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Kyocera 6-K 2010

Documents found in this filing:

  1. 6-K
  2. 6-K
Form 6-K
Table of Contents

 

 

FORM 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

Report of Foreign Private Issuer

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

the Securities Exchange Act of 1934

 

 

For the month of November 2010

Commission File Number: 1-07952

 

 

KYOCERA CORPORATION

 

 

6 Takeda Tobadono-cho, Fushimi-ku,

Kyoto 612-8501, Japan

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  x    Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(7):  ¨

 

 

 


Table of Contents

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

KYOCERA CORPORATION

/s/    SHOICHI AOKI        

Shoichi Aoki

Director,

Managing Executive Officer and

General Manager of

Corporate Financial and Business Systems

Administration Group

Date: November 12, 2010


Table of Contents

 

Information furnished on this form:

EXHIBITS

 

Exhibit
Number

    
1.   English translation of consolidated financial statements included in the Quarterly Report (“shihanki-houkokusho”) for the three months  and six months ended September 30, 2010 submitted to the Director of the Kanto Local Finance Bureau of the Ministry of Finance pursuant to the Financial Instruments and Exchange Law of Japan


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CONSOLIDATED BALANCE SHEETS (Unaudited)

 

     September 30, 2010     March 31, 2010  
     (Yen in millions)  

Current assets:

    

Cash and cash equivalents (Note 5)

   ¥ 287,579      ¥ 313,126   

Investments in debt securities, current (Notes 4 and 5)

     26,284        11,644   

Other short-term investments (Notes 4 and 5)

     230,988        200,413   

Trade notes receivables (Note 5)

     14,378        16,421   

Trade accounts receivables (Note 5)

     204,802        190,903   

Less allowances for doubtful accounts and sales returns

     (3,858     (3,971

Inventories (Note 6)

     199,054        177,361   

Advance payments

     50,915        52,316   

Deferred income taxes (Note 9)

     43,724        40,872   

Other current assets (Notes 5 and 7)

     34,657        35,370   
                

Total current assets

     1,088,523        1,034,455   
                

Non-current assets:

    

Investments and advances:

    

Investments in and advances to affiliates and unconsolidated subsidiaries

     1,248        1,261   

Investments in debt and equity securities, long-term (Notes 4 and 5)

     311,782        370,124   

Other long-term investments (Notes 4 and 5)

     10,519        10,534   
                

Total investments and advances

     323,549        381,919   
                

Property, plant and equipment:

    

Land

     57,987        56,870   

Buildings

     286,276        290,516   

Machinery and equipment

     694,219        689,608   

Construction in progress

     10,108        8,842   

Less accumulated depreciation

     (803,832     (805,737
                

Total property, plant and equipment

     244,758        240,099   
                

Goodwill

     64,529        67,602   

Intangible assets

     45,857        49,593   

Other assets (Note 9)

     75,822        75,049   
                

Total assets

   ¥ 1,843,038      ¥ 1,848,717   
                

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED BALANCE SHEETS (Unaudited)—(Continued)

 

     September 30, 2010     March 31, 2010  
     (Yen in millions)  

Current liabilities:

    

Short-term borrowings (Note 5)

   ¥ 3,269      ¥ 4,073   

Current portion of long-term debt (Note 5)

     11,380        13,456   

Trade notes and accounts payable (Note 5)

     104,656        89,750   

Other notes and accounts payable (Note 5)

     77,607        63,779   

Accrued payroll and bonus

     48,045        47,131   

Accrued income taxes

     23,199        15,602   

Other accrued liabilities

     24,471        26,800   

Other current liabilities (Notes 5 and 7)

     32,480        28,721   
                

Total current liabilities

     325,107        289,312   
                

Non-current liabilities:

    

Long-term debt (Note 5)

     25,343        29,067   

Accrued pension and severance liabilities (Note 8)

     28,461        31,828   

Deferred income taxes

     53,143        75,619   

Other non-current liabilities

     16,714        15,629   
                

Total non-current liabilities

     123,661        152,143   
                

Total liabilities

     448,768        441,455   
                

Commitments and contingencies (Note 10)

    

Kyocera Corporation shareholders’ equity:

    

Common stock

     115,703        115,703   

Additional paid-in capital

     163,144        163,044   

Retained earnings

     1,219,071        1,168,122   

Accumulated other comprehensive income (Note 7)

     (113,052     (51,010

Treasury stock, at cost

     (50,644     (50,624
                

Total Kyocera Corporation shareholders’ equity

     1,334,222        1,345,235   
                

Noncontrolling interests

     60,048        62,027   
                

Total equity (Note 11)

     1,394,270        1,407,262   
                

Total liabilities and equity

   ¥ 1,843,038      ¥ 1,848,717   
                

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

     Six months ended September 30,  
             2009                     2010          
    

(Yen in millions and
shares in thousands,

except per share amounts)

 

Net sales (Note 7)

   ¥ 483,903      ¥ 637,392   

Cost of sales (Note 7)

     369,646        448,119   
                

Gross profit

     114,257        189,273   

Selling, general and administrative expenses (Notes 12 and 15)

     105,399        107,515   
                

Profit from operations

     8,858        81,758   

Other income (expenses):

    

Interest and dividend income

     6,540        6,511   

Interest expense (Note 7)

     (1,500     (1,125

Foreign currency transaction gains, net (Note 7)

     852        1,069   

Equity in earnings of affiliates and unconsolidated subsidiaries (Note 7)

     1,497        221   

Other, net (Note 5)

     901        1,059   
                

Total other income

     8,290        7,735   
                

Income before income taxes

     17,148        89,493   

Income taxes (Note 9)

     6,273        23,670   
                

Net income

     10,875        65,823   

Net income attributable to noncontrolling interests

     (2,147     (3,863
                

Net income attributable to shareholders of Kyocera Corporation

   ¥ 8,728      ¥ 61,960   
                

Earnings per share (Note 14):

    

Net income attributable to shareholders of Kyocera Corporation:

    

Basic

   ¥ 47.56      ¥ 337.62   

Diluted

   ¥ 47.56      ¥ 337.62   

Average number of shares of common stock outstanding:

    

Basic

     183,526        183,519   

Diluted

     183,526        183,519   

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

     Three months ended September 30,  
             2009                     2010          
     (Yen in millions and
shares in thousands,
except per share amounts)
 

Net sales (Note 7)

   ¥ 258,502      ¥ 324,217   

Cost of sales (Note 7)

     192,022        229,377   
                

Gross profit

     66,480        94,840   

Selling, general and administrative expenses (Notes 12 and 15)

     52,050        53,685   
                

Profit from operations

     14,430        41,155   

Other income (expenses):

    

Interest and dividend income

     1,517        1,218   

Interest expense (Note 7)

     (743     (553

Foreign currency transaction gains, net (Note 7)

     628        1,342   

Equity in earnings of affiliates and unconsolidated subsidiaries (Note 7)

     420        19   

Other, net (Note 5)

     193        (11
                

Total other income

     2,015        2,015   
                

Income before income taxes

     16,445        43,170   

Income taxes (Note 9)

     5,984        8,921   
                

Net income

     10,461        34,249   

Net income attributable to noncontrolling interests

     (1,273     (2,182
                

Net income attributable to shareholders of Kyocera Corporation

   ¥ 9,188      ¥ 32,067   
                

Earnings per share (Note 14):

    

Net income attributable to shareholders of Kyocera Corporation:

    

Basic

   ¥ 50.06      ¥ 174.74   

Diluted

   ¥ 50.06      ¥ 174.74   

Average number of shares of common stock outstanding:

    

Basic

     183,525        183,519   

Diluted

     183,525        183,519   

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

     Six months ended September 30,  
             2009                     2010          
     (Yen in millions)  

Cash flows from operating activities:

    

Net income

   ¥ 10,875      ¥ 65,823   

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

    

Depreciation and amortization

     35,894        33,191   

Provision for doubtful accounts and loss on bad debts (Note 15)

     317        1,089   

Write-down of inventories

     7,023        2,581   

Equity in earnings of affiliates and unconsolidated subsidiaries

     (1,497     (221

Foreign currency adjustments

     555        995   

Change in assets and liabilities:

    

Increase in receivables

     (6,950     (28,460

(Increase) decrease in inventories

     5,488        (33,645

(Increase) decrease in other current assets

     245        (533

Increase in notes and accounts payable

     19,635        39,313   

Increase in accrued income taxes

     1,748        8,179   

Increase (decrease) in other current liabilities

     (392     1,328   

Decrease in other non-current liabilities

     (1,796     (923

Other, net

     (3,339     (6,088
                

Net cash provided by operating activities

     67,806        82,629   
                

Cash flows from investing activities:

    

Payments for purchases of available-for-sale securities

     (9,989     (8,911

Payments for purchases of held-to-maturity securities

     (27,316     (37,697

Payments for purchases of other securities

     (4,156     (78

Proceeds from sales and maturities of available-for-sale securities

     10,204        7,820   

Proceeds from maturities of held-to-maturity securities

     21,179        26,155   

Acquisitions of businesses, net of cash acquired (Note 3)

     (3,667     (1,469

Payments for purchases of property, plant and equipment

     (15,313     (27,638

Payments for purchases of intangible assets

     (1,959     (4,714

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

     770        154   

Acquisition of certificate of deposits and time deposits

     (171,395     (174,583

Withdrawal of certificate of deposits and time deposits

     196,854        139,921   

Other, net

     (216     789   
                

Net cash used in investing activities

     (5,004     (80,251
                

Cash flows from financing activities:

    

Decrease in short-term borrowings, net

     (5,897     (516

Proceeds from issuance of long-term debt

     7,879        5,578   

Payments of long-term debt

     (11,860     (7,987

Dividends paid

     (11,871     (11,856

Purchase of treasury stock

     (25     (22

Reissuance of treasury stock

     3        1   

Other, net

     (1,362     (889
                

Net cash used in financing activities

     (23,133     (15,691
                

Effect of exchange rate changes on cash and cash equivalents

     (9,288     (12,234
                

Net increase (decrease) in cash and cash equivalents

     30,381        (25,547

Cash and cash equivalents at beginning of period

     269,247        313,126   
                

Cash and cash equivalents at end of period

   ¥ 299,628      ¥ 287,579   
                

The accompanying notes are an integral part of these statements.

 

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<NOTES TO THE UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS>

(Unaudited)

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) with the United States Securities and Exchange Commission (SEC) in accordance with the Securities Exchange Act of 1933 and made a registration of its common stock and ADR there. In February 1980, Kyocera Corporation again filed Form S-1 and a registration form for ADR with the SEC in accordance with the mentioned act, and in May 1980, listed its ADR on the New York Stock Exchange.

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 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 for interim financial statements. Accounting principles generally accepted in the United States of America consist of the Financial Accounting Standards Board (FASB)’s Accounting Standards Codification (ASC) and the SEC’s regulations for filing and reporting.

The following paragraphs identify the significant differences for Kyocera Corporation and its consolidated subsidiaries (Kyocera) between accounting principles generally accepted in the United States of America and accounting principles generally accepted in Japan.

(1) Revenue Recognition

Kyocera adopts ASC 605, “Revenue Recognition.” Kyocera recognizes revenue when the risks and rewards of ownership have been transferred to the customer and revenue can be reliably measured.

(2) Comprehensive Income

Kyocera adopts ASC 220, “Comprehensive Income.” Comprehensive income is the change in equity except for capital transactions and it consists of net income and other comprehensive income. Other comprehensive income includes changes in foreign currency translation adjustments, pension adjustments and net unrealized gains (losses) on securities and derivative financial instruments during a period.

(3) Business Combinations

Kyocera adopts ASC 805, “Business Combinations.” Kyocera adopts the acquisition method and measures identifiable assets, liabilities and noncontrolling interests at fair value. Kyocera recognizes transaction and restructuring costs as expenses, and recognizes any tax adjustment made after the measurement period as income tax expenses. Kyocera records in-process research and development at fair value on acquisition date as a part of fair value of acquired business. In addition, Kyocera recognizes an asset acquired or a liability assumed in a business combination that arise from a contingency at fair value, at the acquisition date, if the acquisition date fair value of that asset or liability can be determined during the measurement period.

(4) Goodwill and Other Intangible Assets

Kyocera adopts 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.

(5) Lease Accounting

Kyocera adopts ASC 840, “Leases.” Kyocera records tangible assets as capital lease for all of rent transactions which rewards of ownership and transfers risk of property substantially.

 

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(6) Benefit Plans

Kyocera adopts ASC 715, “Compensation—Retirement Benefits.” Kyocera recognizes the overfunded or underfunded status of its defined benefit postretirement plans as an asset or liability in the consolidated balance sheet and recognizes changes in that funded status in the year in which the changes occur through comprehensive income. 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.

(7) Unused Compensated Absence

Kyocera adopts ASC 710, “Compensation—General.” Kyocera records accrued liabilities for compensated absences that employees have earned but have not yet used.

(8) Income Taxes

Kyocera adopts ASC 740, “Income Taxes.” Kyocera records assets and liabilities for unrecognized tax benefits based on the premise of being subject to income tax examination by tax authorities, when it is more likely than not that tax benefits associated with tax positions will not be sustained.

(9) Stock Issuance Costs

Stock issuance costs, net of tax are deducted from additional paid-in capital.

 

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2. SUMMARY OF ACCOUNTING POLICIES

(1) Basis of Consolidation and Accounting for Investments in Affiliated Companies

The quarterly 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 ASC 810, “Consolidation.” All significant inter-company transactions and accounts are eliminated. Investments in 20% to 50% owned companies are accounted for by 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 impact on Kyocera’s consolidated results of operations, financial position and cash flows.

(2) Revenue Recognition

Kyocera generates revenue principally through the sale of industrial components and telecommunications and information equipment. Kyocera’s operations consist of the following 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.

Kyocera recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred and title and risk of loss have been transferred to the customer or services have been rendered, the sales price is fixed or determinable and collectability is reasonably assured in accordance with ASC 605, “Revenue Recognition.” Sales to customers in each of the above segments are based on the specific terms and conditions contained in basic contracts with customers and firm customer orders which detail the price, quantity and timing of the transfer of ownership (such as risk of loss and title) of the products.

For most customer orders, the transfer of ownership and revenue recognition occurs at the time of shipment of the products to the customer. For the remainder of customer orders, the transfer of ownership and revenue recognition occurs at the time of receipt of the products by the customer, with the exception of sales of solar power generating systems in the Applied Ceramic Products Group and information equipment in the Information Equipment Group for which sales are made to end users together with installation services. The transfer of ownership and revenue recognition in these cases occur at the completion of installation and customer acceptance, as Kyocera have no further obligations under the contracts and all revenue recognition criteria under ASC 605 are met. When Kyocera provides a combination of products and services, the arrangement is evaluated under ASC 605-25, “Multiple-Element Arrangements.”

In addition, in the Information Equipment Group, Kyocera may enter into sales contracts and lease agreements ranging from one to seven years directly with end users. Sales contracts and lease agreements may include installation services and have customer acceptance clauses. For sales and sales-type lease agreements, revenue is recognized at the completion of installation and customer acceptance which usually occurs on the same business day as delivery. For sales-type leases, unearned income (which represents interest) is amortized over the lease term using the effective interest method in accordance with ASC 840, “Leases.”

For all sales in the above segments, product returns are only accepted if the products are determined to be defective. There are no price protections, stock rotation or returns provisions, except for certain programs in the Electronic Device Group as noted below.

 

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Sales Incentives

In the Electronic Device Group, sales to independent electronic component distributors may be subject to various sale programs for which a provision for incentive programs is recorded as a reduction of revenue at the time of sale, as further described below in accordance with ASC 605-50, “Customer Payments and Incentives” and ASC 605-15, “Products.”

(a) Distributor Stock Rotation Program

Stock rotation is a program whereby distributors are allowed to return for credit, qualified inventory, semi-annually, equal to a certain percentage of the previous six months net sales. In accordance with ASC 605-15, an estimated sales allowance for stock rotation is recorded at the time of sale based on a percentage of distributor sales using historical trends, current pricing and volume information, other market specific information and input from sales, marketing and other key management. These procedures require the exercise of significant judgments. Kyocera believes that these procedures enable Kyocera to make reliable estimates of future returns under the stock rotation program. Kyocera’s actual results approximate its estimates. When the products are returned and verified, the distributor is given credit against their accounts receivable.

(b) Distributor Ship-from-Stock and Debit Program

Ship-from-Stock and Debit (ship and debit) is a program designed to assist distributors in meeting competitive prices in the marketplace on sales to their end customers. Ship and debit programs require a request from the distributor for a pricing adjustment of a specific part for a sale to the distributor’s end customers from the distributor’s stock. Ship and debit authorizations may cover current and future distributor activity for a specific part for a sale to their customers. In accordance with ASC 605, at the time Kyocera records the sales to distributors, an allowance for the estimated future distributor activities related to such sales is provided since it is probable that such sales to distributors will result in ship and debit activities. In accordance with ASC 605-15, Kyocera records an estimated sales allowance based on sales during the period, credits issued to distributors, distributor inventory levels, historical trends, market conditions, pricing trends noted in direct sales activity with original equipment manufacturers and other customers, and input from sales, marketing and other key management. These procedures require the exercise of significant judgments. Kyocera believes that these procedures enable Kyocera to make reliable estimates of future credits under the ship and debit program. Kyocera’s actual results approximate its estimates.

Sales Rebates

In the case of sales to distributors in the Applied Ceramic Products Group and Information Equipment Group, Kyocera provides cash rebates when predetermined sales targets are achieved during a certain period. Provisions for sales rebates are recorded as a reduction of revenue at the time of revenue recognition based on the best estimate of forecasted sales to each distributor in accordance with ASC 605-50.

Sales Returns

Kyocera records an estimated sales returns allowance at the time of sales based on historical return experience.

Products Warranty

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 liability based on its historical repair experience.

In the Information Equipment Group, Kyocera provides a standard one year manufacturer’s warranty on its products. For sales directly to end users, Kyocera offers extended warranty plans that may be purchased and that are renewable in one year incremental periods at the end of the warranty term. Service revenues are recognized over the term of the related service maintenance contracts in accordance with ASC 605-20, “Services.”

 

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(3) Cash and Cash Equivalents

Kyocera considers cash, bank deposits and all highly liquid investments purchased with an original maturity of three months or less to be cash and cash equivalents.

(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 exchange rates for the respective periods. Translation adjustments result from the process of translating foreign currency denominated financial statements into the Japanese yen. These translation adjustments, which are not included in the determination of net income, are included in other comprehensive income.

Assets and liabilities denominated in foreign currencies are translated at the exchange rates in effect on 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 notes receivables, trade accounts receivables and finance receivables for estimated losses resulting from customers’ inability to make timely payments, including interest on finance receivables. Kyocera’s 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 customer’s 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 included in investments in and advances to affiliates and unconsolidated subsidiaries at September 30, 2010 and at March 31, 2010 were ¥0 million and ¥1 million, respectively. The amounts of allowances for doubtful accounts included in other long-term investments at September 30, 2010 and at March 31, 2010 were ¥124 million and ¥253 million, respectively. The amounts of allowances for doubtful accounts included in other assets at September 30, 2010 and at March 31, 2010 were ¥1,871 million and ¥2,001 million, respectively.

(6) Inventories

Inventories are stated at the lower of cost or market. For finished goods and work in process, cost is determined by the average method for approximately 71% and 70% at September 30, 2010 and at March 31, 2010, respectively, and by other methods including the first-in, first-out method for the others. For raw materials and supplies, cost is determined by the first-in, first-out method for approximately 55% and 57% at September 30, 2010 and at March 31, 2010, respectively, and by other methods, including the average method, for the others. Kyocera recognizes estimated write-down of inventories for excess, slow-moving and obsolete inventories.

 

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(7) Securities

Debt and equity securities are accounted for under ASC 320, “Investments—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. Non-marketable equity securities are accounted for by the cost method.

Kyocera evaluates whether the declines in fair value of debt and equity securities 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.

Kyocera also reviews its investments accounted for by the equity method for impairment quarterly. Factors considered in assessing whether an indication of other-than-temporary impairment exists include the achievement of business plan objectives and milestones including cash flow projections and the results of planned financing activities, the financial condition and prospects of each investee company, the fair value of the ownership interest relative to the carrying amount of the investment, the period of time during which the fair value of the ownership interest has been below the carrying amount of the investment and other relevant factors. Impairment to be recognized is measured based on the amount by which the carrying amount of the investment exceeds the fair value of the investment. Fair value is determined through the use of various methodologies such as discounted cash flows and comparable valuations of similar companies.

(8) Property, Plant and Equipment and 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:

 

Buildings

   2 to 50 years

Machinery and equipment

   2 to 20 years

Major renewals and betterments are capitalized as tangible assets and they are depreciated based on estimated useful lives. The costs of minor renewals, maintenance and repairs are charged to expenses in the period incurred. 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 period of disposal, and costs and accumulated depreciation are removed from accounts.

(9) Goodwill and Other Intangible Assets

Goodwill and other intangible assets are accounted for under 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 straight line 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:

 

Software

   2 to 10 years

Patent rights

   2 to 12 years

Customer relationships

   3 to 18 years

 

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(10) Impairment of Long-Lived Assets

Impairment of long-lived assets and intangible assets are accounted for under ASC 360, “Property, Plant, and Equipment.” Kyocera reviews its long-lived assets and intangible assets with definite useful lives for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

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

Derivatives are accounted for under ASC 815, “Derivatives and Hedging.” 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 may qualify for hedge accounting, if the hedging relationship is expected to be highly effective in achieving offsetting cash flows of hedging instruments and hedged items. Under hedge accounting, changes in the fair value of the effective portion of these hedge derivatives are deferred in accumulated other comprehensive income and charged to earnings when the underlying transaction being hedged occurs.

Kyocera designates certain foreign currency forward contracts, interest rate swaps and interest rate caps as cash flow hedges. Most of Kyocera’s 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 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 linking all derivatives designated as cash flow hedge to specific assets and liabilities on the balance sheet or forecasted transactions. Kyocera also formally assesses, both at the hedge’s 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 hedge or that it has ceased to be a highly effective hedge, Kyocera discontinues hedge accounting prospectively. When a cash flow hedge is discontinued, the net derivative gains or losses remain in accumulated other comprehensive income, unless it is probable that the forecasted transaction will not occur at which point the derivative gains or losses are reclassified into earnings immediately.

(12) Stock-Based Compensation

Costs resulting from share-based payment transactions are accounted for under ASC 718, “Compensation—Stock Compensation,” Kyocera recognizes such costs in the financial statements by fair value based measurement method. Under the modified prospective method, Kyocera recognized compensation costs which include:

 

  (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) Net Income Attributable to Shareholders of Kyocera Corporation and Cash Dividends per Share

Earnings per share is accounted for under ASC 260, “Earnings Per Share.” Basic earnings per share attributable to shareholders of Kyocera Corporation is computed based on the average number of shares of common stock outstanding during each period, and diluted earnings per share attributable to shareholders of Kyocera Corporation is computed based on the diluted average number of shares of stock outstanding during each period.

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 year in which they are paid.

 

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(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 quarterly 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 quarterly consolidated financial statements and accompanying notes. However, actual results could differ from those estimates and assumptions.

(16) Recently Adopted Accounting Standards

Kyocera adopted the FASB’s Accounting Standards Update (ASU) No. 2009-16, “Accounting for Transfers of Financial Assets” on April 1, 2010. This accounting standard codified former Statement of Financial Accounting Standards (SFAS) No. 166, “Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140” issued in June 2009 in the ASC 860, “Transfers and Servicing.” This accounting standard removes the concept of a qualifying special purpose entity from former SFAS No. 140 and removes the exception from applying former FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, to qualifying special purpose entities and establishes specific conditions for reporting a transfer of a portion of a financial asset as a sale. The adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations, financial position and cash flows.

Kyocera adopted the ASU No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” on April 1, 2010. This accounting standard codified former SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” issued in June 2009 in the ASC 810, “Consolidation.” This accounting standard requires an enterprise to perform an analysis to identify the primary beneficiary of a variable interest entity and also requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. The adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations, financial position and cash flows.

(17) Recently Issued Accounting Standards

In July 2010, the FASB issued ASU No. 2010-20, “Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” This accounting standard requires an entity to provide certain existing disclosures and new disclosures, on a disaggregated basis, about its financing receivables and related allowance for credit losses. For public entities, the disclosure as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. As this accounting standard is a provision for disclosure, the adoption of this accounting standard will not have an impact on Kyocera’s consolidated results of operations, financial position and cash flows.

(18) Reclassifications

Certain reclassifications and format changes have been made to the consolidated statements of cash flows for the six months ended September 30, 2009 to conform to the current presentation.

 

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3. BUSINESS COMBINATION

On June 1, 2010, Kyocera Corporation acquired part of Thin Film Transistor Liquid Crystal Display business from Sony Mobile Display Corporation. The results of operations of the acquired business were included into Kyocera’s quarterly consolidated financial statements since the acquisition date and for segment reporting, it is reported in the Electronic Device Group.

Kyocera Tycom Corp. has owned a 33.33% interest in Tycom Ltd., a sales company of cutting tools, and accounted for its investment by the equity method. On August 31, 2010, Kyocera Tycom Corp. acquired all of the remaining shares of Tycom Ltd. As a result, Tycom Ltd. has become a wholly-owned subsidiary of Kyocera and has been consolidated by Kyocera from that date. The results of operations of the acquired business were included into Kyocera’s quarterly consolidated financial statements since the acquisition date and for segment reporting, it is reported in the Applied Ceramic Products Group.

These acquisitions did not have material impacts on Kyocera’s consolidated results of operations, financial position and cash flows.

 

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4. DEBT SECURITIES, EQUITY SECURITIES AND OTHER INVESTMENTS

(1) Debt and equity securities with readily determinable fair values

Investments in debt and equity securities at September 30, 2010 and March 31, 2010, included in investments in debt securities, current and in investments in debt and equity securities, long-term are summarized as follows:

 

     September 30, 2010      March 31, 2010  
     Cost*      Aggregate
Fair Value
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Cost*      Aggregate
Fair Value
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
 
     (Yen in millions)  

Available-for-sale securities:

                       

Marketable equity securities

   ¥ 270,943       ¥ 257,151       ¥ 7,732       ¥ 21,524       ¥ 270,494       ¥ 310,654       ¥ 40,329       ¥ 169   

Investment trusts

     2,840         2,741         130         229         3,346         3,809         463         —     
                                                                       

Total equity securities

     273,783         259,892         7,862         21,753         273,840         314,463         40,792         169   
                                                                       

Corporate bonds

     5,131         4,432         23         722         6,659         6,221         66         504   

Hybrid financial instruments

     11,953         11,953         —           —           9,867         9,867         —           —     

Government bonds and public bonds

     3,037         2,600         3         440         2,230         1,999         8         239   

Other debt securities

     637         611         1         27         1,166         1,131         35         70   
                                                                       

Total debt securities

     20,758         19,596         27         1,189         19,922         19,218         109         813   
                                                                       

Total available-for-sale securities

     294,541         279,488         7,889         22,942         293,762         333,681         40,901         982   
                                                                       

Held-to-maturity securities:

                       

Corporate bonds

     41,775         41,981         239         33         23,904         24,018         194         80   

Government bonds and public bonds

     16,803         16,838         35         —           24,183         24,173         35         45   
                                                                       

Total held-to-maturity securities

     58,578         58,819         274         33         48,087         48,191         229         125   
                                                                       

Total

   ¥ 353,119       ¥ 338,307       ¥ 8,163       ¥ 22,975       ¥ 341,849       ¥ 381,872       ¥ 41,130       ¥ 1,107   
                                                                       

 

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

At September 30, 2010, Kyocera held available-for-sale securities in unrealized loss positions of ¥22,942 million. Kyocera considered the impairments of equity securities were not other-than-temporary as the extent to which fair value was below the cost was minor and the duration of the impairments was within one year. Kyocera considered the impairments of debt securities were not other-than-temporary because the impairment was not caused by credit loss and Kyocera would receive the full cost amount.

(2) Other investments

Kyocera held time deposits and certificates of deposits which were due over three months to original maturity, non-marketable equity securities and long-term loans. Carrying amounts of these investments at September 30, 2010 and March 31, 2010, included in other short-term investments and in other long-term investments, are summarized as follows:

 

    September 30, 2010     March 31, 2010  
    (Yen in millions)  

Time deposits and certificates of deposits (due over 3 months)

  ¥ 231,051      ¥ 200,482   

Non-marketable equity securities

    10,271        10,263   

Long-term loans

    185        202   
               

Total

  ¥ 241,507      ¥ 210,947   
               

 

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5. FAIR VALUE

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of inputs that may be used to measure fair value are as follows:

 

  Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.

 

  Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

 

  Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

(1) Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

     September 30, 2010      March 31, 2010  
     Level 1      Level 2      Level 3      Total      Level 1      Level 2      Level 3      Total  
     (Yen in millions)  

Current Assets:

                       

Corporate bonds

   ¥ 116       ¥ 11       ¥ 8       ¥ 135       ¥ 721       ¥ 158       ¥ 19       ¥ 898   

Hybrid financial instruments

     —           9,978         —           9,978         —           —           —           —     

Government bonds and public bonds

     173         —           —           173         195         —           —           195   

Other debt securities

     —           255         1         256         —           729         2         731   
                                                                       

Total debt securities

     289         10,244         9         10,542         916         887         21         1,824   
                                                                       

Foreign currency forward contracts

     —           1,724         —           1,724         —           760         —           760   
                                                                       

Total derivatives

     —           1,724         —           1,724         —           760         —           760   
                                                                       

Total current assets

     289         11,968         9         12,266         916         1,647         21         2,584   
                                                                       

Non-Current Assets:

                       

Marketable equity securities

     257,151         —           —           257,151         310,654         —           —           310,654   

Investment trusts

     311         2,430         —           2,741         1,100         2,709         —           3,809   
                                                                       

Total equity securities

     257,462         2,430         —           259,892         311,754         2,709         —           314,463   
                                                                       

Corporate bonds

     4,270         16         11         4,297         5,225         87         11         5,323   

Hybrid financial instruments

     —           1,975         —           1,975         —           9,867         —           9,867   

Government bonds and public bonds

     2,427         —           —           2,427         1,804         —           —           1,804   

Other debt securities

     —           354         1         355         —           399         1         400   
                                                                       

Total debt securities

     6,697         2,345         12         9,054         7,029         10,353         12         17,394   
                                                                       

Total non-current assets

     264,159         4,775         12         268,946         318,783         13,062         12         331,857   
                                                                       

Total assets

   ¥ 264,448       ¥ 16,743       ¥ 21       ¥ 281,212       ¥ 319,699       ¥ 14,709       ¥ 33       ¥ 334,441   
                                                                       

Current Liabilities:

                       

Foreign currency forward contracts

   ¥ —         ¥ 2,011       ¥ —         ¥ 2,011       ¥ —         ¥ 984       ¥ —         ¥ 984   

Interest rate swaps

     —           32         —           32         —           44         —           44   

Currency swaps

     —           8         —           8         —           9         —           9   
                                                                       

Total derivatives

     —           2,051         —           2,051         —           1,037         —           1,037   
                                                                       

Total current liabilities

   ¥ —         ¥ 2,051       ¥ —         ¥ 2,051       ¥ —         ¥ 1,037       ¥ —         ¥ 1,037   
                                                                       

 

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The fair value of Level 1 investments is quoted price in an active market with sufficient volume and frequency of transactions.

The fair value of Level 2 investments is other than quoted price included within Level 1 that is observable for the asset or liability, either directly or indirectly through corroboration with observable market data. Kyocera did not recognize any transfers in and out of Levels 1 and 2 for the six and three months ended September 30, 2009 and 2010. In accordance with the provisions of ASC 815-15, “Embedded Derivatives”, Kyocera elects the fair value option for all hybrid financial instruments. Gains on hybrid financial instruments in the amount of ¥211 million and ¥85 million were recorded in other, net on the consolidated statement of income for the six months ended September 30, 2009 and 2010, respectively. Gains on hybrid financial instruments in the amount of ¥21 million and ¥56 million were recorded in other, net on the consolidated statement of income for the three months ended September 30, 2009 and 2010, respectively.

The fair value of Level 3 investments is determined using input that is both unobservable and significant to the values of instruments being measured.

The fair value of Level 2 derivatives is estimated based on quotes from financial institutions. With respect to the detail information of derivatives, please refer to the Note 7 to the Quarterly Consolidated Financial Statement on this Form 6-K.

The following table presents additional information about Level 3 corporate bonds and other debt securities measured at fair value on recurring basis for the six months ended September 30, 2009 and 2010, and the three months ended September 30, 2009 and 2010.

 

    Six months ended September 30,  
    2009     2010  
    (Yen in millions)  

Balance at beginning of period

  ¥ 696      ¥ 33   

Total gains or losses (realized/unrealized)

   

Included in earnings (losses)

    (31     —     

Included in other comprehensive income

    53        (3

Purchase, issuance, and settlements

    (363     —     

Transfer in and/or out of Level 3

    (56     (9
               

Balance at end of period

  ¥ 299      ¥ 21   
               
    Three months ended September 30,  
    2009     2010  
    (Yen in millions)  

Balance at beginning of period

  ¥ 381      ¥ 30   

Total gains or losses (realized/unrealized)

   

Included in earnings (losses)

    (36     —     

Included in other comprehensive income

    60        0   

Purchase, issuance, and settlements

    (53     —     

Transfer in and/or out of Level 3

    (53     (9
               

Balance at end of period

  ¥ 299      ¥ 21   
               

 

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(2) Fair Value of Financial Instruments

The fair values of financial instruments and the methods and assumptions used to estimate the fair value are as follows:

 

     September 30, 2010      March 31, 2010  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  
     (Yen in millions)  

Assets (a):

           

Investments in debt securities, current

   ¥ 26,284       ¥ 26,290       ¥ 11,644       ¥ 11,662   

Investments in debt and equity securities, long term

     311,782         312,017         370,124         370,210   

Other long-term investments

     10,519         10,519         10,534         10,534   
                                   

Total

   ¥ 348,585       ¥ 348,826       ¥ 392,302       ¥ 392,406   
                                   

Liabilities (b):

           

Long-term debt (including due within one year)

   ¥ 36,723       ¥ 36,869       ¥ 42,523       ¥ 42,710   
                                   

Total

   ¥ 36,723       ¥ 36,869       ¥ 42,523       ¥ 42,710   
                                   

 

(a) The fair value is based on quoted market prices. It was not practicable to estimate the fair value of non-marketable equity securities because of the lack of the market price and difficulty in estimating fair value without incurring excessive cost. In addition, Kyocera did not identify any events or changes in circumstances that may have had a significant adverse effect on these investments. The aggregated carrying amounts of these investments included in the above table at September 30, 2010 and March 31, 2010 were ¥10,271 million and ¥10,252 million, respectively.
(b) The fair value is estimated by discounting cash flows, using current interest rates for instruments with similar terms and remaining maturities.

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.

6. INVENTORIES

Inventories at September 30, 2010 and March 31, 2010 are as follows:

 

    September 30, 2010     March 31, 2010  
    (Yen in millions)  

Finished goods

  ¥ 92,493      ¥ 83,444   

Work in process

    44,564        41,409   

Raw materials and supplies

    61,997        52,508   
               

Total

  ¥ 199,054      ¥ 177,361   
               

 

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7. DERIVATIVES AND HEDGING

Kyocera’s activities are exposed to varieties of market risks, including the effects of changes in foreign currency exchange rates, interest rates and stock prices. Approximately 60% of Kyocera’s revenues are 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. Kyocera’s 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 and currency swaps, 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 Kyocera’s 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 uses derivative financial instruments, such as interest rate swaps and interest rate caps, 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 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 (a) entering into transactions with creditworthy counterparties, (b) limiting the amount of exposure to each counterparty, and (c) monitoring the financial condition of its counterparties.

Kyocera does not hold or issue such derivative financial instruments for trading purposes.

Cash Flow Hedges:

Kyocera uses certain foreign currency forward contracts with terms normally lasting for less than four months designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in its forecasted transactions related to purchase commitments and sales. Kyocera also uses interest rate swaps and interest rate caps mainly to convert a portion of its variable rates debt to fixed rates debt.

Other Derivatives:

Kyocera’s main direct foreign export sales and some import purchases are denominated in the customers’ and suppliers’ local currencies, principally the U.S. dollar and the Euro. Kyocera purchases foreign currency forward contracts and currency swaps to protect against the adverse effects that exchange rate fluctuations may have on foreign-currency-denominated trade receivables, payables and borrowings. The gains and losses on both the derivatives and the foreign-currency-denominated trade receivables, payables and borrowings are recorded as foreign currency transaction gains, net in the consolidated statement of income. Kyocera does not adopt hedge accounting for such derivatives.

 

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The aggregate contract amounts of derivative financial instruments at September 30, 2010 and March 31, 2010 are as follows:

 

     September 30, 2010      March 31, 2010  
     (Yen in millions)  

Derivatives designated as hedging instruments:

     

Foreign currency forward contracts

   ¥ 32,960       ¥ 11,961   

Interest rate swaps

     570         625   

Interest rate caps

     —           3,125   
                 

Total

   ¥ 33,530       ¥ 15,711   
                 

Derivatives not designated as hedging instruments:

     

Foreign currency forward contracts

   ¥ 108,913       ¥ 95,758   

Currency swaps

     242         279   
                 

Total

   ¥ 109,155       ¥ 96,037   
                 

Total derivatives

   ¥ 142,685       ¥ 111,748   
                 

The location and fair value of derivative financial instruments in the consolidated balance sheets at September 30, 2010 and March 31, 2010 are as follows:

 

     Location     September 30, 2010     March 31, 2010  
           (Yen in millions)  

Derivative Assets:

      

Derivatives designated as hedging instruments:

      

Foreign currency forward contracts

     Other current assets      ¥ 254      ¥ 79   

Interest rate caps

     Other current assets        —          —     
                  

Total

     ¥ 254      ¥ 79   
                  

Derivatives not designated as hedging instruments:

      

Foreign currency forward contracts

     Other current assets      ¥ 1,470      ¥ 681   
                  

Total

     ¥ 1,470      ¥ 681   
                  

Total derivatives

     ¥ 1,724      ¥ 760   
                  

Derivative Liabilities:

      

Derivatives designated as hedging instruments:

      

Foreign currency forward contracts

     Other current liabilities      ¥ 404      ¥ 167   

Interest rate swaps

     Other current liabilities        32        44   
                  

Total

     ¥ 436      ¥ 211   
                  

Derivatives not designated as hedging instruments:

      

Foreign currency forward contracts

     Other current liabilities      ¥ 1,607      ¥ 817   

Currency swaps

     Other current liabilities        8        9   
                  

Total

     ¥ 1,615      ¥ 826   
                  

Total derivatives

     ¥ 2,051      ¥ 1,037   
                  

 

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The location and amount of derivative financial instruments in the comprehensive income for the six months ended September 30, 2009 and 2010 are as follows:

Derivatives designated as cash flow hedge:

Gains (losses) recognized in accumulated other comprehensive income

 

         Six months ended September 30,  
         2009     2010  
         (Yen in millions)  

Foreign currency forward contracts

   ¥ (60   ¥ (41

Interest rate swaps

     15        11   

Interest rate caps

     0        —     
                  

Total

   ¥ (45   ¥ (30
                  

Gains (losses) reclassified from accumulated other comprehensive income into income (effective portion)

  

 
         Six months ended September 30,  
   

Location

   2009     2010  
         (Yen in millions)  

Foreign currency forward contracts

  Net sales and Cost of sales    ¥ 75      ¥ 127   

Interest rate swaps

  Interest expense      9        10   

Interest rate swaps

 

Equity in earnings of affiliates and unconsolidated subsidiaries

     (10     —     

Interest rate caps

  Interest expense      0        —     
                  

Total

     ¥ 74      ¥ 137   
                  

Gains (losses) recognized in income (ineffective portion and amount excluded from effectiveness testing)

  

 
         Six months ended September 30,  
   

Location

   2009     2010  
         (Yen in millions)  

Foreign currency forward contracts

  Foreign currency transaction gains, net    ¥ (14   ¥ 5   

Interest rate caps

  Interest expense      0        —     
                  

Total

     ¥ (14   ¥ 5   
                  
Derivatives not designated as hedging instruments:     

Gains (losses) recognized in income

  

 
         Six months ended September 30,  
   

Location

   2009     2010  
         (Yen in millions)  

Foreign currency forward contracts

  Foreign currency transaction gains, net    ¥ 4,955      ¥ (1

Currency swaps

  Foreign currency transaction gains, net      9        1   
                  

Total

     ¥ 4,964      ¥ 0   
                  

 

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The location and amount of derivative financial instruments in the comprehensive income for the three months ended September 30, 2009 and 2010 are as follows:

Derivatives designated as cash flow hedge:

Gains (losses) recognized in accumulated other comprehensive income

 

          Three months ended September 30,  
                  2009                     2010          
          (Yen in millions)  

Foreign currency forward contracts

      ¥ (230   ¥ (142

Interest rate swaps

        3        3   

Interest rate caps

        0        —     
                   

Total

      ¥ (227   ¥ (139
                   

Gains (losses) reclassified from accumulated other comprehensive income into income (effective portion)

  

 
          Three months ended September 30,  
    

Location

           2009                     2010          
          (Yen in millions)  

Foreign currency forward contracts

   Net sales and Cost of sales    ¥ 32      ¥ 159   

Interest rate swaps

   Interest expense      5        5   

Interest rate swaps

  

Equity in earnings of affiliates and unconsolidated subsidiaries

     (6     —     

Interest rate caps

   Interest expense      0        —     
                   

Total

      ¥ 31      ¥ 164   
                   

Gains (losses) recognized in income (ineffective portion and amount excluded from effectiveness testing)

  

 
          Three months ended September 30,  
    

Location

           2009                     2010          
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ 1      ¥ 5   

Interest rate caps

   Interest expense      0        —     
                   

Total

      ¥ 1      ¥ 5   
                   
Derivatives not designated as hedging instruments:    

Gains (losses) recognized in income

  

 
          Three months ended September 30,  
    

Location

           2009                     2010          
          (Yen in millions)  

Foreign currency forward contracts

   Foreign currency transaction gains, net    ¥ 3,818      ¥ (5,023

Currency swaps

   Foreign currency transaction gains, net      4        2   
                   

Total

      ¥ 3,822      ¥ (5,021
                   

 

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8. BENEFIT PLANS

Domestic:

Net periodic pension costs at Kyocera Corporation and its major domestic subsidiaries for the six months ended September 30, 2009 and 2010 include the following components:

 

     Six months ended September 30,  
             2009                     2010          
     (Yen in millions)  

Service cost

   ¥ 4,402      ¥ 4,324   

Interest cost

     1,150        1,318   

Expected return on plan assets

     (1,527     (1,628

Amortization of prior service cost

     (2,164     (2,164

Recognized actuarial loss

     587        386   
                

Net periodic pension costs

   ¥ 2,448      ¥ 2,236   
                

Net periodic pension costs at Kyocera Corporation and its major domestic subsidiaries for the three months ended September 30, 2009 and 2010 include the following components:

     Three months ended September 30,  
             2009                     2010          
     (Yen in millions)  

Service cost

   ¥ 2,201      ¥ 2,170   

Interest cost

     575        659   

Expected return on plan assets

     (764     (814

Amortization of prior service cost

     (1,082     (1,082

Recognized actuarial loss

     294        193   
                

Net periodic pension costs

   ¥ 1,224      ¥ 1,126   
                

 

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Foreign:

Net periodic pension costs at Kyocera International, Inc. and its consolidated subsidiaries, AVX Corporation and its consolidated subsidiaries (AVX) and TA Triumph-Adler AG and its consolidated subsidiaries, for the six months ended September 30, 2009 and 2010 include the following components:

 

        Six months ended September 30,    
     2009     2010  
     (Yen in millions)  

Service cost

   ¥ 168      ¥ 160   

Interest cost

     1,119        951   

Expected return on plan assets

     (582     (571

Amortization of prior service cost

     5        5   

Recognized actuarial loss

     115        122   
                

Net periodic pension costs

   ¥ 825      ¥ 667   
                

Net periodic pension costs at Kyocera International, Inc. and its consolidated subsidiaries, AVX and TA Triumph-Adler AG and its consolidated subsidiaries, for the three months ended September 30, 2009 and 2010 include the following components:

      Three months ended September 30,  
     2009     2010  
     (Yen in millions)  

Service cost

   ¥ 83      ¥ 77   

Interest cost

     562        461   

Expected return on plan assets

     (287     (276

Amortization of prior service cost

     2        2   

Recognized actuarial loss

     57        59   
                

Net periodic pension costs

   ¥ 417      ¥ 323   
                

 

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9. INCOME TAXES

The effective tax rates for the six and three months ended September 30, 2010 were 26.4% and 20.7%, respectively. The downward difference in the effective income tax rate from 41.0 %, which is the Japanese statutory income tax rate, is mainly due to a reversal of valuation allowance against deferred tax assets at a certain overseas subsidiary with increasing realization of deferred tax assets, triggered by a significantly improved operating results for the three months ended September 30, 2010.

 

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10. COMMITMENTS AND CONTINGENCIES

As of September 30, 2010, Kyocera had contractual obligations for the acquisition or construction of property, plant and equipment aggregating ¥12,554 million principally due within one year.

Kyocera is a lessee under long-term operating leases primarily for office space and equipment. Future minimum lease commitments under non-cancelable operating leases at September 30, 2010 are as follows:

 

     September 30, 2010  
     (Yen in millions)  

Due within 1 year

   ¥ 4,797   

Due after 1 year but within 2 years

     3,459   

Due after 2 years but within 3 years

     2,005   

Due after 3 years but within 4 years

     1,140   

Due after 4 years but within 5 years

     730   

Thereafter

     1,108   
        

Total

   ¥ 13,239   
        

Kyocera has entered into purchase agreements for a certain portion of an anticipated quantity of materials used in its operations. Under those agreements, during the six months ended September 30, 2010 and during the three months ended September 30, 2010, Kyocera purchased ¥8,201 million and ¥4,454 million, respectively and is obligated to purchase ¥238,362 million in total by the end of December 2020.

Kyocera guarantees the debt of employees, an investee and an unconsolidated subsidiary. At September 30, 2010, the total amount of these guarantees was ¥677 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 disposals and operating sites. AVX continues to monitor these actions and proceedings and to vigorously defend its interests. AVX currently has reserves for current remediation, compliance and legal cost related to these matters.

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 Massachusetts. The Commonwealth of Massachusetts has adopted the same position. EPA has indicated that remediation costs through October 22, 2010 were approximately ¥35,929 million.

In June 2010, EPA issued a proposal providing future cost estimates ranging from ¥30,408 million to ¥33,012 million, net present value, based on certain assumptions. AVX anticipates further discussions with the U.S. Department of Justice, EPA, and the Commonwealth of Massachusetts.

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 it can avoid responsibility for all, or some portion, of these costs because the remediation method has changed over time and costs can be appropriately allocated to parties other than AVX.

The potential impact of this matter on Kyocera’s consolidated results of operations, financial position 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 can be reasonably estimated. However, based on the information available, management believes that damages, if any, resulting from these actions will not have a significant impact on Kyocera’s consolidated results of operations, financial position and cash flows.

 

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11. EQUITY

Based on the resolution for the payment of year-end dividends at the ordinary general shareholders’ meeting held on June 25, 2010, Kyocera paid cash dividends totaling ¥11,011 million, ¥60 per share of common stock on June 28, 2010 to shareholders of record on March 31, 2010.

Based on the resolution for the payment of interim dividends at the board of directors held on October 28, 2010, Kyocera plans to pay cash dividends totaling ¥11,011 million, ¥60 per share of common stock on December 6, 2010 to shareholders of record on September 30, 2010.

Changes in Kyocera Corporation shareholders’ equity, noncontrolling interests and total equity for the six months ended September 30, 2009 and 2010 are as follows:

 

     Six months ended September 30,  
     2009     2010  
     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity  
     (Yen in millions)  

Balance at beginning of period

   ¥ 1,323,663      ¥ 59,425      ¥ 1,383,088      ¥ 1,345,235      ¥ 62,027      ¥ 1,407,262   

Comprehensive income (loss)

     9,979        (811     9,168        (29     (963     (992

Cash dividends paid to Kyocera Corporation’s shareholders

     (11,012     —          (11,012     (11,011     —          (11,011

Cash dividends paid to noncontrolling interests

     —          (871     (871     —          (860     (860

Other

     (56     934        878        27        (156     (129
                                                

Balance at end of period

   ¥ 1,322,574      ¥ 58,677      ¥ 1,381,251      ¥ 1,334,222      ¥ 60,048      ¥ 1,394,270   
                                                

Comprehensive income (loss) for the six months ended September 30, 2009 and 2010 are as follows:

 

     Six months ended September 30,  
     2009     2010  
     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity  
     (Yen in millions)  

Net income

   ¥ 8,728      ¥ 2,147      ¥ 10,875      ¥ 61,960      ¥ 3,863      ¥ 65,823   

Net unrealized gains (losses) on securities

     17,279        83        17,362        (32,441     50        (32,391

Net unrealized gains (losses) on derivative financial instruments

     (45     65        20        (30     44        14   

Pension adjustments

     (434     (67     (501     (811     (40     (851

Foreign currency translation adjustments

     (15,549     (3,039     (18,588     (28,707     (4,880     (33,587
                                                

Comprehensive income (loss)

   ¥ 9,979      ¥ (811   ¥ 9,168      ¥ (29   ¥ (963   ¥ (992
                                                

Comprehensive income (loss) for the three months ended September 30, 2009 and 2010 are as follows:

 

     Three months ended September 30,  
     2009     2010  
     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity     Kyocera
Corporation
shareholders’
equity
    Noncontrolling
interests
    Total equity  
     (Yen in millions)  

Net income

   ¥ 9,188      ¥ 1,273      ¥ 10,461      ¥ 32,067      ¥ 2,182      ¥ 34,249   

Net unrealized gains (losses) on securities

     (2,531     32        (2,499     (8,360     41        (8,319

Net unrealized gains (losses) on derivative financial instruments

     (227     (4     (231     (139     4        (135

Pension adjustments

     (184     52        (132     (412     28        (384

Foreign currency translation adjustments

     (15,366     (2,705     (18,071     (8,127     (1,429     (9,556
                                                

Comprehensive income (loss)

   ¥ (9,120   ¥ (1,352   ¥ (10,472   ¥ 15,029      ¥ 826      ¥ 15,855   
                                                

 

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12. SUPPLEMENTAL EXPENSE INFORMATION

Supplemental expense information is as follows:

 

     Six months ended September 30,  
     2009      2010  
     (Yen in millions)  

Research and development expenses

   ¥ 26,015       ¥ 23,463   

Advertising expenses

   ¥ 3,578       ¥ 3,119   

Shipping and handling cost included in selling, general and administrative expenses

   ¥ 6,316       ¥ 8,173   
     Three months ended September 30,  
     2009      2010  
     (Yen in millions)  

Research and development expenses

   ¥ 12,892       ¥ 12,076   

Advertising expenses

   ¥ 2,025       ¥ 1,690   

Shipping and handling cost included in selling, general and administrative expenses

   ¥ 3,286       ¥ 4,154   

 

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13. 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)

Components for Semiconductor Processing Equipment and LCD Manufacturing Equipment

Information and Telecommunication Components

General Industrial Ceramic Components

Sapphire Substrates

Automotive Components

(Semiconductor Parts Group)

Ceramic Packages for Crystal and SAW Devices

CMOS / CCD 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

Cutting Tools, Micro Drills

Medical and Dental Implants

Jewelry and Fine Ceramic Application Products

(Electronic Device Group)

Ceramic Capacitors, Tantalum Capacitors

Timing Devices such as TCXOs, Crystal Units, Clock Oscillators and Ceramic Resonators

SAW Devices, RF Modules, EMI Filters

Connectors

Thermal Printheads, Inkjet Printheads

Amorphous Silicon Photoreceptor Drums

Liquid Crystal Displays, Touch Panel

(Telecommunications Equipment Group)

CDMA Mobile Phone Handsets

Personal Handy Phone System (PHS) related Products such as PHS Mobile Phone Handsets and PHS Base Stations

Wireless Broadband Systems such as WiMAX associated products

(Information Equipment Group)

Color and Black & White Office Equipment such as ECOSYS Printers, Multifunction Peripherals

Wide Format Multifunctional Systems

Printer and Multifunction Peripherals Supplies

Business Solution Services such as Managed Print Service

(Others)

Telecommunication Engineering Business

Integrated Business of Information Systems and Network Infrastructure

Data Center Business

Management Consulting Business

Molding Compounds for Semiconductor Encapsulation

Electrical Insulators, Molded Products

Optical Components

 

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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 net income attributable to noncontrolling interests.

Kyocera’s sales to KDDI Corporation and its consolidated subsidiaries (KDDI) which are mainly recorded in the Telecommunications Equipment Group are as follows:

 

     Three months ended September 30,  
             2009                      2010          

Amount of sales to KDDI (Yen in millions)

   ¥ 25,408       ¥ 37,107   

Ratio of amount of sale to KDDI to consolidated net sales (%)

     9.8         11.4   
     Six months ended September 30,  
     2009      2010  

Amount of sales to KDDI (Yen in millions)

   ¥ 43,634       ¥ 78,226   

Ratio of amount of sale to KDDI to consolidated net sales (%)

     9.0         12.3   

 

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Information by reporting segments for the three and six months ended September 30, 2009 and 2010 is summarized as follows:

(Reporting Segments)

 

     Three months ended
September 30,
 
     2009     2010  
     (Yen in millions)  

Net sales:

    

Fine Ceramic Parts Group

   ¥ 12,254      ¥ 19,441   

Semiconductor Parts Group

     34,138        45,317   

Applied Ceramic Products Group

     37,012        50,773   

Electronic Device Group

     49,089        64,005   

Telecommunications Equipment Group

     42,946        57,526   

Information Equipment Group

     57,395        58,544   

Others

     31,006        35,431   

Adjustments and eliminations

     (5,338     (6,820
                

Net sales

   ¥ 258,502      ¥ 324,217   
                

Income before income taxes:

    

Fine Ceramic Parts Group

   ¥ (783   ¥ 2,992   

Semiconductor Parts Group

     2,785        9,468   

Applied Ceramic Products Group

     3,239        8,260   

Electronic Device Group

     2,591        12,768   

Telecommunications Equipment Group

     (2,145     (3,228

Information Equipment Group

     6,262        8,902   

Others

     1,824        2,760   
                

Total operating profit

     13,773        41,922   

Corporate

     2,201        1,528   

Equity in earnings of affiliates and unconsolidated subsidiaries

     420        19   

Adjustments and eliminations

     51        (299
                

Income before income taxes

   ¥ 16,445      ¥ 43,170   
                

Depreciation and amortization:

    

Fine Ceramic Parts Group

   ¥ 1,436      ¥ 1,138   

Semiconductor Parts Group

     2,382        2,575   

Applied Ceramic Products Group

     2,512        3,136   

Electronic Device Group

     4,229        3,425   

Telecommunications Equipment Group

     2,323        2,315   

Information Equipment Group

     3,029        2,640   

Others

     1,134        1,158   

Corporate

     595        465   
                

Total

   ¥ 17,640      ¥ 16,852   
                

Capital expenditures:

    

Fine Ceramic Parts Group

   ¥ 462      ¥ 2,723   

Semiconductor Parts Group

     1,229        3,723   

Applied Ceramic Products Group

     2,130        5,715   

Electronic Device Group

     1,132        4,187   

Telecommunications Equipment Group

     831        1,023   

Information Equipment Group

     1,265        2,383   

Others

     691        467   

Corporate

     224        469   
                

Total

   ¥ 7,964      ¥ 20,690   
                

 

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(Reporting Segments)

 

     Six months ended
September 30,
 
             2009                     2010          
     (Yen in millions)  

Net sales:

    

Fine Ceramic Parts Group

   ¥ 21,521      ¥ 36,674   

Semiconductor Parts Group

     62,216        88,125   

Applied Ceramic Products Group

     66,883        95,620   

Electronic Device Group

     94,461        123,554   

Telecommunications Equipment Group

     79,749        122,282   

Information Equipment Group

     111,151        117,009   

Others

     57,825        68,071   

Adjustments and eliminations

     (9,903     (13,943
                

Net sales

   ¥ 483,903      ¥ 637,392   
                

Income before income taxes:

    

Fine Ceramic Parts Group

   ¥ (3,583   ¥ 5,314   

Semiconductor Parts Group

     4,470        18,452   

Applied Ceramic Products Group

     4,364        15,692   

Electronic Device Group

     328        22,248   

Telecommunications Equipment Group

     (7,503     1,904   

Information Equipment Group

     8,360        14,405   

Others

     1,798        4,633   
                

Total operating profit

     8,234        82,648   

Corporate

     7,312        7,393   

Equity in earnings of affiliates and unconsolidated subsidiaries

     1,497        221   

Adjustments and eliminations

     105        (769
                

Income before income taxes

   ¥ 17,148      ¥ 89,493   
                

Depreciation and amortization:

    

Fine Ceramic Parts Group

   ¥ 2,810      ¥ 2,179   

Semiconductor Parts Group

     4,557        4,761   

Applied Ceramic Products Group

     4,964        5,845   

Electronic Device Group

     8,537        6,570   

Telecommunications Equipment Group

     4,984        5,395   

Information Equipment Group

     6,506        5,164   

Others

     2,299        2,293   

Corporate

     1,237        984   
                

Total

   ¥ 35,894      ¥ 33,191   
                

Capital expenditures:

    

Fine Ceramic Parts Group

   ¥ 711      ¥ 4,302   

Semiconductor Parts Group

     2,337        6,682   

Applied Ceramic Products Group

     3,446        8,349   

Electronic Device Group

     2,082        5,897   

Telecommunications Equipment Group

     1,549        1,739   

Information Equipment Group

     1,890        3,810   

Others

     1,029        1,123   

Corporate

     518        785   
                

Total

   ¥ 13,562      ¥ 32,687   
                

 

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Geographic segments (Net sales by region)

 

         Three months ended September 30,      
             2009                      2010          
     (Yen in millions)  

Net sales:

     

Japan

   ¥ 111,702       ¥ 145,951   

United States of America

     41,950         54,651   

Asia

     43,215         55,818   

Europe

     49,607         52,184   

Others

     12,028         15,613   
                 

Net sales

   ¥ 258,502       ¥ 324,217   
                 
         Six months ended September 30,      
             2009                      2010          
     (Yen in millions)  

Net sales:

     

Japan

   ¥ 199,716       ¥ 284,707   

United States of America

     84,750         110,691   

Asia

     82,156         106,758   

Europe

     93,750         105,082   

Others

     23,531         30,154   
                 

Net sales

   ¥ 483,903       ¥ 637,392   
                 

There are no individually material countries with respect to revenue from external customers in Asia, Europe and Others.

Geographic Segments (Net sales and Income before income taxes by Geographic area)

 

         Three months ended September 30,      
             2009                     2010          
     (Yen in millions)  

Net sales:

    

Japan

   ¥ 115,520      ¥ 149,646   

Intra-group sales and transfer between geographic areas

     78,904        115,744   
                
     194,424        265,390   
                

United States of America

     49,909        66,514   

Intra-group sales and transfer between geographic areas

     6,717        8,123   
                
     56,626        74,637   
                

Asia

     37,105        47,550   

Intra-group sales and transfer between geographic areas

     34,991        45,503   
                
     72,096        93,053   
                

Europe

     51,244        54,578   

Intra-group sales and transfer between geographic areas

     6,907        8,719   
                
     58,151        63,297   
                

Others

     4,724        5,929   

Intra-group sales and transfer between geographic areas

     3,145        3,392   
                
     7,869        9,321   
                

Adjustments and eliminations

     (130,664     (181,481
                

Net sales

   ¥ 258,502      ¥ 324,217   
                

Income before income taxes:

    

Japan

   ¥ 7,010      ¥ 26,384   

United States of America

     1,370        5,484   

Asia

     3,962        4,821   

Europe

     551        5,373   

Others

     806        767   
                
     13,699        42,829   

Corporate

     2,201        1,528   

Equity in earnings of affiliates and unconsolidated subsidiaries

     420        19   

Adjustments and eliminations

     125        (1,206
                

Income before income taxes

   ¥ 16,445      ¥ 43,170   
                

 

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Table of Contents

 

         Six months ended September 30,      
             2009                     2010          
     (Yen in millions)  

Net sales:

    

Japan

   ¥ 207,292      ¥ 292,001   

Intra-group sales and transfer between geographic areas

     143,142        225,696   
                
     350,434        517,697   
                

United States of America

     100,509        133,074   

Intra-group sales and transfer between geographic areas

     11,452        16,609   
                
     111,961        149,683   
                

Asia

     70,160        91,030   

Intra-group sales and transfer between geographic areas

     66,548        93,331   
                
     136,708        184,361   
                

Europe

     97,000        109,633   

Intra-group sales and transfer between geographic areas

     12,751        16,402   
                
     109,751        126,035   
                

Others

     8,942        11,654   

Intra-group sales and transfer between geographic areas

     6,254        6,897   
                
     15,196        18,551   
                

Adjustments and eliminations

     (240,147     (358,935
                

Net sales

   ¥ 483,903      ¥ 637,392   
                

Income before income taxes:

    

Japan

   ¥ (1,279   ¥ 52,122   

United States of America

     2,154        10,567   

Asia

     6,167        9,699   

Europe

     (1,042     9,208   

Others

     1,275        1,458   
                
     7,275        83,054   

Corporate

     7,312        7,393   

Equity in earnings of affiliates and unconsolidated subsidiaries

     1,497        221   

Adjustments and eliminations

     1,064        (1,175
                

Income before income taxes

   ¥ 17,148      ¥ 89,493   
                

 

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14. PER SHARE INFORMATION

A reconciliation of the numerators and the denominators of basic and diluted earnings per share computations are as follows:

 

             Six months ended September 30,           
     2009      2010  
     (Yen in millions and shares in thousands,
except per share amounts)
 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 8,728       ¥ 61,960   
                 

Basic earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 47.56       ¥ 337.62   

Diluted earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 47.56       ¥ 337.62   
                 

Basic weighted average number of shares outstanding

     183,526         183,519   

Diluted weighted average number of shares outstanding

     183,526         183,519   
                 
             Three months ended September 30,          
     2009      2010  
     (Yen in millions and shares in thousands,
except per share amounts)
 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 9,188       ¥ 32,067   
                 

Basic earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 50.06       ¥ 174.74   

Diluted earnings per share:

     

Net income attributable to shareholders of Kyocera Corporation

   ¥ 50.06       ¥ 174.74   
                 

Basic weighted average number of shares outstanding

     183,525         183,519   

Diluted weighted average number of shares outstanding

     183,525         183,519   
                 

 

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15. THE CORPORATE REORGANIZATION PROCEDURE FOR WILLCOM, INC.

Since October 2004, Kyocera Corporation owned a 30% interest in WILLCOM, Inc., which is engaged in the personal handy phone system (PHS) business. Kyocera sells PHS handsets and PHS base stations to WILLCOM, Inc. Kyocera has accounted for its investment in WILLCOM, Inc. as an equity method investment.

On September 24, 2009, WILLCOM, Inc. applied and was accepted to undergo Alternative Dispute Resolution (ADR) with the Japanese Association of Turnaround Professionals (JATP), a process for corporate revitalization prescribed in the Act on Special Measures for Industrial Revitalization. The ADR process is not a legal procedure like a bankruptcy or a corporate reorganization procedure, but rather constitutes a flexible private settlement mechanism that allows the subject company to continue its daily commercial operations, while securing fairness through the involvement of the JATP. The JATP has been authorized by the Minister of Economy, Trade and Industry to act as an unbiased intermediary to achieve resolution among relevant parties.

During the three months ended December 31, 2009, Kyocera recognized an impairment loss of ¥19,987 million on its investment in WILLCOM, Inc., recorded as equity in losses of affiliates, reflecting management’s belief that the investment might not be recoverable.

On February 18, 2010, WILLCOM, Inc. filed a petition with the Tokyo District Court for commencement of corporate reorganization procedures and applied to the Enterprise Turnaround Initiative Corporation of Japan (ETIC) for support, after terminating the ADR process. On March 12, 2010, the Tokyo District Court agreed to commence the corporate reorganization procedures. Upon such decision, most of the directors of WILLCOM, Inc., including all of those simultaneously serving as directors of Kyocera, resigned, and trustees and acting trustees were appointed by the Tokyo District Court. On the same day, the ETIC agreed to provide support to WILLCOM, Inc. Due to the commencement of the corporate reorganization procedures, Kyocera lost significant influence over WILLCOM, Inc. and therefore discontinued its application of equity method accounting.

Taking into consideration the decision to commence corporate reorganization procedures, Kyocera recognized a bad debt loss of ¥8,961 million on receivables from WILLCOM, Inc., recorded as selling, general and administrative expenses, based on publicly disclosed information such as the outline of the business revitalization plan of WILLCOM, Inc., etc.

On June 24, 2010, WILLCOM, Inc. requested the Tokyo District Court to extend the filing deadline for their reorganization plan, which was accepted. The new filing deadline was October 14, 2010.

On August 2, 2010, WILLCOM, Inc. entered into a sponsor agreement with SOFTBANK CORP. SOFTBANK CORP. agreed to dispatch a business trustee to WILLCOM, Inc. and to provide necessary support for business operations and execution of the reorganization plan.

On October 14, 2010, the trustees of WILLCOM, Inc. filed the reorganization plan with the Tokyo District Court.

Based on the filed reorganization plan, during the three months ended September 30, 2010, Kyocera recognized an additional bad debt loss of ¥708 million on receivables from WILLCOM, Inc., in selling, general, and administrative expenses.

The filed reorganization plan is subject to approval by the creditors’ committees and the Tokyo District Court. The deduction of ¥9,669 million is Kyocera’s best estimate of the recovery of the receivables outstanding when WILLCOM, Inc. entered the reorganization procedures. In addition, Kyocera has continued to sell PHS handsets and PHS base stations to WILLCOM, Inc. The corporate reorganization procedures’ progress may have a significant effect on Kyocera’s consolidated results of operations, financial position and cash flows.

 

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16. SUBSEQUENT EVENT

Kyocera has evaluated subsequent events requiring recognition or disclosure in the quarterly consolidated financial statements during the period from October 1, 2010 through the date of issuance of this Quarterly Report in Japan. During the period, no material subsequent events were identified.

 

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Reference Information (Unaudited)

1. Production (Sales price)

 

     Three months ended September 30,      Increase
(Decrease)

%
 
     2009      2010     
     Amount      % to
the total
     Amount      % to
the total
    
     (Yen in millions)  

Fine Ceramic Parts Group

   ¥ 11,707         4.6       ¥ 19,738         5.9         68.6   

Semiconductor Parts Group

     35,317         13.7         46,379         13.9         31.3   

Applied Ceramic Products Group

     35,611         13.9         53,354         15.9         49.8   

Electronic Device Group

     49,331         19.2         66,755         19.9         35.3   
                                            

Total Components Business

     131,966         51.4         186,226         55.6         41.1   

Telecommunications Equipment Group

     43,853         17.1         58,164         17.4         32.6   

Information Equipment Group

     58,035         22.6         63,726         19.0         9.8   
                                            

Total Equipment Business

     101,888         39.7         121,890         36.4         19.6   

Others

     22,834         8.9         26,633         8.0         16.6   
                                            

Production

   ¥ 256,688         100.0       ¥ 334,749         100.0         30.4   
                                            

 

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Table of Contents

 

2. Orders

 

     Three months ended September 30,     Increase
(Decrease)

%
 
     2009     2010    
     Amount     % to
the total
    Amount     % to
the total
   
     (Yen in millions)  

Fine Ceramic Parts Group

   ¥ 12,723        4.6      ¥ 20,460        6.0        60.8   

Semiconductor Parts Group

     35,540        12.7        46,991        13.9        32.2   

Applied Ceramic Products Group

     38,672        13.8        51,738        15.3        33.8   

Electronic Device Group

     55,094        19.7        67,442        20.0        22.4   
                                        

Total Components Business

     142,029        50.8        186,631        55.2        31.4   

Telecommunications Equipment Group

     54,911        19.6        63,491        18.8        15.6   

Information Equipment Group

     57,334        20.5        58,714        17.4        2.4   
                                        

Total Equipment Business

     112,245        40.1        122,205        36.2        8.9   

Others

     31,195        11.1        36,107        10.7        15.7   

Adjustments and eliminations

     (5,616     (2.0     (7,018     (2.1     —     
                                        

Orders

   ¥ 279,853        100.0      ¥ 337,925        100.0        20.8   
                                        

 

39

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