to rising demand for ceramic packages used in mobile phone handsets and digital cameras.

3) Applied Ceramic Products Group

Sales and operating profit in this reporting segment increased compared with fiscal 2006 due to sales growth of solar energy products, particularly in the European market, combined with increasing sales of medical materials and cutting tools.

4) Electronic Device Group

Both sales and operating profit increased substantially in this reporting segment compared with fiscal 2006. Sales of capacitors, crystal-related components and connectors, etc., expanded due to strong production activity for digital consumer equipment. In addition, AVX Corporation, a U.S. subsidiary, improved its performance.

Equipment Business:

Sales in the Equipment Business increased by 7.8% compared with fiscal 2006 due to increased sales in the Telecommunications Equipment Group and the Information Equipment Group. Through the positive effect of increased sales in the Information Equipment Group, combined with improved profitability in the Telecommunications Equipment Group and the Optical Equipment Group, operating profit for the Equipment Business increased by 71.0% compared with fiscal 2006.

Consolidated results by reporting segment in the Equipment Business are as follows.

1) Telecommunications Equipment Group

Sales in this reporting segment increased compared with fiscal 2006 due to higher sales of new mobile phone handsets in Japan and overseas. Operating profit improved due to the positive effect of increased sales in the domestic mobile phone handset business and a reduction in loss at Kyocera Wireless Corp., a U.S. subsidiary.

2) Information Equipment Group

Sales in this reporting segment increased compared with fiscal 2006 due to expanded sales of digital multifunctional products and printers overseas resulting from aggressive introduction of new products and enhanced marketing activities. The positive effect of sales growth, as well as the yen’s depreciation against the Euro and the U.S. dollar, led to an increase in operating profit.

3) Optical Equipment Group

Sales in this reporting segment decreased compared with fiscal 2006 due mainly to the downsizing of the camera business, while operating loss was reduced through decreased expenses for structural reforms.

 

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Others:

Sales in this reporting segment increased compared with fiscal 2006 due mainly to growth in the telecommunications engineering business at Kyocera Communication Systems Co., Ltd. Although profit grew at Kyocera Chemical Corporation, operating profit in this reporting segment slightly declined as a result of impairment of goodwill at a Japanese subsidiary.

Consolidated Sales by Reporting Segment

 

     (Yen in millions)  
     Years ended March 31,     Increase
(Decrease)
%
 
     2006     2007    
     Amount     % of
net
sales
    Amount     % of
net
sales
   

Fine Ceramic Parts Group

   69,373     5.9     81,326     6.3     17.2  

Semiconductor Parts Group

   135,299     11.6     152,292     11.9     12.6  

Applied Ceramic Products Group

   117,555     10.0     131,103     10.2     11.5  

Electronic Device Group

   259,592     22.1     286,156     22.3     10.2  
                              

Total Components Business

   581,819     49.6     650,877     50.7     11.9  

Telecommunications Equipment Group

   229,035     19.5     251,183     19.6     9.7  

Information Equipment Group

   249,381     21.2     268,781     20.9     7.8  

Optical Equipment Group

   14,947     1.3     11,704     0.9     (21.7 )
                              

Total Equipment Business

   493,363     42.0     531,668     41.4     7.8  

Others

   117,409     10.0     125,656     9.8     7.0  

Adjustments and eliminations

   (19,047 )   (1.6 )   (24,304 )   (1.9 )    
                              

Net sales

   1,173,544     100.0     1,283,897     100.0     9.4  
                              

 

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Consolidated Operating Profit by Reporting Segment

 

     (Yen in millions)  
     Years ended March 31,    Increase
(Decrease)
%
 
     2006    2007   
     Amount     % of
segment
sales
   Amount     % of
segment
sales
  

Fine Ceramic Parts Group

   11,014     15.9    15,677     19.3    42.3  

Semiconductor Parts Group

   17,742     13.1    22,210     14.6    25.2  

Applied Ceramic Products Group

   21,876     18.6    22,334     17.0    2.1  

Electronic Device Group

   27,170     10.5    44,487     15.5    63.7  
                            

Total Components Business

   77,802     13.4    104,708     16.1    34.6  

Telecommunications Equipment Group

   (1,706 )      291     0.1     

Information Equipment Group

   26,412     10.6    33,970     12.6    28.6  

Optical Equipment Group

   (5,774 )      (1,895 )       
                            

Total Equipment Business

   18,932     3.8    32,366     6.1    71.0  

Others

   8,983     7.7    8,776     7.0    (2.3 )
                            

Operating profit

   105,717     9.0    145,850     11.4    38.0  
                            

Corporate

   12,785        8,569        (33.0 )

Equity in (losses) earnings of affiliates and unconsolidated subsidiaries

   (1,216 )      2,621         

Adjustments and eliminations

   (49 )      (500 )       
                            

Income from continuing operations before income taxes

   117,237     10.0    156,540     12.2    33.5  
                            

Note 2. Commencing in fiscal 2007, net sales and operating profit of the Precision Machine Division of Kyocera Corporation, formerly included within “Corporate,” have been reclassified into “Others.” Accordingly, previously reported net sales and operating profit of these reporting segments for fiscal 2006 have been retrospectively reclassified.

Note 3. For the reasons set forth in Note 1 on page 5 and Note 2 above, net sales of “Others” in fiscal 2006 decreased by ¥7,565 million and “Adjustments and eliminations” increased by ¥(380) million compared with those previously announced. Also, operating profit of “Others” in fiscal 2006 decreased by ¥3,577 million, “Corporate” decreased by ¥573 million and “Adjustments and eliminations” increased by ¥(1) million compared with those previously announced.

 

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(5) Consolidated Sales by Geographic Area

 

     (Yen in millions)
     Years ended March 31,    Increase
(Decrease)
(%)
     2006    2007   
     Amount    % of
net
sales
   Amount    % of
net
sales
  

Japan

   467,035    39.8    496,959    38.7    6.4

USA

   253,696    21.6    274,361    21.4    8.1

Asia

   198,731    16.9    216,663    16.9    9.0

Europe

   184,351    15.7    210,726    16.4    14.3

Others

   69,731    6.0    85,188    6.6    22.2
                        

Net sales

   1,173,544    100.0    1,283,897    100.0    9.4
                        

Note 4. For the reasons set forth in Note 1 on page 5, consolidated sales in Japan in fiscal 2006 decreased by ¥7,945 million, compared with those previously announced.

1) Japan

Sales increased compared with fiscal 2006 due to large growth for mobile phone handsets and products in the Fine Ceramic Parts Group.

2) United States of America

Sales increased compared with fiscal 2006 due to growth in mobile phone handsets and products in the Semiconductor Parts Group and the Information Equipment Group.

3) Asia

Sales increased compared with fiscal 2006 due to growth for products in the Electronic Device Group and the Semiconductor Parts Group.

4) Europe

Sales increased largely compared with fiscal 2006 due to growth for the Information Equipment Group coupled with growth in the Electronic Device Group and solar energy products.

5) Others

Sales increased significantly compared with fiscal 2006 due mainly to growth for mobile phone handsets.

 

(6) Capital Expenditures and Depreciation

 

     (Yen in millions)  
      Years ended March 31,    Increase
(Decrease)
(%)
 
      2006    2007   
      Amount    % of
net
sales
   Amount    % of
net
sales
  

Capital expenditures

   88,860    7.6    69,896    5.4    (21.3 )

Depreciation

   62,942    5.4    70,155    5.5    11.5  

Note 5. For the reasons set forth in Note 1 on page 5, capital expenditures in fiscal 2006 decreased by ¥1,411 million and the depreciation decreased by ¥76 million, compared with those previously announced.

During fiscal 2007, Kyocera made capital expenditures particularly to increase production capacity in the Electronic Device Group. However, overall capital expenditures in fiscal 2007 decreased compared with fiscal 2006, which included large-scale capital expenditures such as the establishment of new production bases in the organic package business and the solar energy business. On the other hand, depreciation increased compared with fiscal 2006 because of the considerable amount of capital expenditures conducted in fiscal 2006.

 

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2. Fiscal 2008 Forecast

Consolidated Forecasts for the Year Ending March 31, 2008 (fiscal 2008)

 

     (Yen in millions, except per share amounts and exchange rates)  
     Fiscal 2007 Results    Fiscal 2008 Forecasts    Increase
(Decrease)
(%)
 
     Amount    % of
net
sales
   Amount    % of
net
sales
  

Net sales

   1,283,897    100.0    1,330,000    100.0    3.6  

Profit from operations

   135,102    10.5    151,000    11.4    11.8  

Income from continuing operations before income taxes

   156,540    12.2    166,000    12.5    6.0  

Net income

   106,504    8.3    103,000    7.7    (3.3 )

Diluted earnings per share

   564.79       546.21       (3.3 )

Average US$ exchange rate

   117       110        

Average Euro exchange rate

   150       150        
                          

Capital expenditures

   69,896    5.4    86,000    6.5    23.0  

Depreciation

   70,155    5.5    79,000    5.9    12.6  

In fiscal 2008, Kyocera expects production of digital consumer equipment such as mobile phone handsets, PCs, new game consoles and digital TVs to remain at a high level. As a result, continued strong component demand for these equipments is forecast. In this market environment, Kyocera will continue to enhance business performance by launching new products, expanding sales of high-value-added products and cultivating new markets in the Components Business while maximizing all opportunities for business growth. With respect to the Equipment Business, Kyocera aims to increase sales and enhance profitability by expanding its product line with new mobile phone handsets as well as new printers and digital multifunction products, especially color models, to meet market needs. To achieve mid- to long-term growth, Kyocera will make capital expenditures to expand production capacity in the Components Business.

Kyocera aims to continuously reinforce the “Amoeba Management System,” create new businesses and cultivate new markets through the pursuit of group synergies, and bolster strategic businesses. Through those activities, Kyocera aims to achieve continuous sales expansion and a high profit ratio.

 

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Consolidated sales and operating profit forecasts by reporting segment are as follows.

Consolidated Sales by Reporting Segment

 

     (Yen in millions)
     Fiscal 2007 Results     Fiscal 2008 Forecasts     Increase
(Decrease)
(%)
     Amount     % of
net
sales
    Amount     % of
net
sales
   

Fine Ceramic Parts Group

   81,326     6.3     85,000     6.4     4.5

Semiconductor Parts Group

   152,292     11.9     157,000     11.8     3.1

Applied Ceramic Products Group

   131,103     10.2     144,000     10.8     9.8

Electronic Device Group

   286,156     22.3     290,000     21.8     1.3
                            

Total Components Business

   650,877     50.7     676,000     50.8     3.9

Telecommunications Equipment Group

   251,183     19.6     265,000     19.9     5.5

Information Equipment Group

   268,781     20.9     274,000     20.6     1.9

Optical Equipment Group

   11,704     0.9            
                            

Total Equipment Business

   531,668     41.4     539,000     40.5    

Others

   125,656     9.8     140,000     10.5    

Adjustments and eliminations

   (24,304 )   (1.9 )   (25,000 )   (1.8 )  
                            

Net sales

   1,283,897     100.0     1,330,000     100.0     3.6
                            

 

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Consolidated Operating Profit by Reporting Segment

 

     (Yen in millions)  
     Fiscal 2007 Results    Fiscal 2008
Forecasts
   Increase
(Decrease)
(%)
 
     Amount     % of
segment
sales
   Amount    % of
segment
sales
  

Fine Ceramic Parts Group

   15,677     19.3    16,000    18.8    2.1  

Semiconductor Parts Group

   22,210     14.6    24,000    15.3    8.1  

Applied Ceramic Products Group

   22,334     17.0    27,000    18.8    20.9  

Electronic Device Group

   44,487     15.5    46,000    15.9    3.4  
                           

Total Components Business

   104,708     16.1    113,000    16.7    7.9  

Telecommunications Equipment Group

   291     0.1    6,000    2.3     

Information Equipment Group

   33,970     12.6    35,000    12.8    3.0  

Optical Equipment Group

   (1,895 )             
                           

Total Equipment Business

   32,366     6.1    41,000    7.6     

Others

   8,776     7.0    7,000    5.0     
                           

Operating profit

   145,850     11.4    161,000    12.1    10.4  
                           

Corporate and others

   10,690        5,000       (53.2 )
                           

Income from continuing operations before income taxes

   156,540     12.2    166,000    12.5    6.0  
                           

Note 6. Commencing in fiscal 2008, the “Optical Equipment Group,” previously a separate reporting segment, will be reclassified into “Others.”

 

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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, particularly including China; unexpected changes in economic, political and legal conditions in China; our ability to develop, launch and produce innovative products, including meeting quality and delivery standards, and our ability to otherwise meet the advancing technical requirements of our customers, particularly in the highly competitive markets for ceramics, semiconductor parts and electronic components manufacturing delays or defects resulting from outsourcing or internal manufacturing processes which may adversely affect our production yields and operating results; factors that may affect our exports, including a strong yen, political and economic instability, difficulties in collection of accounts receivable, decrease in cost competitiveness of our products, increases in shipping and handling costs, difficulty in staffing and managing international operations, and inadequate protection of our intellectual property; changes in exchange rates, particularly between the yen and the U.S. dollar and euro, respectively, in which we make significant sales; inability to secure skilled employees, particularly engineering and technical personnel; insufficient protection of our trade secrets and patents; holding licenses to continue to manufacture and sell certain of its products, the expense of which may adversely affects its results of operations; 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; the occurrence of natural disasters, such as earthquakes, in locations where our manufacturing and other key business facilities are located; and fluctuations in the value of, and impairment losses on, securities and other assets held by us, and changes in accounting principles. 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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3. Financial Position

<Cash Flow>

Cash and cash equivalents at the end of fiscal 2007 decreased by ¥18,601 million to ¥282,208 million compared with the end of fiscal 2006.

 

     (Yen in millions)  
     Years Ended March 31,     Increase
(Decrease)
 
     2006     2007    

Cash flow from operating activities

   171,077     149,644     (21,433 )

Cash flow from investing activities

   (165,467 )   (151,703 )   13,764  

Cash flow from financing activities

   (23,289 )   (20,645 )   2,644  

Effect of exchange rate changes on cash and cash equivalents

   7,896     4,103     (3,793 )

Net decrease in cash and cash equivalents

   (9,783 )   (18,601 )   (8,818 )

Cash and cash equivalents at beginning of year

   310,592     300,809     (9,783 )

Cash and cash equivalents at end of year

   300,809     282,208     (18,601 )

 

(1) Cash flow from operating activities

Net cash provided by operating activities in fiscal 2007 decreased by ¥21,433 million to ¥149,644 million from the fiscal 2006 of ¥171,077 million. This was due mainly to decreases in cash inflows related to inventories and receivables, although net income increased by ¥36,808 million compared with fiscal 2006.

 

(2) Cash flow from investing activities

Net cash used in investing activities in fiscal 2007 decreased by ¥13,764 million to ¥151,703 million from the fiscal 2006 of ¥165,467 million. This reflected that although deposit of time deposits significantly increased, there were decreases in payments for property, plant, equipment and intangible assets and purchase of securities as well as increases in sales or redemption of securities and withdrawal of time deposits.

 

(3) Cash flow from financing activities

Net cash used in financing activities in fiscal 2007 decreased by ¥2,644 million to ¥20,645 million from the fiscal 2006 of ¥23,289 million. This was due to an increase in sales of treasury stock and a decrease in payments of long-term debt, which exceeded decreases in proceeds from short-term borrowings and long-term debt.

<Cash Flows Indexes (Consolidated)>

 

      Years Ended March 31,  
   2003     2004     2005     2006     2007  

Stockholders’ equity to total assets

   61.2 %   64.1 %   67.3 %   66.7 %   71.1 %

Market capitalization to total assets

   66.5 %   91.3 %   82.2 %   101.3 %   98.4 %

Interest bearing debts per operating cash flows (years)

   1.2     3.2     1.0     0.8     0.2  

Operating cash flows per interest paid (ratio)

   49.8     20.6     62.4     88.5     93.4  

All indexes are computed on a consolidated basis.

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

 

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4. Basic Profit Distribution Policy

Kyocera considers that the best way to respond to shareholders’ expectations is to improve the consolidated performance into the future. Kyocera takes strongly into consideration the linkage between dividend amounts and the consolidated performance and has implemented a dividend policy aiming for a consolidated dividend ratio of approximately 20% to 25%. In addition, Kyocera determines dividend amounts based on an overall assessment, taking into consideration various factors including the amount of capital expenditures necessary for the medium to long-term growth.

Pursuant to this policy and based on performance through fiscal 2007, Kyocera will propose a year-end dividend for fiscal 2007 of 60 yen per share, an increase of 10 yen compared to fiscal 2006. When aggregated with the interim dividend in the amount of 50 yen, the total annual dividend amount will be 110 yen per share.

Kyocera will also propose that other general reserve shall be set aside, in order to take into account the necessary reserve amounts for creation of new businesses, development of new markets and new technologies and acquisition of outside management resources needed to achieve sustainable corporate growth.

 

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KYOCERA GROUP

Kyocera group consists of Kyocera Corporation, 169 subsidiaries and 10 affiliates.

(Chart of the group companies)

LOGO

 

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Table of Contents

Management Policies

1. Basic Policy

Kyocera aims to be respected by society as “The Company” from the perspective of corporate ethics, while maintaining continuous sales growth and high profitability. To achieve this management vision, Kyocera’s management policy is to further drive business expansion to be “a creative company that continues to grow.” Kyocera promotes efficient resource management, emphasizes consolidated group management and intends to increase corporate value through improvement in business performance.

2. Target of Pre-tax Income Ratio

To be “a creative company that continues to grow,” Kyocera aims to quickly achieve its target of a pre-tax income ratio of 15% or higher.

3. Medium Term Management Strategy

Kyocera promotes “high-value-added diversification” as its management strategy to realize such management policy. This involves ensuring that each business is highly profitable and pursuing synergies within Kyocera with the objective of driving sustainable growth even in an ever-changing business environment.

Specifically, Kyocera aims to: (1) exploit competitive advantages; (2) strengthen existing businesses; and (3) create new businesses.

(1) Exploit competitive advantages

The “Kyocera Philosophy,” which places people’s hearts at its core, the “Amoeba Management” system, which is unique to Kyocera and has been a driving force for growth since Kyocera Corporation’s earliest days, and a strong financial structure, are sources of competitive advantage for Kyocera over other companies in implementing its diversification strategy. With these foundations firmly in place, Kyocera endeavors to strengthen competitiveness in technological development, sales and marketing in the high-growth potential markets for telecommunications and information processing and for environmental protection, and to translate its diversification strategy into improved business performance.

(2) Strengthen existing businesses

Kyocera strives to continuously improve profitability in all existing businesses within Kyocera Group. Elsewhere, by strengthening ties and maximizing synergies between Kyocera Corporation and Kyocera Group companies, Kyocera seeks to improve profitability in each business segment on a consolidated basis. In promoting a global strategy in each business, Kyocera has created development, manufacturing and sales systems in optimal locations, while the integration of Group-wide resources helps boost the competitiveness of existing businesses. Kyocera regularly reviews those businesses that have lost market competitiveness and that show little promise of expansion going forward.

(3) Create new businesses

Kyocera endeavors to create businesses that will become its core going forward in order to improve consolidated performance over the medium term. To achieve this goal, Kyocera integrates Group-wide management resources to develop new technologies and products and create new markets. The focus of Kyocera’s business creation strategy lies in the markets for telecommunications and information processing and for environmental protection.

 

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4. Challenges

To be “a creative company that continues to grow,” Kyocera seeks to continuously expand sales and to attain high profitability in its Components and Equipment Businesses. To accomplish these goals, Kyocera continues to reinforce the “Amoeba Management System” (go back to the origin of “Amoeba Management”) and create new value in fiscal 2008.

Kyocera plans to strengthen “executional excellence,” which refers to vitality in the workplace, across development, manufacturing, sales and back office divisions. The goal is to boost “operational excellence,” which means the ability to achieve targets, and thus create a highly profitable company.

In addition, Kyocera aims to improve its quality, optimize manufacturing locations worldwide and expand production capacity in order to enhance management foundations in the mid-to long-term range. Kyocera will create new businesses and markets by pursuing group synergies. Efforts will also be made to strengthen strategic businesses and to improve efficiency in operation of assets.

 

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CONSOLIDATED BALANCE SHEETS

 

     Yen in millions  
     March 31,    Increase
(Decrease)
 
     2006    2007   
     Amount     %    Amount     %   

Current assets :

            

Cash and cash equivalents

   ¥ 300,809        ¥ 282,208        ¥ (18,601 )

Short-term investments

     87,942          213,495          125,553  

Trade notes receivables

     24,597          25,033          436  

Trade accounts receivables

     210,393          236,380          25,987  

Short-term finance receivables

     39,505                   (39,505 )

Less allowances for doubtful accounts and sales returns

     (7,425 )        (5,960 )        1,465  

Inventories

     190,564          209,188          18,624  

Deferred income taxes

     40,411          45,390          4,979  

Other current assets

     33,872          40,757          6,885  
                                  

Total current assets

     920,668     47.7      1,046,491     49.1      125,823  
                                  

Non-current assets :

            

Investments and advances :

            

Investments in and advances to affiliates and unconsolidated subsidiaries

     7,355          10,093          2,738  

Securities and other investments

     553,377          690,568          137,191  
                                  

Total investments and advances

     560,732     29.0      700,661     32.9      139,929  

Long-term finance receivables

     80,970     4.2               (80,970 )

Property, plant and equipment, at cost :

            

Land

     58,286          56,806          (1,480 )

Buildings

     249,506          261,998          12,492  

Machinery and equipment

     697,383          729,636          32,253  

Construction in progress

     13,473          7,362          (6,111 )

Less accumulated depreciation

     (733,302 )        (774,896 )        (41,594 )
                                  

Total property, plant and equipment, at cost

     285,346     14.8      280,906     13.2      (4,440 )

Goodwill

     31,351     1.6      32,894     1.5      1,543  

Intangible assets

     31,227     1.6      24,657     1.2      (6,570 )

Other assets

     21,228     1.1      44,855     2.1      23,627  
                                  

Total non-current assets

     1,010,854     52.3      1,083,973     50.9      73,119  
                                  

Total assets

   ¥ 1,931,522     100.0    ¥ 2,130,464     100.0    ¥ 198,942  
                                  

 

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Table of Contents
     Yen in millions  
     March 31,       
     2006    2007    Increase
(Decrease)
 
     Amount     %    Amount     %   

Current liabilities :

            

Short-term borrowings

   ¥ 90,865        ¥ 15,250        ¥ (75,615 )

Current portion of long-term debt

     16,347          5,853          (10,494 )

Trade notes and accounts payable

     103,503          100,295          (3,208 )

Other notes and accounts payable

     51,997          49,134          (2,863 )

Accrued payroll and bonus

     37,998          41,680          3,682  

Accrued income taxes

     27,658          36,475          8,817  

Other accrued liabilities

     31,414          33,391          1,977  

Other current liabilities

     18,841          24,110          5,269  
                                  

Total current liabilities

     378,623     19.6      306,188     14.4      (72,435 )
                                  

Non-current liabilities :

            

Long-term debt

     33,360          7,283          (26,077 )

Accrued pension and severance liabilities

     27,092          16,297          (10,795 )

Deferred income taxes

     125,686          206,858          81,172  

Other non-current liabilities

     12,742          12,355          (387 )
                                  

Total non-current liabilities

     198,880     10.3      242,793     11.4      43,913  
                                  

Total liabilities

     577,503     29.9      548,981     25.8      (28,522 )
                                  

Minority interests in subsidiaries

     64,942     3.4      66,923     3.1      1,981  

Stockholders’ equity :

            

Common stock

     115,703          115,703          —    

Additional paid-in capital

     161,994          162,363          369  

Retained earnings

     967,576          1,055,293          87,717  

Accumulated other comprehensive income

     72,947          203,056          130,109  

Treasury stock, at cost

     (29,143 )        (21,855 )        7,288  
                                  

Total stockholders’ equity

     1,289,077     66.7      1,514,560     71.1      225,483  
                                  

Total liabilities, minority interests and stockholders’ equity

   ¥ 1,931,522     100.0    ¥ 2,130,464     100.0    ¥ 198,942  
                                  
Note: Accumulated other comprehensive income is as follows :             
     Yen in millions             
     March 31,             
     2006          2007             

Net unrealized gains on securities

   ¥ 82,649        ¥ 184,670       

Net unrealized (losses) gains on derivative financial instruments

   ¥ (75 )      ¥ 63       

Minimum pension liability adjustments

   ¥ (2,057 )              

Pension due to adoption of SFAS158

            ¥ 15,419       

Foreign currency translation adjustments

   ¥ (7,570 )      ¥ 2,904       

 

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Table of Contents

CONSOLIDATED STATEMENTS OF INCOME

 

     Yen in millions and shares in thousands, except per share amounts  
     Years ended March 31,    

Increase

(Decrease)

 
     2006     2007    
     Amount     %     Amount     %     Amount     %  

Net sales

   ¥ 1,173,544     100.0     ¥ 1,283,897     100.0     ¥ 110,353     9.4  

Cost of sales

     835,042     71.2       900,470     70.1       65,428     7.8  
                                          

Gross profit

     338,502     28.8       383,427     29.9       44,925     13.3  

Selling, general and administrative expenses

     238,807     20.3       248,325     19.4       9,518     4.0  
                                          

Profit from operations

     99,695     8.5       135,102     10.5       35,407     35.5  

Other income (expenses) :

            

Interest and dividend income

     8,990     0.8       15,472     1.2       6,482     72.1  

Interest expense

     (1,301 )   (0.1 )     (1,647 )   (0.1 )     (346 )    

Foreign currency transaction losses, net

     (316 )   (0.0 )     (65 )   (0.0 )     251      

Equity in (losses) earnings of affiliates and unconsolidated subsidiaries

     (1,216 )   (0.1 )     2,621     0.2       3,837      

Gains on sales and maturities of securities, net

     1,472     0.1       3,819     0.3       2,347     159.4  

Gains on exchange for the shares

     5,294     0.4       24     0.0       (5,270 )   (99.5 )

Gain on sale of investment in an affiliate

     6,931     0.6       26     0.0       (6,905 )   (99.6 )

Loss on impairment of investment in an affiliate

     (3,492 )   (0.3 )               3,492      

Other, net

     1,180     0.1       1,188     0.1       8     0.7  
                                          

Total other income

     17,542     1.5       21,438     1.7       3,896     22.2  
                                          

Income from continuing operations before income taxes and minority interests

     117,237     10.0       156,540     12.2       39,303     33.5  

Income taxes

     46,760     4.0       48,887     3.8       2,127     4.5  
                                          

Income from continuing operations before minority interests

     70,477     6.0       107,653     8.4       37,176     52.7  

Minority interests

     (4,389 )   (0.4 )     (6,324 )   (0.5 )     (1,935 )    
                                          

Income from continuing operations

     66,088     5.6       101,329     7.9       35,241     53.3  

Income from discontinued operations

     3,608     0.3       5,175     0.4       1,567     43.4  
                                          

Net income

   ¥ 69,696     5.9     ¥ 106,504     8.3     ¥ 36,808     52.8  
                                          

 

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Earnings per share :

     

Income from continuing operations :

     

Basic

   ¥ 352.44    ¥ 538.52

Diluted

   ¥ 352.21    ¥ 537.35

Income from discontinued operations :

     

Basic

   ¥ 19.24    ¥ 27.51

Diluted

   ¥ 19.22    ¥ 27.44

Net income :

     

Basic

   ¥ 371.68    ¥ 566.03

Diluted

   ¥ 371.43    ¥ 564.79

Weighted average number of shares of common stock outstanding :

     

Basic

     187,514      188,160

Diluted

     187,640      188,573

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 years ended March 31, 2006 and 2007 were an increase of ¥130,804 million and an increase of ¥219,055 million, 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 converted into common stock, exercised or resulted in the issuance of common stock.
3. Against the Correction Disposition with regard to transfer pricing taxation, which was rendered by the Osaka Regional Taxation Bureau in March 2005, Kyocera filed the Request for Reinvestigation in May 2005. Kyocera then received the Decision on the Request for Reinvestigation in September 2006. Based on the Decision, ¥(4,305) million is included in income taxes shown above, as refunds for the previous years.
4. In accordance with SFAS No. 144, “Accounting for the Impairment of Disposal of Long-Lived Assets,” the consolidated financial statement for the year ended March 31, 2006 has been retrospectively reclassified as for the discontinued operations.

 

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

     Yen in millions and shares in thousands

(Number of shares of common stock)

   Common
stock
   Additional
paid-in
capital
    Retained
earnings
    Accumulated
other
comprehensive
income
   Treasury
stock
    Comprehensive
income

Balance, March 31, 2005 (187,481)

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

Net income for the year

          69,696          ¥ 69,696

Other comprehensive income

            61,108        61,108
                  

Total comprehensive income for the year

               ¥ 130,804
                  

Cash dividends

          (18,748 )       

Purchase of treasury stock (20)

               (170 )  

Reissuance of treasury stock (294)

        (67 )          2,407    
                                        

Balance, March 31, 2006 (187,755)

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

Net income for the year

          106,504          ¥ 106,504

Other comprehensive income

            112,551        112,551
                  

Total comprehensive income for the year

               ¥ 219,055
                  

Adjustment for initially applying SAFS No. 158, net of tax

            17,558     

Cash dividends

          (18,787 )       

Purchase of treasury stock (24)

               (251 )  

Reissuance of treasury stock (918)

        127            7,539    

Stock option plan of subsidiaries

        242           
                                        

Balance, March 31, 2007 (188,649)

   ¥ 115,703    ¥ 162,363     ¥ 1,055,293     ¥ 203,056    ¥ (21,855 )  
                                        

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Yen in millions  
     Years ended March 31,  
     2006     2007  

Cash flows from operating activities :

    

Net income

   ¥ 69,696     ¥ 106,504  

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

    

Depreciation and amortization

     73,186       82,182  

Write-down of inventories

     8,446       11,328  

Minority interests

     4,389       6,324  

Gains on sales and maturities of securities, net

     (1,652 )     (3,819 )

Gains on sales of investment in affiliates

     (6,931 )     (26 )

Loss on impairment of investment in an affiliate

     3,492        

Gains on sales of investment in subsidiaries

           (8,252 )

Gains on exchange for the shares

     (5,294 )     (24 )

Increase in receivables

     (9,237 )     (32,626 )

Decrease (increase) in inventories

     21,263       (25,100 )

Increase in notes and accounts payable

     14,390       6,015  

Other, net

     (671 )     7,138  
                

Net cash provided by operating activities

     171,077       149,644  
                

Cash flows from investing activities :

    

Payments for purchases of securities

     (109,289 )     (71,449 )

Payments for purchases of investments and advances

     (224 )     (307 )

Sales and maturities of securities

     52,430       127,119  

Proceeds from sales of investment in affiliates

     24,133       60  

Proceeds from sales of investment in subsidiaries

           24,602  

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

     (102,025 )     (72,966 )

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

     3,350       2,693  

Acquisition of business, net of cash acquired

     3       (756 )

Deposit of negotiable certificate of deposits and time deposits

     (132,286 )     (356,169 )

Withdrawal of negotiable certificate of deposits and time deposits

     100,923       203,076  

Other, net

     (2,482 )     (7,606 )
                

Net cash used in investing activities

     (165,467 )     (151,703 )
                

Cash flows from financing activities :

    

Increase in short-term borrowings

     23,363       9,369  

Proceeds from issuance of long-term debt

     19,876       1,928  

Payments of long-term debt

     (48,458 )     (13,361 )

Dividends paid

     (20,473 )     (20,632 )

Net sales of treasury stock

     2,169       7,415  

Other, net

     234       (5,364 )
                

Net cash used in financing activities

     (23,289 )     (20,645 )
                

Effect of exchange rate changes on cash and cash equivalents

     7,896       4,103  
                

Net decrease in cash and cash equivalents

     (9,783 )     (18,601 )

Cash and cash equivalents at beginning of year

     310,592       300,809  
                

Cash and cash equivalents at end of year

   ¥ 300,809     ¥ 282,208  
                

 

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SUPPLEMENTAL CASH FLOW INFORMATION

 

     Yen in millions  
     Years ended March 31,  
     2006     2007  

Cash paid during the year for:

    

Interest

   ¥ 1,933     ¥ 1,603  

Income taxes

     53,037       52,847  

Acquisitions of businesses :

    

Fair value of assets acquired

   ¥ 65     ¥ 1,151  

Fair value of liabilities assumed

     (45 )     (333 )

Minority interests

     (8 )     —    

Cash acquired

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

 

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SEGMENT INFORMATION

1. Reporting segments :

 

     Yen in millions  
     Years ended March 31,    

Increase

(Decrease)

 
     2006     2007    
     Amount     Amount     Amount     %  

Net sales :

        

Fine Ceramic Parts Group

   ¥ 69,373     ¥ 81,326     ¥ 11,953     17.2  

Semiconductor Parts Group

     135,299       152,292       16,993     12.6  

Applied Ceramic Products Group

     117,555       131,103       13,548     11.5  

Electronic Device Group

     259,592       286,156       26,564     10.2  

Telecommunications Equipment Group

     229,035       251,183       22,148     9.7  

Information Equipment Group

     249,381       268,781       19,400     7.8  

Optical Equipment Group

     14,947       11,704       (3,243 )   (21.7 )

Others

     117,409       125,656       8,247     7.0  

Adjustments and eliminations

     (19,047 )     (24,304 )     (5,257 )   —    
                              
   ¥ 1,173,544     ¥ 1,283,897     ¥ 110,353     9.4  
                              

Operating profit :

        

Fine Ceramic Parts Group

   ¥ 11,014     ¥ 15,677     ¥ 4,663     42.3  

Semiconductor Parts Group

     17,742       22,210       4,468     25.2  

Applied Ceramic Products Group

     21,876       22,334       458     2.1  

Electronic Device Group

     27,170       44,487       17,317     63.7  

Telecommunications Equipment Group

     (1,706 )     291       1,997     —    

Information Equipment Group

     26,412       33,970       7,558     28.6  

Optical Equipment Group

     (5,774 )     (1,895 )     3,879     —    

Others

     8,983       8,776       (207 )   (2.3 )
                              
     105,717       145,850       40,133     38.0  

Corporate

     12,785       8,569       (4,216 )   (33.0 )

Equity in (losses) earnings of affiliates and unconsolidated subsidiaries

     (1,216 )     2,621       3,837     —    

Adjustments and eliminations

     (49 )     (500 )     (451 )   —    
                              

Income from continuing operations before income taxes

   ¥ 117,237     ¥ 156,540     ¥ 39,303     33.5  
                              

Segment assets :

        

Fine Ceramic Parts Group

   ¥ 43,822     ¥ 54,860     ¥ 11,038     25.2  

Semiconductor Parts Group

     103,302       106,359       3,057     3.0  

Applied Ceramic Products Group

     112,422       125,266       12,844     11.4  

Electronic Device Group

     383,150       412,979       29,829     7.8  

Telecommunications Equipment Group

     87,343       92,584       5,241     6.0  

Information Equipment Group

     185,362       207,862       22,500     12.1  

Optical Equipment Group

     16,211       11,934       (4,277 )   (26.4 )

Others

     243,166       121,150       (122,016 )   (50.2 )
                              
     1,174,778       1,132,994       (41,784 )   (3.6 )

Corporate

     815,833       1,056,646       240,813     29.5  

Investments in and advances to affiliates and unconsolidated subsidiaries

     7,355       10,093       2,738     37.2  

Adjustments and eliminations

     (66,444 )     (69,269 )     (2,825 )   —    
                              

Total assets

   ¥ 1,931,522     ¥ 2,130,464     ¥ 198,942     10.3  
                              

Depreciation and amortization :

        

Fine Ceramic Parts Group

   ¥ 4,126     ¥ 4,500     ¥ 374     9.1  

Semiconductor Parts Group

     10,623       12,533       1,910     18.0  

Applied Ceramic Products Group

     7,167       8,097       930     13.0  

Electronic Device Group

     21,202       21,537       335     1.6  

Telecommunications Equipment Group

     8,692       9,075       383     4.4  

Information Equipment Group

     12,641       16,326       3,685     29.2  

Optical Equipment Group

     1,635       655       (980 )   (59.9 )

Others

     3,989       6,764       2,775     69.6  

Corporate

     2,996       2,575       (421 )   (14.1 )
                              

Total

   ¥ 73,071     ¥ 82,062     ¥ 8,991     12.3  
                              

Capital expenditures :

        

Fine Ceramic Parts Group

   ¥ 4,182     ¥ 7,447     ¥ 3,265     78.1  

Semiconductor Parts Group

     24,136       11,432       (12,704 )   (52.6 )

Applied Ceramic Products Group

     14,545       7,330       (7,215 )   (49.6 )

Electronic Device Group

     21,562       19,812       (1,750 )   (8.1 )

Telecommunications Equipment Group

     2,639       3,800       1,161     44.0  

Information Equipment Group

     12,389       11,962       (427 )   (3.4 )

Optical Equipment Group

     199       322       123     61.8  

Others

     5,654       5,452       (202 )   (3.6 )

Corporate

     3,554       2,339       (1,215 )   (34.2 )
                              

Total

   ¥ 88,860     ¥ 69,896     ¥ (18,964 )   (21.3 )
                              

 

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

 

     Yen in millions  
     Years ended March 31,              
     2006     2007     Increase (Decrease)  
     Amount     Amount     Amount     %  

Net sales:

        

Japan

   ¥ 497,758     ¥ 523,869     ¥ 26,111     5.2  

Intra-group sales and transfer between geographic areas

     327,786       388,879       61,093     18.6  
                              
     825,544       912,748       87,204     10.6  
                              

United States of America

     288,746       319,033       30,287     10.5  

Intra-group sales and transfer between geographic areas

     26,246       37,357       11,111     42.3  
                              
     314,992       356,390       41,398     13.1  
                              

Asia

     171,015       195,319       24,304     14.2  

Intra-group sales and transfer between geographic areas

     125,586       152,219       26,633     21.2  
                              
     296,601       347,538       50,937     17.2  
                              

Europe

     189,750       219,695       29,945     15.8  

Intra-group sales and transfer between geographic areas

     33,764       40,040       6,276     18.6  
                              
     223,514       259,735       36,221     16.2  
                              

Others

     26,275       25,981       (294 )   (1.1 )

Intra-group sales and transfer between geographic areas

     8,274       11,432       3,158     38.2  
                              
     34,549       37,413       2,864     8.3  
                              

Adjustments and eliminations

     (521,656 )     (629,927 )     (108,271 )   —    
                              
   ¥ 1,173,544     ¥ 1,283,897     ¥ 110,353     9.4  
                              

Operating Profits:

        

Japan

   ¥ 79,278     ¥ 96,804     ¥ 17,526     22.1  

United States of America

     3,317       23,521       20,204     609.1  

Asia

     14,880       19,165       4,285     28.8  

Europe

     4,748       10,218       5,470     115.2  

Others

     757       1,086       329     43.5  
                              
     102,980       150,794       47,814     46.4  

Adjustments and eliminations

     2,688       (5,444 )     (8,132 )   —    
                              
     105,668       145,350       39,682     37.6  

Corporate

     12,785       8,569       (4,216 )   (33.0 )

Equity in (losses) earnings of affiliates and unconsolidated subsidiaries

     (1,216 )     2,621       3,837     —    
                              

Income from continuing operations before income taxes

   ¥ 117,237     ¥ 156,540     ¥ 39,303     33.5  
                              

 

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3. Geographic segments (Sales by region):

 

     Yen in millions
     Years ended March 31,          
     2006    2007    Increase (Decrease)
     Amount     %    Amount     %    Amount    %

Japan

   ¥ 467,035     39.8    ¥ 496,959     38.7    ¥ 29,924    6.4

United States of America

     253,696     21.6      274,361     21.4      20,665    8.1

Asia

     198,731     16.9      216,663     16.9      17,932    9.0

Europe

     184,351     15.7      210,726     16.4      26,375    14.3

Others

     69,731     6.0      85,188     6.6      15,457    22.2
                                     

Net sales

   ¥ 1,173,544     100.0    ¥ 1,283,897     100.0    ¥ 110,353    9.4
                                     

Sales outside Japan

   ¥ 706,509        ¥ 786,938        ¥ 80,429    11.4

Sales outside Japan to net sales

     60.2 %        61.3 %        

 

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INVESTMENTS IN DEBT AND EQUITY SECURITIES

Investments in debt and equity securities at March 31, 2006 and 2007, included in short-term investments (current assets) and securities and other investments (non-current assets) are summarized as follows :

 

    Yen in millions
    March 31,
    2006   2007
    Cost   Aggregate
fair values
  Gross
unrealized
gains
  Gross
unrealized
losses
  Cost   Aggregate
fair values
  Gross
unrealized
gains
  Gross
unrealized
losses

Available-for-sale securities :

               

Corporate debt securities

  ¥ 3,745   ¥ 3,908   ¥ 184   ¥ 21   ¥ 3,842   ¥ 4,033   ¥ 194   ¥ 3

Other debt securities

    133,758     132,660     29     1,127     74,563     74,574     71     60

Equity securities

    274,985     415,950     141,059     94     272,653     585,274     312,724     103
                                               

Total available-for-sale securities

    412,488     552,518     141,272     1,242     351,058     663,881     312,989     166
                                               

Held-to-maturity securities :

               

Other debt securities

    34,398     34,015         383     33,512     33,450         62
                                               

Total held-to-maturity securities

    34,398     34,015         383     33,512     33,450         62
                                               

Total investments in debt and equity securities

  ¥ 446,886   ¥ 586,533   ¥ 141,272   ¥ 1,625   ¥ 384,570   ¥ 697,331   ¥ 312,989   ¥ 228
                                               

 

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

 

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BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

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

Major consolidated subsidiaries :

AVX CORPORATION

KYOCERA WIRELESS CORP.

KYOCERA MITA CORPORATION

KYOCERA ELCO CORPORATION

Major affiliates accounted for by the equity method :

WILLCOM, INC.

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

Consolidation

     

(Increase)

   7    KYOCERA KINSEKI HERTZ TECHNOLOGY INC. and others

(Decrease)

   8    KYOCERA LEASING CO., LTD. and others

Equity method

     

(Increase)

   None   

(Decrease)

   2   

3. Summary of significant accounting policies

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

(1) Valuation of inventories

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

(2) Valuation of securities

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

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

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

(3) Depreciation method of Property, Plant and Equipment

Depreciation is computed based mainly on a declining balance over their estimated useful lives.

(4) Goodwill and other intangible assets

Kyocera adopts Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

 

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Table of Contents

( 5 ) Accounting for allowances and accruals

Allowance for doubtful accounts :

We provided based on the past actual ratio of losses on bad debt in addition to the 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” and Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” pension and severance cost is accrued based on the projected benefit obligations and the fair value of plan assets at the balance sheet date. Prior service cost is amortized by the straight-line method over the average remaining service period of employees. 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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Table of Contents

BALANCE SHEETS

 

     Yen in millions  
     March 31,   

Increase
(Decrease)

 
     2006    2007   
     Amount     %    Amount     %   

Current assets :

            

Cash and bank deposits

   ¥ 136,870        ¥ 203,301        ¥ 66,431  

Trade notes receivable

     43,325          41,423          (1,902 )

Trade accounts receivable

     90,073          108,685          18,612  

Marketable securities

     19,331          22,937          3,606  

Finished goods and merchandise

     17,588          17,204          (384 )

Raw materials

     14,152          16,560          2,408  

Work in process

     17,104          20,541          3,437  

Supplies

     751          706          (45 )

Advance payments

     2,967          10,100          7,133  

Prepaid expenses

     —            443          443  

Deferred income taxes

     15,375          17,193          1,818  

Loans to subsidiaries

     1,316          16,880          15,564  

Other accounts receivable

     9,012          8,291          (721 )

Other current assets

     434          891          457  

Allowances for doubtful accounts

     (142 )        (173 )        (31 )
                                  

Total current assets

     368,156     26.5      484,982     30.1      116,826  
                                  

Non-current assets :

            

Tangible fixed assets :

            

Buildings

     36,978          34,921          (2,057 )

Structures

     2,268          2,091          (177 )

Machinery and equipment

     44,113          44,896          783  

Vehicles

     25          21          (4 )

Tools, furniture and fixtures

     7,477          8,139          662  

Land

     33,323          33,372          49  

Construction in progress

     4,533          900          (3,633 )
                                  

Total tangible fixed assets

     128,717     9.3      124,340     7.7      (4,377 )
                                  

Intangible assets :

            

Patent rights

     13,523          9,518          (4,005 )

Trademark

     143          124          (19 )

Software

     623          776          153  

Other intangible assets

     9          13          4  
                                  

Total intangible assets

     14,298     1.0      10,431     0.6      (3,867 )
                                  

Investments and other assets :

            

Investments in securities

     536,019          648,538          112,519  

Investments in subsidiaries and affiliates

     278,817          260,775          (18,042 )

Investments in subsidiaries and affiliates other than equity securities

     27,033          26,685          (348 )

Long-term loans to subsidiaries

     30,428          20,633          (9,795 )

Impaired loans

     256          238          (18 )

Long-term prepaid expenses

     3,785          2,458          (1,327 )

Long-term deposits

     —            31,000          31,000  

Security deposits

     1,918          1,823          (95 )

Other investments

     336          289          (47 )

Allowances for doubtful accounts

     (367 )        (301 )        66  
                                  

Total investments and other assets

     878,225     63.2      992,138     61.6      113,913  
                                  

Total non-current assets

     1,021,240     73.5      1,126,909     69.9      105,669  
                                  

Total assets

   ¥ 1,389,396     100.0    ¥ 1,611,891     100.0    ¥ 222,495  
                                  

 

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Table of Contents
     Yen in millions  
     March 31,    

Increase
(Decrease)

 
     2006     2007    
     Amount     %     Amount     %    

Current liabilities :

          

Trade accounts payable

   ¥ 49,570       ¥ 55,561       ¥ 5,991  

Other payables

     29,659         21,774         (7,885 )

Accrued expenses

     7,610         8,356         746  

Income taxes payables

     14,200         12,550         (1,650 )

Advance received

     340         532         192  

Deposits received

     2,315         1,916         (399 )

Unearned income

     4         10         6  

Accrued bonuses

     10,109         11,152         1,043  

Accrued bonuses for directors

             136         136  

Warranty reserves

     521         5,045         4,524  

Allowances for sales returns

     163         114         (49 )

Other current liabilities

     369         125         (244 )
                                    

Total current liabilities

     114,860     8.3       117,271     7.3       2,411  
                                    

Non-current liabilities :

          

Long-term accounts payable

     5,309         2,953         (2,356 )

Deferred income taxes

     118,557         191,441         72,884  

Accrued pension and severance costs

     17,236         12,705         (4,531 )

Retirement allowances for directors and executive officers

     889         1,022         133  

Other non-current liabilities

     284         138         (146 )
                                    

Total non-current liabilities

     142,275     10.2       208,259     12.9       65,984  
                                    

Total liabilities

     257,135     18.5       325,530     20.2     ¥ 68,395  
                                    

Stockholders’ equity

          

Common stock

     115,703     8.3                  

Capital surplus :

          

Additional paid-in capital

     192,555                  

Total capital surplus

     192,555     13.9                  

Retained earnings :

          

Legal reserves

     17,207     1.2                  

General reserves

     558,721     40.2                  

Reserve for special depreciation

     1,584                  

Reserve for research and development

     1,000                  

Reserve for dividends

     1,000                  

Reserve for retirement benefits

     300                  

Reserve for overseas investments

     1,000                  

Other general reserve

     553,837                  

Unappropriated retained earnings

     69,245     5.0                  
                                    

Total retained earnings

     645,173     46.4                  
                                    

Net unrealized gain on other securities

     207,973     15.0                  

Treasury stock, at cost

     (29,143 )   (2.1 )                
                                    

Total stockholders’ equity

     1,132,261     81.5                  
                                    

Total liabilities and stockholders’ equity

   ¥ 1,389,396     100.0                  
                                    

Net assets

          

Stockholders’ equity :

          

Common stock

               115,703     7.2        

Capital surplus:

          

Additional paid-in capital

             192,555          

Other capital surplus

             127          

Total capital surplus

               192,682     12.0        

Retained earnings :

          

Legal reserves

             17,207          

Other retained earnings :

             671,140          

Reserve for special depreciation

             991          

Reserve for research and development

             1,000          

Reserve for dividends

             1,000          

Reserve for retirement benefits

             300          

Reserve for overseas investments

             1,000          

General reserve

             603,837          

Unappropriated retained earnings

             63,012          
                                    

Total retained earnings

               688,347     42.7        

Treasury stock, at cost

               (21,855 )   (1.4 )      

Total stockholders’ equity

               974,877     60.5        

Difference of appreciation and conversion

          

Net unrealized gains on other securities

               311,484     19.3        
                                    

Total net assets

               1,286,361     79.8        
                                    

Total liabilities and net assets

             ¥ 1,611,891     100.0        
                                    

 

33


Table of Contents

STATEMENTS OF INCOME

 

     Yen in millions  
     Years ended March 31,    

Increase

(Decrease)

 
     2006    2007    
     Amount    %    Amount     %     Amount     %  

Net sales

   ¥ 477,379    100.0    ¥ 531,557     100.0     ¥ 54,178     11.3  

Cost of sales

     367,835    77.1      407,121     76.6       39,286     10.7  
                                        

Gross profit

     109,544    22.9      124,436     23.4       14,892     13.6  

Selling, general and administrative expenses

     69,607    14.5      75,004     14.1       5,397     7.8  
                                        

Profit from operations

     39,937    8.4      49,432     9.3       9,495     23.8  

Non-operating income :

              

Interest and dividend income

     26,441    5.5      25,090     4.7       (1,351 )   (5.1 )

Foreign currency transaction gains, net

     437    0.1      1,021     0.2       584     133.7  

Other non-operating income

     6,652    1.4      6,730     1.3       78     1.2  
                                        

Total non-operating income

     33,530    7.0      32,841     6.2       (689 )   (2.1 )

Non-operating expenses :

              

Interest expense

     14    0.0      14     0.0       (0 )   (0.0 )

Loss on disposal of inventories

     2,779    0.6      7,235     1.4       4,456     160.4  

Loss on long-term purchase commitment of merchandise

     1,240    0.2                (1,240 )    

Other non-operating expenses

     1,252    0.3      1,295     0.2       43     3.3  
                                        

Total non-operating expenses

     5,285    1.1      8,544     1.6       3,259     61.6  
                                        

Recurring profit

     68,182    14.3      73,729     13.9       5,547     8.1  

Non-recurring gain :

              

Gain on sale of tangible fixed assets

     779    0.2      327     0.0       (452 )   (58.0 )

Reversal of allowance for doubtful accounts

     3    0.0      7     0.0       4     143.6  

Reversal of allowance for doubtful accounts for a subsidiary

     4,505    0.9                (4,505 )    

Liquidation gain on investments in securities

     8    0.0                (8 )    

Gain on sale of investments in a subsidiary and an affiliate

     17,593    3.7      9,084     1.7       (8,509 )   (48.4 )

Reversal of allowance for loss on investment in a subsidiary

     5,950    1.3                (5,950 )    

Other non-recurring gain

     51    0.0      1,987     0.4       1,936      
                                        

Total non-recurring gain

     28,889    6.1      11,405     2.1       (17,484 )   (60.5 )

Non-recurring loss :

              

Loss on sale and disposal of tangible fixed assets

     1,189    0.3      951     0.2       (238 )   (20.0 )

Loss on transfer of investment securities

     67    0.0                (67 )    

Loss on impairment of investment securities

     282    0.1                (282 )    

Loss on impairment of investments in subsidiaries and affiliates

             3,166     0.6       3,166      

Loss on impairment of investments in subsidiaries other than equity securities

     4,437    0.9                (4,437 )    

Other non-recurring loss

     17    0.0      344     0.0       327      
                                        

Total non-recurring loss

     5,992    1.3      4,461     0.8       (1,531 )   (25.5 )
                                        

Income before income taxes

     91,079    19.1      80,673     15.2       (10,406 )   (11.4 )

Income taxes current

     20,233    4.2      23,814     4.5       3,581     17.7  

Refund of income taxes previous years

             (4,305 )   (0.8 )     (4,305 )    

Income taxes deferred

     2,134    0.5      (865 )   (0.2 )     (2,999 )    
                                        

Net income

     68,712    14.4    ¥ 62,029     11.7     ¥ (6,683 )   (9.7 )