Kyocera 6-K 2008
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 August 2008
Commission File Number: 1-07952
6 Takeda Tobadono-cho, Fushimi-ku,
Kyoto 612-8501, Japan
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(7): ¨
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No x
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b); 82- .
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
Date: August 22, 2008
English translation of Quarterly Report (shihanki-houkokusho) for the three months ended June 30, 2008 filed with the Director of the Kanto Local Finance Bureau of the Ministry of Finance pursuant to the Financial Instruments and Exchange Law of Japan
1. Selected Financial Data (Unaudited)
2. Business Overview
The consolidated financial information of Kyocera Corporation and its consolidated subsidiaries (Kyocera) is prepared in conformity with accounting principles generally accepted in the United States of America. The scope of consolidation and application of equity method are also in accordance with accounting principles generally accepted in the United States of America. The descriptions in Item 2. Business Results and Item 3. Equipment and Facilities are also made as well.
As of June 30, 2008, Kyocera consists of a parent company, 175 consolidated subsidiaries, two non-consolidated subsidiaries accounted for by the equity method and nine affiliates accounted for by the equity method. Kyocera categorizes its operations into seven reporting segments: (1) Fine Ceramic Parts Group, (2) Semiconductor Parts Group, (3) Applied Ceramic Products Group, (4) Electronic Device Group, (5) Telecommunications Equipment Group, (6) Information Equipment Group, and (7) Others.
During the three months ended June 30, 2008, there was no change in Kyoceras principal businesses, and there were changes in subsidiaries as follows:
Telecommunications Equipment Group
On April 1, 2008, Kyocera acquired the mobile phone related business of SANYO Electronic Co., Ltd. (SANYO). As a result of this acquisition, Kyocera Telecom Equipment (Malaysia) Sdn. Bhd., a manufacturing company located in Malaysia, and Kyocera SANYO Telecom, Inc., a sales company of mobile phone handsets located in the United States of America, are newly consolidated by Kyocera.
3. Scope of Consolidation and Application of the Equity Method
As set forth in the above Item 2. Business Overview, the following two companies are consolidated by Kyocera.
4. Employees of Kyocera Corporation and its consolidated subsidiaries
Number of employees of Kyocera Corporation and its consolidated subsidiaries by reporting segments is as follows:
Number of employees of Kyocera Corporation is as follows:
1. Production, Orders and Distribution
As analyses of production, orders and distribution are similar to that of net sales, please refer to the results of each reporting segment set forth in 3. Analysis of Result of Operation and Financial Position.
2. Significant Contracts and Agreements
There is no significant contract or agreement newly concluded in the three months ended June 30, 2008.
3. Analysis of Result of Operation and Financial Position
(1) Results of Operations
During the three months ended June 30, 2008, continuing concern over financial instability coupled with rising prices for crude oil and raw materials led to heightened likeliness of a slowdown in world economy. Corporate earnings and private capital investment posted sluggish growth, and personal consumption weakened due to deteriorating employment conditions in Europe and the United States, and to increasing global inflation fears.
In the digital consumer equipment market, which is the principal market for Kyocera, although production of personal computers was steady compared with the three months ended June 30, 2007, demand for mobile phone handsets with advanced functions slackened in the European and U.S. markets, and there were production adjustments in the Chinese market, which led to weakened surrounding environment for the components business. The solar energy market continued to expand on the back of burgeoning demand amid increasing awareness of solar power as a viable alternative energy.
Consolidated results by reporting segment are as follows:
1) Fine Ceramic Parts Group
This reporting segment includes fine ceramic components and automotive components. As a result of a decrease in sales of components for semiconductor fabrication equipment and automotive components, overall sales and operating profit in this reporting segment decreased compared with the three months ended June 30, 2007.
2) Semiconductor Parts Group
This reporting segment includes ceramic packages and organic packages.
Sales of ceramic packages for crystal and SAW devices and ceramic packages for image sensors increased, reflecting growing use in mobile phone handsets and digital still cameras. Furthermore, improved profitability was achieved for organic packages business through the effect of increased sales and productivity. As a result, overall sales and operating profit increased significantly compared with the three months ended June 30, 2007.
3) Applied Ceramic Products Group
This reporting segment includes solar cells and modules, solar power generating systems, cutting tools, medical and dental implants, and jewelry and applied ceramic related products. Both sales and operating profit in this reporting segment increased considerably in the three months ended June 30, 2008 compared with the three months ended June 30, 2007 due mainly to substantial growth in sales in the solar energy business overseas, notably in Europe and the United States.
4) Electronic Device Group
This reporting segment includes electronic components such as various types of capacitors, crystal related products and connectors, and thin-film products such as thermal printheads. Sales of crystal units and so forth for digital consumer equipment grew steadily in the three months ended June 30, 2008. However, a decline in unit selling prices for ceramic capacitors due to deterioration in the supply and demand relationship, particularly in Asia, led to decreases in overall sales and operating profit in this reporting segment compared with the three months ended June 30, 2007.
5) Telecommunications Equipment Group
This reporting segment includes mobile phone handsets as well as Personal Handyphone System (PHS) base stations and handsets. Sales in this reporting segment increased significantly during the three months ended June 30, 2008 compared with the three months ended June 30, 2007 due to the addition of the mobile phone business of SANYO in April and an increase in sales of PHS related products. Operating profit increased compared with the three months ended June 30, 2007 due to a successful reduction in production costs in the domestic mobile phone handset business and the positive effect of sales growth in PHS related products.
6) Information Equipment Group
This reporting segment includes ECOSYS brand printers and digital multifunctional peripherals. Both sales and operating profit in this reporting segment decreased in the three months ended June 30, 2008 compared with the three months ended June 30, 2007 due to weakened demand for printers and digital multifunctional peripherals on the back of a decline in investment in information equipment in the corporate sector reflecting sluggish market conditions in the United States, coupled with a severe business environment, characterized in particular by intensifying price competition.
This reporting segment includes various information and communications technology services and chemical materials for electronic components.
Sales in this reporting segment in the three months ended June 30, 2008 increased compared with the three months ended June 30, 2007 due primarily to increases in sales in the Information & Communication Technology business and the telecommunications engineering business of Kyocera Communication Systems Co., Ltd. Operating profit decreased compared with the three months ended June 30, 2007 due to an increase in overhead costs.
Sales increased compared with the three months ended June 30, 2007 due to an increase in sales in the Telecommunication Equipment Group, notably of mobile phone handsets.
2) United States of America
Sales decreased compared with the three months ended June 30, 2007 due mainly to a decline in sales of printers and digital multifunctional peripherals in the Information Equipment Group.
Sales increased compared with the three months ended June 30, 2007 due to sales growth in solar energy business in the Applied Ceramic Products Group.
Sales decreased compared with the three months ended June 30, 2007 due mainly to a decline in sales in the Electronic Device Group.
Sales increased compared with the three months ended June 30, 2007 due to an increase in sales of mobile phone handsets in the Telecommunication Equipment Group.
(2) Cash flow
1) Cash flows from operating activities
Net cash provided by operating activities in the three months ended June 30, 2008 increased by ¥5,628 million to ¥40,638 million compared with the three months ended June 30, 2007. Although there was a decrease in net income, it was more than offset by an increase due to cash inflows from receivables.
2) Cash flows from investing activities
Net cash used in investing activities in the three months ended June 30, 2008 increased by ¥138,180 million to ¥173,240 million compared with the three months ended June 30, 2007. This was due mainly to a large increase in acquisition of certificate deposits and time deposits, and payments for acquisitions of businesses.
3) Cash flows from financing activities
Net cash used in financing activities in the three months ended June 30, 2008 increased by ¥8,602 million to ¥12,151 million compared with the three months ended June 30, 2007. This was due mainly to an increase in payments of short-term debt and a decrease in reissuance of treasury stock.
Cash and cash equivalents at June 30, 2008 decreased by ¥135,905 million to ¥311,681 million, from ¥447,586 million at March 31, 2008.
(3) Management Challenges
Kyocera promotes high-value-added diversification as its medium-term management strategy to be a creative company that continues to grow. 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.
Kyocera faces the following challenges from the year ending March 31, 2009 onward, in light of the aforementioned medium-term management strategy.
1) Improve profitability in the Telecommunications Equipment Group
On April 1, 2008 Kyocera acquired the mobile phone related business of SANYO. As a result, the Telecommunications Equipment Group now generates the largest amount of sales among all of Kyoceras reporting segments. Going forward, Kyocera seeks to achieve the following three goals as a means to swiftly improve profitability in such business: 1) expand sales and improve profitability in the mobile phone market in North America; 2) further expand market share and establish strong business foundations in the Japanese mobile phone market; and 3) expand the wireless telecommunication systems business.
2) Strengthen new product development and create new businesses
Kyocera promotes the development of small ceramics and organic packages in the Semiconductor Parts Group and electronic devices befitting sophisticated digital consumer equipment for the telecommunications and information processing market. Kyocera is also striving to increase the conversion efficiency of photovoltaic generating systems for the environmental preservation market. In addition, Kyocera seeks to create new businesses in key markets by leveraging its cutting-edge materials and components technologies amassed across departments within Kyocera. Specifically, Kyocera is pushing ahead with development aimed at quick commercialization of solid oxide fuel cells (SOFC) for household use by exploiting materials technology employed in fine ceramic parts.
(4) Research and Development Activities
Kyocera continuously aims at expanding sales and boosting profitability in its Components and Equipment Businesses. To achieve these objectives, Kyocera seeks to create new technologies, products and businesses by integrating group-wide management resources while advancing and focusing technological capabilities.
Kyocera will channel its energies into high-growth-potential areas; namely, the markets for telecommunications and information processing and for environmental preservation. Research and development activities are conducted in all of these markets in the realms of materials, components, devices and equipment. Specific initiatives in each reporting segment are as follows.
1) Fine Ceramic Parts Group
By making effective use of fine ceramic materials technology, processing technology and design technology, Kyocera is seeking to strengthen the development of fine ceramic components such as for next generation semiconductor processing equipment, and higher quality sapphire substrates for LEDs, the demand for which is expected to expand.
In the growing automotive market, efforts are being undertaken to develop products that meet the need for advanced electronics and safety and growing concerns with the environment. Specific endeavors include the development and production of glow plugs by fully utilizing the high temperature durability of ceramics and piezoelectric-stacks that enable precision control for the fuel injection of diesel engine cars, which are becoming more widespread in Europe.
2) Semiconductor Parts Group
Kyocera is advancing the development of new ceramic packages and organic packages for digital consumer equipment, where demand is expected to expand. In the ceramic package business, efforts are being made to develop smaller, thinner and more highly sophisticated ceramic packages with a variety of built-in functions that meet advancements in mobile phone handsets. In the organic package business, Kyocera is developing new flip chip packages for next-generation high-performance semiconductors and narrow pitch flip-chip system in a package (SiP) substrates to realize even thinner packages.
3) Applied Ceramic Products Group
While striving to further increase the conversion efficiency and cost reduction of solar cells for the environmental preservation market, Kyocera is developing a variety of next-generation solar cells.
4) Electronic Device Group
Kyocera develops small, thin ceramic capacitors and various filters for mobile phone handsets and other electronic products in the wireless telecommunications market. In the industrial machinery and automotive related market, Kyocera is developing various sensors and actuators through piezoelectric ceramic technology.
In thin film components, Kyocera is developing thermal printheads for high-resolution digital photo printers and small printer module units. Development is also being done towards the mass-producing of organic light emitting diode (OLED) displays that realize low power consumption and that have moving image quality seen as outstanding for mobile devices.
5) Telecommunications Equipment Group
By making effective use of component, device and software technologies within Kyocera, Kyocera is conducting research and development towards introduction of high-value-added products for the mobile telecommunications equipment market, in which functions are becoming increasingly advanced. In the domestic PHS market, Kyocera moved forward with development of new PHS base stations, which are smaller in size and reduce electricity consumption, PHS handsets that meet the market needs, and base stations for next generation PHS service, the provision of which will be commenced from 2009. In addition, Kyocera also pursued development of wireless broadband systems including iBurst® and WiMAX, which enable stable, high speed and high capacity communications.
6) Information Equipment Group
Kyocera is promoting the development of more color-based and solutions-oriented products based on the ECOSYS concept. Kyocera is pursuing this goal through the installation of our amorphous silicon photoreceptor drum with high abrasion resistance, which led to improved durability of engine, and further reduction of running costs and industrial wastes. Apart from bolstering the lineup for both black and white and color ECOSYS printers, copying machines and multifunction peripherals, Kyocera is advancing the development of document solutions products that can handle the integrated management of documents and digital information. Efforts are also being made to strengthen security functions.
Kyocera Communications Systems Co., Ltd. is conducting the development of engineering, optimization of wireless telecommunication, and other related advance technologies by anticipating the needs of next-generation mobile telecommunication infrastructures such as WiMAX. In addition, Kyocera Communication Systems Co., Ltd. continues to develop authentication and security technologies, which seek to meet the needs of fast advancing next-generation networks.
Kyocera Chemical Corporation is currently strengthening the development of materials for semiconductor and electronic components. Focused efforts include the development of epoxy molding compounds for semiconductors and the development of conductive paste for electronic components.
Research and development expenses by reporting segment are as follows:
(5) Liquidity and Capital Resources
In the short term, Kyoceras cash demand mainly arises from working capital requirements, capital expenditures required to expand its operations and payments of dividends to stockholders. Kyoceras primary source of short-term liquidity is cash in hands and cash generated by operations. Certain subsidiaries also generate capital in the form of borrowings and debts from financial institutions. These borrowings and debts are mostly denominated in the U.S. dollar and the yen.
In the three months ended June 30, 2008, capital expenditures totaled ¥17,967 million, an increase of ¥2,923 million compared with the three months ended June 30, 2007. Research and development expenses totaled ¥16,914 million, an increase of ¥1,599 million compared with the three months ended June 30, 2007. Nearly all capital expenditures and Research and Development Expenses were funded by cash in hand or cash generated by operations.
Kyoceras working capital amounted to ¥789,258 million at June 30, 2008, a decrease of ¥27,285 million from ¥816,543 million at March 31, 2008. This was due mainly to a decrease in cash and cash equivalents and increases in notes and accounts payable as a result of an acquisition of the mobile phone related business from SANYO.
Cash from operations generally has been sufficient to fund its working capital requirements and to fulfill its future capital expenditures, debt repayments and other obligations. As Kyoceras cash and cash equivalents as of June 30, 2008 were ¥311,681 million, Kyocera believes that its working capital is sufficient for present and predictable future requirements.
Based on the resolution for the payment of year-end dividends at the general meeting of shareholders held on June 26, 2008, Kyocera paid cash dividends totaling ¥11,367 million, ¥60 per share on June 27, 2008 to all stockholders of record on March 31, 2008.
Any future significant deterioration in market demand for Kyoceras products, or a slump in product prices to levels substantially below those projected by Kyocera, could adversely affect Kyoceras operating results and financial position, possibly resulting in reduced liquidity.
(6) Significant Customer
In the three months ended June 30, 2008, Kyoceras sales to KDDI Corporation Group amounted to ¥45,862 million, or 13.8% to consolidated net sales.
KDDI Corporation provides telecommunication services, and Kyocera sells mainly telecommunication equipment to KDDI Corporation. Kyocera Corporation made an equity investment in KDDI Corporation when it was founded, and currently a director of Kyocera Corporation is a member of the board of directors of KDDI Corporation. At June 30, 2008, Kyocera Corporations equity interest in KDDI Corporation was 12.76%. Kyocera serves KDDI Corporation as an independent vendor in terms of price determination, remittance condition and product distribution. All of the agreements and ongoing contractual commitments between Kyocera and KDDI Corporation have been made on an arms -length basis. Kyocera expects that KDDI Corporation will remain a significant customer in the future.
(1) Significant Equipment and Facilities
As a result of the acquisition of the mobile phone related business from SANYO on April 1, 2008, Kyocera acquired the following equipment and facilities.
(2) Material Sale and Disposal of Equipment and Facilities
Kyocera does not plan to sell or dispose equipment or facilities that significantly affect its production capability, except for the ordinary sale and disposal of equipment and facilities in the normal course of business.
1. Authorized Capital and Common Stock
(1) Number of Authorized Capital and Common Stock
1) Authorized Capital
2) Number of Shares of Common Stock Issued
As of June 30, 2008, and August 11, 2008, 191,309,290 shares of common stock were issued, registered on Tokyo Stock Exchange, Osaka Securities Exchange in Japan and New York Stock Exchange in the United States as follows:
(2) Stock Acquisition Rights
The following table shows stock acquisition rights issued pursuant to Articles 280-20 and 280-21 of the former Commercial Code of Japan.
<Stock acquisition rights approved at the stockholders meeting held on June 25, 2003>
<Stock acquisition rights approved at the stockholders meeting held on June 25, 2004>
<Stock acquisition rights approved at the stockholders meeting held on June 28, 2005>
(3) Rights Plan
(4) Status of Common Stock and Capital
(5) Major Shareholders
None of the shareholders informed us a holder of over 5 % of the total issued voting shares of Kyocera Corporation in the three months ended June 30, 2008.
(6) Voting Rights
As Kyocera Corporation did not establish the record of shareholders as of June 30, 2008, the following tables show voting rights of common stock and treasury stock of Kyocera Corporation based on the record of shareholders as of March 31, 2008.
1) Shares issued
2) Treasury stock
2. Price Range of Shares
The following table shows price range of shares of Kyocera Corporation in the three months ended June 30, 2008.
As of August 11, 2008, there has been no change in a member of Directors since Kyocera Corporation filed its Annual Report (Yuukashouken-houkokusho) for the year ended March 31, 2008 with the Director of the Kanto Local Finance Bureau of the Ministry of Finance pursuant to the Financial Instruments and Exchange Law of Japan.
1. Preparation of Consolidated Financial Statements
Pursuant to the article No. 93 of Regulations Concerning the Terminology, Forms and Preparation Methods of Quarterly Consolidated Financial Statements (Ministry of Finance Ordinance No. 64, 2007), the quarterly consolidated financial statements are prepared in conformity with the accounting principles generally accepted in the United States of America.
2. Report of Independent Auditor
In accordance with the article 193-2-1 of the Financial Instruments and Exchange Law, the quarterly consolidated financial statement for the three months ended June 30, 2008 was reviewed by Kyoto Audit Corporation.
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS(Continued)
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
<NOTES TO THE QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS>
1. Accounting Principles, Procedures and Financial Statements Presentation
In December 1975, Kyocera Corporation filed a registration statement, Form S-1 and a registration form for American Depositary Receipt (ADR), in accordance with the Securities Exchange Act of 1933, with the United States Securities and Exchange Commission (SEC) and made a registration of its common stock and ADR there. In accordance with the mentioned act, Kyocera Corporation again filed Form S-1 and a registration form for ADR with the SEC in February 1980, and listed its ADR on the New York Stock Exchange in May 1980.
Kyocera Corporation has filed Form 20-F as an annual report with the SEC, which includes the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America, under the section 13 of the Securities Exchange Act of 1934. Kyocera Corporation has also prepared quarterly consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, however, certain footnotes required by accounting principles generally accepted in the United States of America are omitted. The following are accounting principles and regulations with which Kyocera Corporation is required to comply: Regulations for filing and reporting to the SEC (Regulation S-X, Accounting Series Releases, Staff Accounting Bulletins, and etc.), Statements of Financial Accounting Standards Board (SFAS), Accounting Principles Board (APB) Opinions and Accounting Research Bulletin (ARB), among others.
The following paragraphs identify the significant areas where a method other than that prescribed by Regulation Concerning Quarterly Consolidated Financial Statement was used and the method the company followed.
(1) Revenue Recognition
Kyocera adopts Staff Accounting Bulletin No. 104 Revenue Recognition in Financial Statements.
(2) Foreign Currency Translation and Forward Exchange Contracts
Assets and liabilities denominated in foreign currencies and financial statements of foreign subsidiaries are translated based on SFAS No. 52 Foreign Currency Translation. Forward exchange contracts are accounted for by SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138 Accounting for Certain Derivative Instruments and Certain Hedging Activitiesan Amendment of SFAS No. 133.
(3) Benefit Plans
Kyocera applies SFAS No. 87 Employers Accounting for Pensions and SFAS No.158 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans.
(4) Minority Interests
Minority interests are presented as a separate category between liabilities and stockholders equity in the consolidated balance sheets.
(5) Comprehensive Income
Kyocera applies SFAS No. 130 Reporting Comprehensive Income, which defines comprehensive income as the change in equity except for capital transaction and it consists of net income and other comprehensive income. Other comprehensive income includes foreign currency translation adjustments, pension adjustments, net unrealized gains (losses) on securities and on derivative financial instruments.
(6) Stock Issuance Costs
Stock issuance costs, net of tax are deducted from the additional paid-in capital.
(7) Business Combinations
Kyocera adopts SFAS No. 141 Business Combinations.
(8) Goodwill and Other Intangible Assets
Kyocera adopts SFAS No. 142 Goodwill and Other Intangible Assets.
(9) Derivative Financial Instruments
Kyocera adopts SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138 Accounting for Certain Derivative Instruments and Certain Hedging Activitiesan Amendment of SFAS No. 133.
(10) Lease Accounting
Kyocera adopts SFAS No. 13 Accounting for Leases.
(11) Unused Compensated Absence
Kyocera adopts SFAS No. 43 Accounting for Compensated Absence.
2. Summary of Accounting Policies
(1) Basis of Consolidation and Accounting for Investments in Affiliated Companies
The consolidated financial statements include the accounts of Kyocera Corporation, its majority-owned subsidiaries and a variable interest entity for which Kyocera Corporation is the primary beneficiary under Financial Accounting Standard Board (FASB) Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities. All significant inter-company transactions and accounts are eliminated. Investments in 20% to 50% owned companies are accounted for under the equity method, whereby Kyocera includes in net income its equity in the earnings or losses from these companies.
The consolidated variable interest entity for which Kyocera Corporation is the primary beneficiary does not have a material effect on Kyoceras financial position and results of operations.
(2) Revenue Recognition
Kyocera sells various types of products, including fine ceramic parts, semiconductor parts, and telecommunications equipment. Kyocera recognizes revenue upon completion of the earnings process, which occurs when products are shipped or delivered to customers in accordance with the terms of an agreement of sale, there is a fixed or determinable selling price, title and risk of loss have been transferred, and collectibility is reasonably assured. Most of these conditions are satisfied at the time of delivery to customers in domestic sales (FOB destination) and at the time of shipment (FOB shipping) for export sales.
Kyocera records an estimated sales return allowance at the time of sales based on its historical returns experience.
For after-service costs to be paid during warranty periods, Kyocera accrues a product warranty liability for claims under warranties relating to the products that have been sold. Kyocera records an estimated product warranty based on its historical repair experience.
(3) Cash and Cash Equivalents
Cash and cash equivalents include time deposits and certificates of deposit with original maturities of three months or less.
(4) Translation of Foreign Currencies
Assets and liabilities of consolidated foreign subsidiaries and affiliates accounted for by the equity method are translated into Japanese yen at the exchange rates in effect on the respective balance sheet dates. Operating accounts are translated at the average rates of exchange for the respective years. Translation adjustments result from the process of translating foreign currency financial statements into Japanese yen. These translation adjustments, which are not included in the determination of net income, are reported in other comprehensive income.
Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates in effect at the respective balance sheet dates, and resulting transaction gains or losses are included in the determination of net income.
(5) Allowances for Doubtful Accounts
Kyocera maintains allowances for doubtful accounts related to trade note receivables, trade accounts receivables and finance receivables for estimated losses resulting from customers inability to make timely payments. Kyoceras estimates are based on various factors including the length of past due payments, historical experience and current business environments. In circumstances where it is aware of a specific customers inability to meet its financial obligations, a specific allowance against these amounts is provided considering the fair value of assets pledged by the customer as collateral. The amounts of allowances for doubtful accounts are included in other assets at June 30, 2008 and at March 31, 2008 were ¥2,155 million and ¥1,962 million, respectively.
Inventories are stated at the lower of cost or market. Cost is determined by the average method for approximately 69% and 66% of finished goods and work in process as well as approximately 16% and 17% of raw material and supplies at June 30, 2008 and March 31, 2008, respectively. The first-in, first-out method is applied to the other inventories. Kyocera recognizes estimated write-down of inventories for excess, slow-moving and obsolete inventories.
Certain investments in debt and equity securities are accounted for under SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities. Securities classified as available-for-sale securities are recorded at fair value, with unrealized gains and losses excluded from income and reported in other comprehensive income, net of taxes. Securities classified as held-to-maturity securities are recorded at amortized cost.
Kyocera evaluates whether the declines in fair value of debt and equity securities with readily determinable fair values are other-than-temporary. Other-than-temporary declines in fair value are recorded as a realized loss with a new cost basis. This evaluation is based mainly on the duration and the extent to which the fair value is less than cost, and the anticipated recoverability in fair value.
(8) Property, Plant and Equipment and Depreciation
Property, Plant and Equipment are recorded at cost less accumulated depreciation. Kyocera provides for depreciation of buildings, machinery and equipment over their estimated useful lives primarily on the declining balance method. The principal estimated useful lives used for computing depreciation are as follows:
The cost of maintenance, repairs and minor renewals is charged to expense in the year incurred; major renewals and betterments are capitalized. When assets are sold or otherwise disposed of, the profits or losses thereon, computed on the basis of the difference between depreciated costs and proceeds, are credited or charged to income in the year of disposal, and costs and accumulated depreciation are removed from accounts.
(9) Goodwill and Other Intangible Assets
Kyocera has adopted SFAS No. 142, Goodwill and Other Intangible Assets. This requires that, rather than being amortized, goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually, and also following any events and changes in circumstances that might lead to impairment. Intangible assets with definite useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.
The principal estimated useful lives for intangible assets are as follows:
(10) Impairment of long-lived assets
Pursuant to SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Kyocera reviews its long-lived assets and intangible assets with definite useful lives for impairment periodically. Long-lived assets and intangible assets with definite useful lives are considered to be impaired when the expected undiscounted cash flow from the asset group is less than its carrying value. A loss on impairment is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets and intangible assets with definite useful lives.
(11) Derivative Financial Instruments
Kyocera utilizes derivative financial instruments to manage its exposure resulting from fluctuations of foreign currencies and interest rates. These derivative financial instruments include foreign currency forward contracts and interest rate swaps. Kyocera does not hold or issue such derivative financial instruments for trading purposes.
Kyocera applies SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities an Amendment of SFAS No. 133. All derivatives are recorded as either assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives are charged in current earnings. However cash flow hedges which meet the criteria of SFAS No. 133 may qualify for hedge accounting treatment. Changes in the fair value of the effective portion of these hedge derivatives are deferred in other comprehensive income and charged to earnings when the underlying transaction being hedged occurs.
Kyocera designates certain foreign currency forward contracts and interest rate swaps as cash flow hedges under SFAS No. 133. Most of Kyoceras foreign currency forward contracts are entered into as hedges of existing foreign currency denominated assets and liabilities. Accordingly, Kyocera records changes in fair value of these foreign currency forward contracts currently in earnings. It is expected that such changes will be offset by corresponding gains or losses on the underlying assets and liabilities.
Kyocera formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes all derivatives designated as cash flow hedge are linked to specific assets and liabilities on the balance sheet or forecasted transactions. Kyocera also formally assesses, both at the hedges inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, Kyocera discontinues hedge accounting prospectively. When hedge accounting is discontinued, the derivative will continue to be carried on the balance sheet at its fair value, with deferred unrealized gains or losses charged immediately in current earnings.
(12) Stock-Based Compensation
Kyocera adopted SFAS No. 123 (revised 2004) (SFAS No. 123R), Share-Based Payment and recognized the cost resulting from share-based payment transactions in financial statements by adopting fair-value based measurement method in accordance with SFAS No. 123R. Under the modified prospective method of adoption for SFAS No. 123R, Kyocera recognized compensation cost which includes: (a) compensation cost for all stock options granted prior to, but not yet vested as of April 1, 2006, and (b) compensation cost for all stock options granted or modified subsequent to April 1, 2006.
(13) Earnings and Cash Dividends per Share
Basic earnings per share is computed based on the weighted average number of shares outstanding during each period. Diluted earnings per share assumes the dilution that could occur if all stock options were exercised and resulted in the issuance of common stock.
Cash dividends per share are those declared with respect to the earnings for the respective periods for which dividends are proposed by the Board of Directors. Dividends are charged to retained earnings in the period in which they are paid.
(14) Research and Development Expenses and Advertising Expenses
Research and development expenses and advertising expenses are charged to operations as incurred.
(15) Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. However, actual results could differ from those estimates.
(16) Recently Adopted Accounting Standards
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The purpose of SFAS No. 157 is to define fair value, establish a framework for measuring fair value and enhance disclosures about fair value measurements. The measurement and disclosure requirements related to financial assets and financial liabilities are effective April 1, 2008. The adoption of SFAS No. 157 for financial assets and financial liabilities has no material impact on Kyoceras consolidated results of operations and financial position.
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132 (R). SFAS No. 158 requires an employer to measure the funded status of a benefit plan as of the date of its fiscal year-end statement of financial position for the years ending after December 15, 2008. Kyocera adopts this measurement date provision in the year ending March 31, 2009 and starts to measure the funded status of its benefit plans at the date of its fiscal year-end statement of financial position. As a result of applying the transition method of this provision, retained earnings and other comprehensive income at April 1, 2008 decreased by ¥522 million and ¥418 million, respectively.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No. 115. SFAS No.159 provides companies with an option to report selected financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings. SFAS No.159 is effective beginning after April 1, 2008. The adoption of SFAS No. 159 has no material impact on Kyoceras consolidated results of operations or financial position.
(17) Recently Issued Accounting Standards
In December 2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS No. 141R), Business Combinations, which requires assets, liabilities and noncontrolling interests be measured at fair value. Under SFAS No. 141R, transaction and restructuring costs are required to be generally expensed, as well as contingent consideration and in-process research and development be recorded at fair value on acquisition date as a part of fair value of acquired business. In addition, any tax adjustment made after the measurement period impacts income tax expenses. SFAS No. 141R is effective for fiscal years beginning on or after December 15, 2008. Kyocera will assess the impact of SFAS No. 141R on any future acquisition.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statement an Amendment of Accounting Research Bulletin No. 51. SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. Kyocera is currently evaluating the impact that SFAS No. 160 will have on Kyoceras consolidated results of operations and financial position.
In February 2008, the FASB issued FASB Staff Position (FSP) 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 (FSP 157-1) and FSP 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2). FSP 157-1 amends SFAS No. 157 to remove certain leasing transactions from its scope. FSP 157-2 delays the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities. Kyocera is currently evaluating the impact that SFAS No. 157 will have on Kyoceras consolidated results of operations and financial position when it is applied to non-financial assets and non-financial liabilities beginning after April 1, 2009.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative instruments and Hedging Activities an Amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures regarding an entitys derivative and hedging activities to provide adequate information about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SAFS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows. SFAS No. 161 is effective beginning after November 15, 2008. As SFAS No. 161 does not impact the measurement or recognition of derivative instruments, the adoption of the SFAS No. 161 will not have any impact on Kyoceras financial position, financial performance and cash flows.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States of America. The sources of accounting principles that are generally accepted are categorized in descending order as follows:
The adoption of SFAS No. 162 is not expected to have any impact on Kyoceras financial position, financial performance and cash flows.
Certain reclassifications of previously reported amounts have been made to the consolidated balance sheet at March 31, 2008 in order to conform to the current period presentation. Such reclassifications have no effect on net assets, net income and cash flows.
3. Business Combination
On April 30, 2008, Kyocera Mita Corporation acquired the development operations related to digital multi-function devices for printers and copy machines from Peerless System Corp. On May 30, 2008, Kyocera Mita America, Inc., a subsidiary of Kyocera Mita Corporation, acquired all operations and related assets of Internetworking Innovations, Inc., a sales company of information equipment. On June 30, 2008, Kyocera Industrial Ceramics Corp. acquired all of the outstanding capital stock of On Time Machining Company, a manufacturing and sales company of cutting tools. Impact of these acquisitions on Kyoceras consolidated results of operations and financial position was not material.
On April 1, 2008, Kyocera acquired the mobile phone related business and its related assets and liabilities from SANYO through corporate split. The result of operations of the acquired business was included into Kyoceras consolidated financial statement since the acquisition date and for the segment reporting, it is reported in the Telecommunications Equipment Group. The acquired business consists of the development, manufacturing and sales of mobile phones, PHS and wireless communication systems in Japan and overseas. The acquired business has sales offices and research and development facilities in Japan, sales locations in North America and a manufacturing facility in Malaysia. Kyocera pursues synergies between distribute channels in North America, development activities and design technologies of the acquired business and its existing management resources.
Kyocera has used the purchase method of accounting to record assets acquired and liabilities assumed in accordance with SFAS No. 141 Business Combinations.
As of June 30, 2008, the purchase price and the allocation of purchase price have not been determined due to an incompleteness of closing adjustments for the acquisition costs on the final agreement. Accordingly, the purchase price and the allocation of purchase price may be adjusted additionally based on the determination of the acquisition costs and the completion of valuations.
The related assets and liabilities were recorded based upon their estimated relative fair values at the date of acquisition with the excess being allocated to goodwill as shown in the following table. Current liabilities in the following table include an amount of payables as of the purchase date that were not individually stated within the purchase agreement which were collectively assumed from SANYO. As such these payables have been included in the allocation of purchase price.
4. Investment in Debt and Equity Securities
Investments in debt and equity securities as of June 30, 2008 and March 31, 2008, included in short-term investments (current assets) and in securities and other investments (non-current assets) are summarized as follows:
5. Assets Pledged as Collateral and Liabilities with Assets Pledged
Kyoceras assets pledged as collateral for long-term debt at June 30, 2008 and at March 31, 2008 amounted to ¥5,077 million and ¥5,145 million of property and equipment, net of accumulated depreciation, respectively.
Kyoceras current portion of long-term debt with assets pledged at June 30, 2008 and at March 31, 2008 amounted to ¥604 million and ¥691 million, respectively. Kyoceras long-term debt (excluding current portion) with assets pledged at June 30, 2008 and at March 31, 2008 amounted to ¥1,787 million and ¥1,894 million, respectively.
6. Derivative Financial Instruments and Hedging Activities
Kyoceras activities are exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates and interest rates. Approximately 60% of Kyoceras revenue is generated from overseas customers, which exposes Kyocera to foreign currency exchange rates fluctuations. These financial exposures are monitored and managed by Kyocera as an integral part of its overall risk management program. Kyoceras risk management program focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.
Kyocera maintains a foreign currency risk management strategy that uses derivative financial instruments, such as foreign currency forward contracts, to minimize the volatility in its cash flows caused by changes in foreign currency exchange rates. Movements in foreign currency exchange rates pose a risk to Kyoceras operations and competitive position, since exchange rates changes may affect the profitability, cash flows, and business and/or pricing strategies of non Japan-based competitors. These movements affect cross-border transactions that involve, but not limited to, direct export sales made in foreign currencies and raw material purchases incurred in foreign currencies.
Kyocera maintains an interest rate risk management strategy that may use derivative financial instruments, such as interest rate swaps, to minimize significant, unanticipated cash flow fluctuations caused by interest rate volatility.
By using derivative financial instruments to hedge exposures to changes in exchange rates and interest rates, Kyocera became exposed itself to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contracts. When the fair value of a derivative contract is positive, the counterparty owes Kyocera, which creates repayment risk for Kyocera. When the fair value of a derivative contract is negative, Kyocera owes the counterparty and, therefore, it does not possess repayment risk. Kyocera minimizes the credit (or repayment) risk in derivative financial instruments by (1) entering into transactions with creditworthy counterparties, (2) limiting the amount of exposure to each counterparty, and (3) monitoring the financial condition of its counterparties.
Cash Flow Hedges
Kyocera uses certain foreign currency forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in its forecasted transactions related to purchase commitments and sales. During the three months ended June 30, 2008, Kyocera recorded ¥194 million of foreign currency transaction gains, net in the consolidated statements of income, which was charged from deferred net gains in accumulated other comprehensive income.
Kyocera also uses interest rate swaps mainly to convert a portion of its variable rate debt to fixed rates. Kyocera recognized deferred net losses of ¥66 million and deferred net gains of ¥196 million in accumulated other comprehensive income at June 30, 2008 and at March 31, 2008.
Kyoceras main direct foreign export sales and some import purchases are denominated in the customers and suppliers local currency, principally the U.S. dollar, Euro and STG. Kyocera purchases foreign currency forward contracts with terms normally lasting less than four months to protect against the adverse effects that exchange-rate fluctuations may have on foreign-currency-denominated trade receivables and payables. The gains and losses on both the derivatives and the foreign currency-denominated trade receivable and payable are recorded as foreign currency transaction gains (losses), net in the consolidated statement of income. Kyocera does not adopt hedge accounting for such derivatives.
The aggregate contract amounts of derivative financial instruments to which hedge accounting is not applied are as follows:
7. Commitments and Contingencies
As of June 30, 2008, Kyocera had contractual obligations for the acquisition or construction of property, plant and equipment aggregating ¥14,615 million due within one year.
Kyocera is lessee under long-term operating leases primarily for office space and equipment. Future minimum lease commitments under non-cancelable operating leases at June 30, 2008 are as follows:
Kyocera has entered into material supply agreements for a significant portion of anticipated material used in its operations. Under those agreements, during the three months ended June 30, 2008, Kyocera purchased ¥2,023 million and is obligated to purchase ¥170,860 million in total by the end of December 2019.
Kyocera guarantees the debt of employees, an investee and an unconsolidated subsidiary. At June 30, 2008, the total amount of these guarantees was ¥852 million. The financial guarantees are made in the form of commitments and letters of awareness issued to financial institutions and generally obligate Kyocera to make payments in the event of default by the borrowers.
AVX has been named as a potentially responsible party (PRP) in state and federal administrative proceedings seeking contribution for costs associated with the correction and remediation of environmental conditions at various waste disposal and operating sites. To resolve AVXs liability at each of the sites at which AVX has been named a PRP, AVX has entered into various administrative orders and consent decrees with federal and state regulatory agencies. AVX has paid, or reserved for, all estimated amounts required under the terms of these orders and decrees corresponding to AVXs apportioned share of the liabilities.
In July 2007, AVX received oral notification from the Environmental Protection Agency (EPA), and in December 2007, written notification from the U.S. Department of Justice indicating that the United States is preparing to exercise the reopener provision under a 1991 consent decree relating to the environmental conditions at, and remediation of, New Bedford Harbor in the Commonwealth of Massachusetts. The EPA has indicated that remediation costs through December 6, 2007 (which remediation is ongoing) are approximately ¥33,761 million. AVX has not yet completed an investigation of the monies spent or its available defenses in light of the notification. AVX has also not yet determined whether or to what extent other parties may bear responsibility for these costs.
On April 1, 2008, the U.S. Department of Justice indicated that the future work to be performed at the harbor is expected to exceed hundreds of millions of dollars under current estimates. AVX met with the U.S. Department of Justice, the EPA, and the Commonwealth of Massachusetts most recently in June 2008, and toured the harbor area in July 2008. At those meetings, the EPA described the ongoing remediation activity, and potential changes to such remediation. The EPA indicated that the timing and ultimate cost of the remediation depends on the level of annual funding available, and the effectiveness of various remediation methods. AVX anticipates further discussions with the U.S. Department of Justice, the EPA and the Commonwealth of Massachusetts.
The potential impact of this matter on Kyoceras financial position, results of operations and cash flows cannot be determined at this time.
Kyocera is subject to various lawsuits and claims which arise, in the ordinary course of business. Kyocera consults with legal counsel and assesses the likelihood of adverse outcome of these contingencies. Kyocera records liabilities for these contingencies when the likelihood of an adverse outcome is probable and the amount is reasonably estimated. However, based on the information available, management believes that damages, if any, resulting from these actions will not have a significant effect on Kyoceras consolidated results of operations and financial position.
8. Stock holders equity
As of June 30, 2008, Kyocera issued 191,309 thousand shares of common stock and held 1,743 thousand shares of treasury stock.
As of June 30, 2008, Kyoceras equity in retained earnings or deficits of affiliates and unconsolidated subsidiaries accounted for by the equity method of accounting amounted to ¥ (5,776 million) and was included in its consolidated retained earnings.
Based on the resolution for the payment of year-end dividends at the general meeting of shareholders held on June 26, 2008, Kyocera paid cash dividends totaling ¥11,367 million, ¥60 per share of common stock on June 27, 2008 to stockholders of record on March 31, 2008.
Changes in accumulated other comprehensive income are as follows:
9. Supplemental Expense Information
Research and development expenses in the three months ended June 30, 2008 amounted to ¥16,914 million. Advertising expenses in the three months ended June 30, 2008 amounted to ¥2,234 million. Shipping and handling cost included in selling, general and administrative expenses in the three months ended June 30, 2008 amounted to ¥4,552 million.
10. Segment Reporting
Kyocera manufactures and sells a highly diversified range of products, including components involving fine ceramic technologies and applied ceramic products, telecommunications and information equipment etc.
Kyocera categorizes its operations into seven reporting segments: (1) Fine Ceramic Parts Group, (2) Semiconductor Parts Group, (3) Applied Ceramic Products Group, (4) Electronic Device Group, (5) Telecommunications Equipment Group, (6) Information Equipment Group, and (7) Others.
Main products or businesses of each reporting segment are as follows:
(Fine Ceramic Parts Group)
Information & Telecommunication Components
Components for Semiconductor Processing Equipment
Components for LCD Manufacturing Equipment
General Industrial Ceramic Components
(Semiconductor Parts Group)
Surface Mount Device (SMD) Ceramic Packages
CCD / CMOS Sensor Ceramic Packages
LSI Ceramic Packages
Wireless Communication Device Packages
Optical Communication Device Packages and Components
Organic Multilayer Packages and Substrates
(Applied Ceramic Products Group)
Residential and Industrial Solar Power Generating Systems
Solar Cells and Modules
Jewelry and Application Products
Medical and Dental Implants
(Electronic Device Group)
Timing Devices [Temperature Compensated Crystal Oscillators (TCXOs), Crystal Units, Ceramic Resonators]
Surface Acoustic Wave (SAW) filters
Amorphous Silicon Photoreceptor Drums
Liquid Crystal Displays
(Telecommunications Equipment Group)
CDMA Mobile Phone Handsets
Personal Handy Phone System (PHS) Related Products [PHS Mobile Phone Handsets, PHS Base Stations, High Speed Wireless Data Transmission Systems]
(Information Equipment Group)
Telecommunication Engineering Business
Information and Communication Technology Business
Management Consulting Business
Chemical Materials for Electronic Components
Realty Development Business
Insurance Agent and Travel Agent Business
Commencing the three months ended June 30, 2008, the mobile phone related business acquired from SANYO has been reported in Telecommunications Equipment Group.
Inter-segment sales, operating revenue and transfers are made with reference to prevailing market prices. Transactions between reportable segments are immaterial and not shown separately.
Operating profit for each reporting segment represents net sales, less related costs and operating expenses, excluding corporate revenue and expenses, equity in earnings, income taxes and minority interest.
Kyoceras sales to KDDI Corporation Group, which was mainly recorded at the Telecommunications Equipment Group, for the three months June 30, 2008, was ¥45,862 million, and comprised of 13.8% to consolidated net sales.
Information by reporting segments for the three months ended June 30, 2008 is summarized as follows:
In Europe Asia, and Others, there are no individual countries in which sales were a material portion of Kyoceras net sales.
Geographic Segments (Sales and Operating Profit by Geographic area)
11. Per Share Information
(1) Stockholders equity per share
Kyoceras stockholders equity per share at June 30, 2008 and at March 31, 2008 was ¥7,903.51 and ¥7,659.72, respectively. Number of shares, which were used for the calculation of stockholders equity per share, at June 30, 2008 and at March 31, 2008, was 189,567 thousand and 189,454 thousand, respectively.
(2) Earnings per Share
A reconciliation of the numerators and the denominators of basic and diluted earnings per share computations is as follows:
12. Supplemental Cash Flow Information
Supplemental information related to the Consolidated Statement of Cash Flows is as follows:
13. Subsequent Events
Quarterly Review Report of Independent Auditors
August 8, 2008
To the Board of Directors
Kyoto Audit Corporation
Hirokaze Hanai, Partner and CPA
Keiichiro Kagi, Partner and CPA
We have reviewed the accompanying quarterly consolidated financial statements, namely the quarterly consolidated balance sheet, quarterly consolidated statement of income and quarterly consolidated statement of cash flow of Kyocera Corporation and its consolidated subsidiaries for the three-month period then ended (from April 1, 2008 to June 30, 2008) of the fiscal year from April 1, 2008 to March 31, 2009, included in Accounting Information section, to provide our opinion in accordance with the section 193-2, Article 1 of the Financial Instruments and Exchange Law of Japan. The quarterly consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the quarterly consolidated financial statements based on our review.
We conducted our review in accordance with Quarterly Review Standards generally accepted in Japan. A review consists principally of making inquiries of management and persons responsible for finance and accounting matters, applying analytical procedures applied to financial data and certain additional review procedures. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards.
Based on our quarterly review, we are not aware of any material modifications that should be made to the financial position of Kyocera Corporation and its consolidated subsidiaries as of June 30, 2008 and their result of operation and their cash flow for the three-month period then ended (from April 1, 2008 to June 30, 2008) of quarterly consolidated financial statements referred to above in order for them to be in conformity with accounting principles generally accepted in the United States of America (refer to note 1 of the quarterly consolidated financial statements).
We have no relationships with the Company to be disclosed pursuant to the provision of the Certified Public Accountants Law of Japan.