Kyocera 6-K 2010
Documents found in this filing:
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 June 2010
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):
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: June 4, 2010
Notice of the 56th Ordinary General Meeting of Shareholders
to be held in Kyoto, Japan on June 25, 2010
6 Takeda Tobadono-cho, Fushimi-ku, Kyoto, Japan
Security Code 6971
June 4, 2010
To Our Shareholders:
Notice of the 56th Ordinary General Meeting of Shareholders
This is to inform you that Kyocera Corporation (the Company) will hold its 56th Ordinary General Meeting of Shareholders, as described below, which you are cordially invited to attend.
If you are unable to attend the Meeting, please exercise your voting rights in written form or electronically, after examining the attached reference documents for the General Meeting of Shareholders, no later than 5:30 p.m. Thursday, June 24, 2010, Japan time.
[Method of exercising voting rights in written form (voting card)]
Please mark for or against as to the agenda on the voting card enclosed herewith and return it by the above deadline for exercising voting rights.
[Method of exercising voting rights electronically (through the Internet, etc.)]
Please access the Internet website for exercise of voting rights (http://daiko-sb.gcan.jp) through a personal computer or mobile phone. Using the code and password written on the voting card enclosed herewith and following the guidelines set forth on the website, please mark for or against as to the agenda by the above deadline for exercising voting rights.
3. Purpose of the Meeting:
Matters to be reported:
Matters to be resolved:
4. Matters relating to the Convocation:
[Treatment in case of multiple exercises of voting rights by a shareholder]
Reference Documents for General Meeting of Shareholders
Agenda and References are as follows:
Agendum No. 1: Disposition of Surplus
The Company believes that the best way to meet shareholders expectations is to improve the consolidated performance of the Company on an ongoing basis.
The Company has adopted the principal guideline that dividend amounts should be within a range based on net income attributable to shareholders of the Company on a consolidated basis, and has set its consolidated dividend policy to maintain a consolidated dividend ratio at a level of approximately 20% to 25% of consolidated net income. In addition, the Company determines dividend amounts based on an overall assessment, taking into account various factors including the amount of capital expenditures necessary for the medium to long-term growth of the Company.
Pursuant to this policy and based on full year performance through the year ended March 31, 2010, the Company proposes a year-end dividend for the year ended March 31, 2010 in the amount of 60 yen per share, the same amount as in the year ended March 31, 2009. When aggregated with the interim dividend in the amount of 60 yen per share, the total annual dividend will be 120 yen per share, the same amount as in the previous fiscal year.
The Company also proposes to effect a reversal of its general reserve, taking into account the Companys financial status, performance through the year ended March 31, 2010, and business conditions going forward.
The proposed disposition of surplus is as follows:
Agendum No. 2: Election of two (2) Directors
The Company proposes that two (2) Directors be elected in order to reinforce the management structure of the Company. Pursuant to Paragraph 2 of Article 21 of the Articles of Incorporation of the Company, the terms of office of the Directors to be elected at this Meeting will expire simultaneously with the expiration of the terms of the other Directors currently in office. Due to the resignation of one Director as of August 31, 2009, the total number of Directors will increase in practice by only one.
The candidates for Director are as follows:
- END -
Report for the year ended March 31, 2010
(Accompanying documents for the 56th Ordinary General Meeting of Shareholders)
This is an English translation of the Japanese original of the Report for the year ended March 31, 2010 of Kyocera Corporation distributed to shareholders in Japan. The translation is prepared solely for the reference and convenience of foreign shareholders. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail.
Table of Contents
Respect the Divine and Love People
Preserve the spirit to work fairly and honorably,
respecting people, our work, our company and our global community.
To provide opportunities for the material and intellectual growth of all our
employees, and through our joint efforts, contribute to the advancement of
society and humankind.
To coexist harmoniously with nature and society.
Harmonious coexistence is the underlying foundation of all our business
activities as we work to create a world of abundance and peace.
Kyocera was built upon a unique foundation: the human spirit
When I founded Kyocera, I didnt have sufficient funding, let alone decent facilities or equipment. However, I was fortunate enough to have associates with whom I felt a spiritual bond. We shared every joy and pain, just like a family. I therefore decided to run this company with faith in the human spirit. The human spirit is said to be easily changed. Yet, when a deep sense of trust exists, I have found that there is nothing stronger or more reliable than our spiritual ties. Today, this faith in the human spirit forms the very heart of Kyocera.
We are pleased to present to you our Report for the year ended March 31, 2010 (hereinafter, fiscal 2010 refers to the fiscal year ended March 31, 2010, and other fiscal years are referred to in a corresponding manner).
Net sales for fiscal 2010 decreased compared with fiscal 2009 due to sharp deterioration in the business environment following the financial crisis sparked in the United States. Nonetheless, through efforts to strengthen each business management foundations by implementing various profit boosting initiatives, including reductions in manufacturing costs and other thorough cost-cutting measures, and improving productivity throughout the Kyocera Group, we were able to increase profits relative to fiscal 2009.
The operating environment for the Kyocera Group in fiscal 2011 is expected to pick up from fiscal 2010, and Kyocera will strive to further strengthen each business and seize opportunities for growth to drive improvement in performance. Specifically, in line with expansion of the information and communications market, we will increase production capacity in the components business, while working to increase sales in emerging countries and enhance profitability in the Telecommunications Equipment Group. For the booming environment and energy market, we will work vigorously to expand the solar energy business. Through these initiatives, we aim to become a high-growth, highly-profitable company.
We would very much appreciate your continued support of the Kyocera Group as we work steadily towards our goals.
Chairman of the Board and Representative Director
President and Representative Director
(1) Business Progress and Results
In fiscal 2010, the U.S. and European economies showed signs of recovery due to the effects of economic policy and fiscal measures in various countries, which included packages to stimulate personal consumption. In addition, the Chinese economy expanded strongly, mainly supported by growth in capital investment and personal consumption. Despite signs of expansion in corporate production activities along with a recovery in exports, particularly to Asia, and moderate improvement in personal consumption, the Japanese economy did not show full-scale recovery due to continued stagnation in capital investment and the employment environment.
In the digital consumer equipment market, which is a principal market for Kyocera Corporation and its consolidated subsidiaries (Kyocera Group or Kyocera), production activities showed signs of recovery, notably for mobile phone handsets and personal computers (PCs), due to the end of inventory adjustments. The solar energy market expanded firmly, with demand in Japan in particular increasing rapidly due to support from governmental subsidy systems.
Consolidated Financial Results:
Despite deterioration of the business environment until the second quarter (July 1, 2009 to September 30, 2009), the profitability of the components business and the equipment business improved significantly from the third quarter (October 1, 2009 to December 31, 2009). Consolidated net sales for fiscal 2010, however, amounted to ¥1,073,805 million, a decrease of 4.9% compared with fiscal 2009, mainly due to the impact of appreciation of the yen against the Euro and U.S. dollar.
In fiscal 2010 Kyocera continued working hard to improve profitability and strengthen the foundations of each business from fiscal 2009 by promoting cost-cutting measures including manufacturing cost reductions, and by improving productivity throughout the Kyocera Group. As a result, profit from operations for fiscal 2010 increased by 47.1% to ¥63,860 million, and income before income taxes increased by 8.6% to ¥60,798 million, despite the decline in sales and the recording of a one-time loss relating to WILLCOM, Inc.* Net income attributable to shareholders of Kyocera Corporation for fiscal 2010 amounted to ¥40,095 million, an increase of 35.9% compared with fiscal 2009.
Average exchange rates for fiscal 2010 were ¥93 to the U.S. dollar and ¥131 to the Euro, marking appreciation by ¥8 (approximately 8%) and ¥12 (approximately 8%), respectively, compared with those for fiscal 2009. This appreciation resulted in declines in net sales and income before income taxes after translation into yen for fiscal 2010 by approximately ¥49.0 billion and ¥13.5 billion, respectively, compared with fiscal 2009.
Highlights of Consolidated Results
Consolidated Results by Reporting Segment
(1) Fine Ceramic Parts Group
Demand for digital consumer equipment parts, such as sapphire substrates for LEDs, has been on a recovery track since the commencement of fiscal 2010, and demand for industrial machinery components such as semiconductor fabrication equipment components and automotive components began to recover from the third quarter as well. However, such demand remained at a low level compared with fiscal 2009, and as a result sales and operating profit in this reporting segment for fiscal 2010 both decreased compared with fiscal 2009.
(2) Semiconductor Parts Group
Demand for ceramic packages for crystal and SAW devices and for CCD/CMOS sensors was strong, in line with resurgence in production of mobile phone handsets and digital cameras, etc. In addition, demand for organic packages showed signs of recovery. As a result, sales in this reporting segment for fiscal 2010 as a whole increased compared with fiscal 2009. Operating profit for fiscal 2010 increased significantly compared with fiscal 2009, due mainly to manufacturing cost reductions and improved productivity.
(3) Applied Ceramic Products Group
Overall sales in this reporting segment for fiscal 2010 increased compared with fiscal 2009. This was due to a significant increase in sales in the solar energy business resulting from efforts to expand production capacity for solar cells coupled with aggressive sales expansion measures to meet rising demand in Japan driven by governmental subsidy policies. Operating profit decreased compared with fiscal 2009 due to a decline in selling prices in the solar energy business in European and U.S. markets, to appreciation of the yen, and to deterioration in the cutting tools market.
(4) Electronic Device Group
Although demand for ceramic capacitors, timing devices and connectors, etc. has recovered since the commencement of fiscal 2010 due to a recovery in production activities for digital consumer equipment, it did not reach the level recorded in fiscal 2009. The appreciation of the yen also produced a negative impact on sales. As a result, overall sales in this reporting segment for fiscal 2010 decreased compared with fiscal 2009. Operating profit for fiscal 2010 improved significantly compared with fiscal 2009, however, as a result of efforts to reduce manufacturing costs and to enhance productivity throughout the Kyocera Group.
(1) Telecommunications Equipment Group
Sales in this reporting segment for fiscal 2010 decreased compared with fiscal 2009 amid a tough business environment attributable to weakened replacement demand for mobile phone handsets in the Japanese market and sluggish sales of mobile phone handsets in the U.S. market, despite efforts to expand sales of new models. Operating loss for fiscal 2010 decreased compared with fiscal 2009 despite the recognition of an impairment loss on account receivables from WILLCOM, Inc. in the fourth quarter (January 1 to March 31, 2010), due to improved profitability arising from streamlining of operations, including reorganization of sales and development systems, and cost reductions.
(2) Information Equipment Group
Sales in this reporting segment for fiscal 2010 increased slightly compared with fiscal 2009, due mainly to increased sales of new products and the contribution from new subsidiaries joined from the fourth quarter of fiscal 2009, despite persistent stagnation in demand due to severe curtailment of information technology investment by both Japanese and overseas customers and by yen appreciation. Operating profit for fiscal 2010 increased compared with fiscal 2009, mainly due to a sales increase in color machines and manufacturing cost reductions.
Although sales in Kyocera Communication Systems Co., Ltd. increased, sales from other consolidated subsidiaries as a whole decreased due to the stagnant business climate. As a result, sales in this reporting segment for fiscal 2010 decreased slightly compared with fiscal 2009. Operating profit for fiscal 2010 decreased compared with fiscal 2009, due to the absence of gains on sales of real estate, etc. which was recorded in fiscal 2009 in the amount of ¥9,352 million.
A loss relating to WILLCOM, Inc.:
On February 18, 2010, WILLCOM, Inc. filed a petition with the Tokyo District Court for commencement of corporate reorganization procedures, and on March 12, 2010, the Tokyo District Court decided to commence such procedures. During the third quarter, Kyocera recognized an impairment loss of ¥19,987 million on its investment in WILLCOM, Inc., reflecting Kyoceras belief that the decline in the value of such investment will not be of temporary nature. Taking into consideration the decision to commence corporate reorganization procedures, and based on publicly disclosed information such as the outline of the business revitalization plan of WILLCOM, Inc., etc., Kyocera also recognized an impairment loss of ¥8,961 million on its account receivables from WILLCOM, Inc. The one time impacts relating to WILLCOM, Inc. on Kyoceras profit from operations and income before income taxes for fiscal 2010 were losses of ¥8,961 million and ¥28,948 million, respectively.
(2) Capital Expenditures
During fiscal 2010, Kyocera made capital expenditures to increase production volume in the solar energy business. From the fourth quarter of fiscal 2009, Kyocera substantially slowed down capital expenditures in other businesses in reaction to the declining business environment. As a result, capital expenditures for fiscal 2010 totaled ¥37,869 million, a decrease of ¥25,186 million (39.9%) compared with fiscal 2009.
Required funds for fiscal 2010 were mainly financed from internal funds.
(3) Management Challenges
Kyocera aims to strengthen existing businesses, pursue synergies among businesses, and create new businesses through implementation of the Kyocera Philosophy, our corporate philosophy and the Amoeba Management System, our own management method. As a result of efforts to reduce manufacturing costs and improve profitability throughout the Kyocera Group in response to sharp deterioration in the business environment since the second half of fiscal 2009, Kyocera was able to strengthen operational foundation in each business in fiscal 2010. The Kyocera Groups business environment in fiscal 2011 is expected to pick up relative to fiscal 2010, and Kyocera will tackle the following challenges to further strengthen the foundation in each business and seize opportunities for business growth, with the goal of becoming a high-growth, highly-profitable company.
(i) Enhance profitability in the information and communications market
Demand for digital consumer equipment such as mobile phones and PCs is expected to show continuing growth in line with the popularization of information and communication technologies and the expansion of the economies of emerging countries. Aiming to seize opportunities for growth, Kyocera will strive to secure orders in the components business by launching new compact and advanced products for digital consumer equipment, and reinforcing production capacity. In the Telecommunications Equipment Group, Kyocera seeks to expand sales through continuous introduction of new models to markets worldwide, including smartphones, etc. in overseas markets. In addition, efforts will be made to enhance profitability by strengthening development and manufacturing systems.
(ii) Expand business in the environment and energy market
The solar energy market is expected to continue expanding going forward, backed by heightened environmental awareness around the world coupled with subsidy policies in various countries. Kyocera will continue with aggressive capital investment in Japan and overseas to strengthen its production capacity for solar cells and modules as a means to steadily secure orders and growth in line with strong demand. In concrete terms, Kyocera plans to commence production of solar cells at the Yasu Plant in Shiga Prefecture in the summer of 2010, and boost production capacity at plants manufacturing solar modules globally. Kyocera also aims to increase sales and profits in the solar energy business through efforts to consistently reduce manufacturing costs and improve the conversion efficiency of solar cells. Further, Kyocera will strengthen development of solid oxide fuel cells (SOFCs) for residential use, with the goal of swift practical application that will contribute to expansion of business in the environment and energy market.
(iii) Strengthen new product development by pursuing synergies
Kyocera aims to strengthen development of new products by integrating technologies among its divisions, including each business division and the R&D division, etc., and to introduce distinctive products to the market in a timely manner. Specifically, Kyocera will develop base stations and terminals for the next-generation Long Term Evolution communication protocol by integrating technologies between its telecommunications equipment and electronic component businesses, and will also develop automotive cameras that improve safety in automobiles by integrating technologies between its automotive components and optical components businesses.
Note: Forward-Looking Statements
Certain of the statements made in this report 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 the following lists.
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 report.
(4) Four-Year Financial Summary
(5) Principal Business (as of March 31, 2010)
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. The principal products and businesses are as follows:
(6) Significant Subsidiaries (as of March 31, 2010)
(7) Principal Business Sites (as of March 31, 2010)
(8) Employees (as of March 31, 2010)
2. Shares (as of March 31, 2010)
(1) Total number of shares authorized to be issued: 600,000,000
(2) Total number of shares issued: 191,309,290
(7,788,351 treasury shares are included in the total number of shares issued set forth above.)
(3) Number of shareholders: 63,791
(4) Major shareholders (Top 10)
3. Directors and Corporate Auditors
(1) List of Directors and Corporate Auditors (as of March 31, 2010)
(2) Directors and Corporate Auditors retired during fiscal 2010
Directors and Corporate Auditor retired during fiscal 2010, as follows:
(3) Remuneration to Directors and Corporate Auditors for fiscal 2010
(4) Outside Corporate Auditors
(i) Activities of outside Corporate Auditors during fiscal 2010
(ii) Substance of agreements regarding limitation of liability
Kyocera Corporation has entered into agreements with outside Corporate Auditors regarding the limitation of their liability for damages due to negligence in the performance of their tasks, in accordance with paragraph 1 of Article 427 of the Corporation Act and Article 35 of the Articles of Incorporation of Kyocera Corporation. The amounts of damages that may be pursued against them, as set under such agreements, are the smallest amounts permissible under applicable laws and regulations.
4. Accounting Auditor
In the event that the Board of Corporate Auditors determines that the Accounting Auditor is subject to any of the events as provided by Paragraph 1 of Article 340 of the Corporation Act, the Board of Corporate Auditors is authorized to terminate the office of such Accounting Auditor or to request the Board of Directors to consider proposing to the General Meeting of Shareholders the termination or non-reappointment of such Accounting Auditor. Should anything occur to negatively impact the qualifications or independence of the Accounting Auditor, making it unlikely that such Accounting Auditor will be able to properly perform an audit, the Board of Directors, subject to prior consent of the Board of Corporate Auditors, shall propose to the General Meeting of Shareholders a resolution to terminate or not to reappoint such Accounting Auditor.
5. System and Policy
Kyocera Corporation has adopted through its Board of Directors the Kyocera Group Basic Policy for Corporate Governance and Internal Control as follows:
Basic Policy for Corporate Governance and Internal Control
Kyocera Group has made Respect the Divine and Love People its corporate motto and To provide opportunities for the material and intellectual growth of all our employees, and through our joint effort, contribute to the advancement of society and humankind its management rationale.
Kyocera Group always strives to maintain equity and fairness, and faces all situations with courage and conscience, and it intends to realize transparent systems for corporate governance and internal control.
Under such corporate motto and management rationale, the Board of Directors is implementing a basic policy for corporate governance and internal control as described below.
This statement of basic policy sets forth such basic policy in accordance with Paragraph 5 and item 6 of Paragraph 4 of Article 362 of the Corporation Act, and Paragraphs 1 and 3 of Article 100 of the Execution Rules of the Corporation Act, which require establishment of a system to ensure that conduct of business by the Directors will be in compliance with all applicable laws and regulations and the Articles of Incorporation and to ensure proper conduct of business by Kyocera Corporation (the Company) and Kyocera Group, as a whole.
I. Corporate Governance
1. Basic Policy for Corporate Governance
The Board of Directors of Kyocera Corporation defines the corporate governance of Kyocera Group to mean structures to ensure that Directors conducting the business manage the corporations in a fair and correct manner.
The purpose of corporate governance is to maintain soundness and transparency of management and to achieve fair and efficient corporate management, through which the management rationale of Kyocera Group can be realized.
The Board of Directors shall inculcate the Kyocera Philosophy, which is the basis of the management policy of Kyocera Group, into all Directors and employees working in Kyocera Group, and establish a sound corporate culture. The Board of Directors shall establish proper corporate governance through exercise of the Kyocera Philosophy (Note).
2. System for Corporate Governance
The Board of Directors of Kyocera Corporation determines, pursuant to the basic policy described in 1 above, the below-outlined system for corporate governance of Kyocera Corporation, which is the core company within Kyocera Group, to ensure that the conduct of business by the Directors is in compliance with all applicable laws and regulations and the Articles of Incorporation. The Board of Directors will constantly seek the ideal system for corporate governance and always evolve and develop its existing corporate governance system.
(1) Organs of Corporate Governance
The Board of Directors shall establish a corporate structure in which the Corporate Auditors and the Board of Corporate Auditors will serve as organs of corporate governance pursuant to the provisions of the Articles of Incorporation, as approved by the General Meeting of Shareholders of Kyocera Corporation. Directors of Kyocera Corporation shall strictly observe the following, to ensure effective audit by the Corporate Auditors and the Board of Corporate Auditors:
Representative Directors shall establish offices for the Corporate Auditors upon their request, and shall cause certain employees, nominated through prior discussion with the Corporate Auditors, to work in such offices to assist in the tasks of the Corporate Auditors and the Board of Corporate Auditors. Such employees, while still subject to the work rules of Kyocera Corporation, shall be under the instruction and supervision of each of the Corporate Auditors, and transfer, treatment (including evaluation) and disciplinary action relating to them shall be made only following discussion with the Corporate Auditors.
In the event that any Director becomes aware of any matter that breaches or may breach any law or regulation or the Articles of Incorporation, or in the event that any Director becomes aware of any matter that may cause substantial damage to Kyocera Group, he or she shall immediately report thereon to the Board of Corporate Auditors. In addition, in the event that any Corporate Auditor or the Board of Corporate Auditors requests a report from any Director pursuant to the Regulations of the Board of Corporate Auditors, such Director shall comply with such request.
Representative Directors shall cause the internal audit department to report regularly the status of the internal audit to the Corporate Auditors. In addition, upon request from the Corporate Auditors, Representative Directors shall cause any specified department(s) to report the status of their conduct of business directly to the Corporate Auditors. Representative Directors shall also maintain a system for reporting of internal complaints to the Board of Corporate Auditors, established by the Board of Corporate Auditors, under which employees, suppliers and customers of Kyocera Corporation may submit complaints directly to the Board of Corporate Auditors.
In the event that Representative Directors are requested by any Corporate Auditor to effectuate any of the following matters, as necessary to establish a system to ensure effective audit by the Corporate Auditors, Representative Directors shall comply with such request:
(2) Kyocera Philosophy Education
Representative Directors of Kyocera Corporation shall undertake Kyocera Philosophy Education from time to time in order to inculcate the Kyocera Philosophy into the Directors (including themselves) and employees of Kyocera Group.
II. Internal Controls
1. Basic Policy for Internal Controls
The Board of Directors of Kyocera Corporation defines the internal controls of Kyocera Group to mean systems to be established within the corporate organization to achieve management policy and master plans in a fair manner, in order for the Directors undertaking management of Kyocera Corporation to effectuate management policy. The Board of Directors of Kyocera Corporation will establish internal controls through implementation of the Kyocera Philosophy.
2. System for Internal Controls
Under the policy as described in 1 above, the Board of Directors shall cause Representative Directors to establish the systems described below. In addition, the Board of Directors shall constantly evolve and develop such systems, seeking an ideal system of internal controls.
Representative Directors shall establish the Kyocera Disclosure Committee as a system for making timely and appropriate disclosure of information and for properly maintaining information relating to the conduct of business by the Directors in accordance with applicable laws and regulations and the internal rules of Kyocera Corporation.
Representative Directors shall create a risk management department in order to establish a risk management system for Kyocera Group. Representative Directors shall also establish systems to undertake necessary actions from time to time.
Representative Directors shall establish employee consultation corners as an internal complaint reporting system within Kyocera Group, so that employees who become aware of any matter that breaches or may breach laws or regulations or the Articles of Incorporation or other internal rules can report thereon. The employee consultation corners will take appropriate action in respect of reports received thereby, which shall be treated in accordance with the Law for Protection of Reporters in the Public Interest.
Representative Directors shall clearly delegate authority and related responsibility by establishing an Executive Officer system to achieve efficient and effective conduct of business. Representative Directors shall cause the Executive Officers to report the status of their conduct of business, and, accordingly, a system shall be maintained under which Representative Directors can verify whether business is conducted efficiently.
In addition to the matters described in (1) through (3) above, as a system to ensure the appropriate conduct of business at Kyocera Group, Representative Directors shall establish the Kyocera Group Management Committee. Such Committee shall discuss important matters relating to Kyocera Group and receive reports relating thereto. Representative Directors shall also establish an internal audit department in order to conduct audits regularly to evaluate the appropriateness of conduct of business at Kyocera Group.
The current status of systems established relating to internal control is as follows:
Consolidated Balance Sheets
The consolidated balance sheets and the consolidated statements of income of the previous fiscal year, indications of increase (decrease) of amounts and remarks are presented solely for the reference.
Commencing from fiscal 2010, noncontrolling interests, which were previously referred to as minority interests and classified between total liabilities and shareholders equity, are now included as a separate component of total equity due to a change in accounting principles generally accepted in the United States of America.
Consolidated Statements of Income
Commencing from fiscal 2010, minority interests and net income are presented as net income attributable to noncontrolling interests and net income attributable to shareholders of Kyocera Corporation, respectively due to a change in accounting principles generally accepted in the United States of America.
Consolidated Statement of Equity (From April 1, 2009 to March 31, 2010)
Consolidated Cash Flows (For Reference Only)
1. Basis of preparation of Consolidated Financial Statements
Number of consolidated subsidiaries: 200
Major consolidated subsidiaries: Kyocera Mita Corporation, AVX Corporation and Kyocera International, Inc.
Major non-consolidated subsidiary: Kyoto Purple Sanga Co., Ltd.
This subsidiary is excluded from the scope of consolidation because its total assets, net sales, net income attributable to shareholders of Kyocera Corporation and retained earnings, etc. are immaterial to a reasonable judgment of the consolidated financial condition and business results of Kyocera.
Number of non-consolidated subsidiaries and affiliates accounted for by the equity method: 12
Major affiliate accounted for by the equity method: Miyaki Electric Mfg. Co., Ltd.
Increase by foundation: 10, Kyocera Asia Pacific (India) Pvt. Ltd. and others
Decrease by liquidation: 19, Kyocera Wireless (India) Pvt. Ltd. and others
Increase by foundation: 1, Accuver Co., Ltd.
Excluded due to court decision to commence corporate reorganization procedures: 1, Willcom, Inc.
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States pursuant to paragraph 1 of Article 3 of the supplementary provisions (Act of Justice Ministry No. 46 issued and effective in 2009) of the Corporate Calculation Rules of Japan. Certain disclosure and footnotes required under principles generally accepted in the United States are omitted pursuant to the same provision.
Finished goods and work in process are mainly stated at the lower of cost or market, the cost being determined by the average method. Other inventories are mainly stated at the lower of cost or market, the cost being determined by the first-in, first-out method.
Kyocera has adopted FSAB ASC (ASC) 320, Debt and Equity Securities. Held-to-maturity securities are recorded at amortized cost. Available-for-sale securities are recorded at fair value, with unrealized gains and losses excluded from income and recorded in accumulated other comprehensive income, net of tax. Non-marketable equity securities are recorded using the cost method.
Depreciation is computed based mainly on the declining-balance method.
Kyocera has adopted ASC 350, Intangibles Goodwill and Other. Goodwill and intangible assets with indefinite useful lives, rather than being amortized, 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 estimate useful lives.
Allowance for doubtful accounts:
In anticipation of uncollectible accounts receivable, Kyocera provides allowance for doubtful accounts, for general accounts receivable, based on the past actual ratio of losses on bad debts; and, for certain specific doubtful accounts receivable, based on estimates of uncollectible amounts pursuant to analysis of individual receivables.
Allowances for sales returns:
Kyocera records an estimated sales return allowance at the time of sales based on historical return experience.
Accrued pension and severance liabilities:
Kyocera has adopted ASC 715, Compensation Retirement Benefits. Kyocera recognizes the overfunded or underfunded status of its defined benefit postretirement plans as an asset or liability, as the case may be, in the consolidated balance sheet and recognizes changes in the funded status during the year as changes in the comprehensive income of such year. Prior service cost is amortized by the straight-line method over the average remaining service period of employees. Actuarial gain or 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.
Kyocera adopted ASC 105, Generally Accepted Accounting Principles (former Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162) on July 1, 2009. This accounting standard compiles all generally accepted accounting principles in the U.S. and establishes Accounting Standards Codification as the single official source of authoritative generally accepted accounting standards. The adoption of this accounting standard had no impact on Kyoceras consolidated results of operations and financial position.
Kyocera adopted ASC 805, Business Combinations (former SFAS No. 141 (revised 2007), Business Combinations) on April 1, 2009, which requires that assets, liabilities and noncontrolling interests be measured at fair value. Under this accounting standard, transaction and restructuring costs are required to be generally expensed, and contingent consideration and in-process research and development are required to be recorded at fair value on the acquisition date as a part of the fair value of an acquired business. Any tax adjustment made after the measurement period impacts on income tax expenses. This accounting standard also requires companies to recognize an asset acquired or a liability assumed in a business combination that arises from a contingency at fair value on the acquisition date, if the acquisition-date fair value of that asset or liability can be determined during the measurement period. The adoption of this accounting standard had no material impact on Kyoceras consolidated results of operations and financial position.
Kyocera adopted ASC 810, Consolidation (former SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an Amendment of Accounting Research Bulletin No. 51) on April 1, 2009. This accounting standard requires that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated balance sheets, and requires that changes in a parents ownership interest while the parent retains its controlling financial interest in its subsidiary shall be accounted for as equity transactions. Following the adoption of this accounting standard, noncontrolling interests that were previously referred to as minority interests and classified between total liabilities and shareholders equity on the consolidated balance sheets, were included as a separate component of total equity. The presentation of consolidated statements of income has also been changed. The adoption of this accounting standard had no material impact on Kyoceras consolidated results of operations and financial position.
2. Notes to Consolidated Balance Sheets
3. Notes to Consolidated Statement of Equity
(1) Total number of shares issued
(2) Distribution of surplus
4. Notes to Financial Instruments
(1) Notes to Financial Instruments
Kyocera refrains from making any speculative transactions and always maintains a high level of capital liquidity to ensure the utmost stability in its fund management. Operating receivables such as notes receivable and accounts receivable are exposed to customer credit risk. Kyocera seeks to reduce this risk in accordance with its credit management policies. Kyocera is exposed to market risk, including changes in foreign currency exchange rates, interests and equity prices. In order to hedge against these risks, Kyocera uses derivative financial instruments. Kyocera does not hold or issue derivative financial instruments for trading purposes. Kyocera enters into foreign currency forward contracts, interest rate swaps and currency swaps. Kyocera regularly assesses these market risks based on policies and procedures established to protect against the adverse effects of these risks and other potential exposures, primarily by reference to the market value of financial instruments.
Kyocera has marketable equity securities, debt securities and non-marketable equity securities. Kyocera is currently a major shareholder of KDDI Corporation. At March 31, 2010, the unrealized gain on the shares of KDDI Corporation was ¥28,140 million.
(2) Fair Value of Financial Instruments
The fair values of financial instruments at March 31, 2010 and methods and assumption used to estimate such fair values were as follows:
Cash and cash equivalents, other short-term investments, trade notes receivable, trade accounts receivable, short-term borrowings, trade notes and accounts payable, and other notes and accounts payable approximate fair value because of the short maturity of these instruments.
5. Notes to per share information
Statements of Income
Statement of Changes in Net Assets
1. Summary of Significant Accounting Policies
(1) Standards and methods of valuation of assets
(2) Depreciation of non-current assets:
(3) Accounting for allowances and accruals
(4) Other significant policies
2. Notes to Balance Sheets:
Keep-well letters and guidance for management:
3. Notes to Statements of Income:
4. Notes to Statement of Changes in Net Assets
Number and class of treasury shares
5. Notes to Accounting for Effects of Income Taxes
6. Notes to fixed assets used under finance leases
Some fixed assets used under finance leases consisting principally of manufacturing equipment and computers are off balance sheet.
7. Notes concerning Related Party Transactions
8. Notes to per share information
Independent Auditors Report
May 24, 2010
To the Board of Directors of
We have audited, pursuant to paragraph 4 of Article 444 of the Corporation Act of Japan, the consolidated financial statements, which consist of the consolidated balance sheet, the consolidated statement of income, the consolidated statement of equity and the notes to the consolidated financial statements of Kyocera Corporation (hereinafter referred to as the Company) for the fiscal year from April 1, 2009 to March 31, 2010. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kyocera Corporation and its consolidated subsidiaries as of March 31, 2010 and the consolidated result of their operations for the year then ended in conformity with accounting principles generally accepted in the United States of America pursuant to the provision of paragraph 1 of Article 3 of supplementary provision (Act of Justice Ministry No. 46 issued and effective in 2009) of the Corporate Calculation Rules of Japan. (Refer to Note 1 Basis of preparation of Consolidated Financial Statements to the consolidated financial statements.)
As described in (6) Accounting change of Note 1 Basis of preparation of Consolidated Financial Statements, the Company adopted ASC 810, Consolidation on April 1, 2009 and prepared the consolidated financial statements in accordance with this accounting standard.
We have no interest in or relationship with the Company which is required to be disclosed pursuant to the provisions of the Certified Public Accountant Law of Japan.
Independent Auditors Report
May 24, 2010
To the Board of Directors of
We have audited, pursuant to paragraph 2 1 of Article 436 of the Corporation Act of Japan, the financial statements, which consist of the balance sheet, the statement of income, the statement of changes in net assets, the notes to the financial statements and the supplementary schedules thereof of Kyocera Corporation (hereinafter referred to as the Company) for the 56th fiscal year from April 1, 2009 to March 31, 2010. These financial statements and supplementary schedules thereof are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and supplementary schedules thereof based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we obtain reasonable assurance about whether the financial statements and supplementary schedules are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and supplementary schedules thereof. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and supplementary schedules thereof referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2010 and the result of its operation for the year then ended in conformity with accounting principles generally accepted in Japan.
We have no interest in or relationship with the Company which is required to be disclosed pursuant to the provisions of the Certified Public Accountant Law of Japan.
The Board of Corporate Auditors, based on audit reports prepared by each Corporate Auditor related to the execution of duties of Directors during the 56th fiscal year from April 1, 2009 to March 31, 2010, hereby reports its results of audit after deliberations, as the unanimous opinion of all Corporate Auditors, as follows:
1. Audit Methods by individual Corporate Auditors and by the Board of Corporate Auditors
The Board of Corporate Auditors established auditing policies, auditing plans and role sharing for the fiscal year and received audit reports from each Corporate Auditor on the execution of his auditing activities and the result thereof. In addition, it received reports on the execution of duties from Directors, etc. and from the Independent Auditors, and, when necessary, requested their explanations regarding such reports.
In accordance with the auditing standards for Corporate Auditors set by the Board of Corporate Auditors, each Corporate Auditor communicated with Directors, internal audit division such as Global Audit Division and Risk Management Division, and employees of Kyocera Corporation (hereinafter referred to as the Company) and endeavored to gather information and create an improved environment for auditing, according to the auditing policies, auditing plans and role sharing for the fiscal year. Corporate Auditors also attended the meetings of the Board of Directors and other important meetings, received reports from Directors, internal audit division and employees of the Company on business execution, and, when necessary, requested their explanations regarding those reports. Corporate Auditors also inspected documents related to important decisions and examined operations and assets at the Companys head office, plants, major operational establishments and sales offices. In addition, Corporate Auditors had regular meetings with Chairman of the Board and Representative Director and President and Representative Director of the Company and exchanged opinions and information on issues, etc. with respect to auditing. Corporate Auditors also monitored and examined the resolution of the Board of Directors regarding the systems required by Paragraph 1 and 3 of Article 100 of the Execution Rules of the Corporation Act as being necessary for ensuring that the execution of duties by Directors shall be in compliance with laws and regulations and with the Companys Articles of Incorporation and that the Companys operations shall be conducted appropriately, and the status of the systems (internal control systems) established under such resolution.
With respect to the internal control systems regarding financial reporting, Corporate Auditors received reports on the evaluation of such internal control systems and the auditing condition from Directors, etc. and from Kyoto Audit Corporation, and, when necessary, requested their explanations regarding those reports.
With respect to subsidiaries, Corporate Auditors received reports on auditing condition of subsidiaries from their Corporate Auditors, etc. at the regular meetings with them and facilitated communications with Directors of them too, and, when necessary, attended the important meetings, received reports on business, requested their explanations and expressed opinions. Based on the foregoing methods, Corporate Auditors reviewed the business report of the fiscal year and the supplementary schedules.
In addition, Corporate Auditors monitored and examined whether the Independent Auditors maintain their independence and performed their audits in an appropriate manner, and received reports from the Independent Auditors on the execution of their duties and, when necessary, requested their explanations regarding those reports. Corporate Auditors also received notification from the Independent Auditors that they have taken steps to improve the system for ensuring appropriate execution of their duties (as enumerated in Article 131 of the Corporate Calculation Rules of Japan) in compliance with the Quality Control Standards Relating to Auditing (adopted by the Business Accounting Deliberation Council on October 28, 2005), etc. and, when necessary, requested their explanations regarding such notification. Based on the foregoing methods, Corporate Auditors reviewed the financial statements (balance sheet, statement of income, statement of changes in net assets and notes to financial statements) for the fiscal year and supplementary schedules thereto as well as consolidated financial statements (consolidated balance sheet, consolidated statement of income, consolidated statement of equity and notes to consolidated financial statements).
2. Results of Audit
(1) Result of the audit of the business report, etc.
(2) Result of the audit of financial statements and supplementary schedules thereto
(3) Result of the audit of consolidated financial statements
May 27, 2010
Board of Corporate Auditors
Full-time Corporate Auditor
Full-time Corporate Auditor
Osamu Nishieda, Kazuo Yoshida and Yoshinari Hara are outside Corporate Auditors as required under Item 16 of Article 2 and Paragraph 3 of Article 335 of the Corporation Act.